IRS Updates No-Rule List

Superseded by Rev. Proc. 2024-3

Corrected by Announcement 2023-17

Supersedes Rev. Proc. 2022-3 and Rev. Proc. 2022-28

26 CFR 601.201: Rulings and determination letters.

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TABLE OF CONTENTS

SECTION 1. PURPOSE AND NATURE OF CHANGES

SECTION 2. BACKGROUND AND SCOPE

SECTION 3. AREAS IN WHICH RULINGS WILL NOT BE ISSUED

SECTION 4. AREAS IN WHICH RULINGS WILL NOT ORDINARILY BE ISSUED

SECTION 5. AREAS UNDER STUDY IN WHICH RULINGS WILL NOT BE ISSUED

SECTION 6. AREAS COVERED BY AUTOMATIC APPROVAL PROCEDURES

SECTION 7. EFFECT ON OTHER REVENUE PROCEDURES

SECTION 8. EFFECTIVE DATE

SECTION 9. PAPERWORK REDUCTION ACT

DRAFTING INFORMATION

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SECTION 1. PURPOSE AND NATURE OF CHANGES

01. The purpose of this revenue procedure is to update Rev. Proc. 2022-3, 2022-1 I.R.B.144, by providing a revised list of those areas of the Internal Revenue Code under the jurisdiction of the Associate Chief Counsel (Corporate), the Associate Chief Counsel (Financial Institutions and Products), the Associate Chief Counsel (Income Tax and Accounting), the Associate Chief Counsel (Passthroughs and Special Industries), the Associate Chief Counsel (Procedure and Administration), and the Associate Chief Counsel (Employee Benefits Exempt Organizations, and Employment Taxes) (EEE) relating to issues on which the Internal Revenue Service (the “Service”) will not issue letter rulings or determination letters. For a list of areas under the jurisdiction of the Associate Chief Counsel (International) relating to international issues on which the Service will not issue letter rulings or determination letters, see Rev. Proc. 2023-7, this Bulletin. For a list of areas under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division relating to issues, exempt organizations, plans, or plan amendments on which the Service will and will not issue letter rulings or determination letters, see Rev. Proc. 2023-4 and Rev. Proc. 2023-5, this Bulletin.

02. Changes.

1) Section 3.01(1), regarding §§ 40, 40A, 4041, 4081, 4083(a), and 6426, has been modified.

2) Sectionn3.01(108),regarding § 1362(f), has been added.

3) Section 3.01(109), regarding § 1362(f), has been added.

4) Section 3.01(120), regarding §§ 3121, 3306, and 3401, has been modified.

5) Section 3.01(121), regarding §§ 3121 and 3401, has been added.

6) Section 3.01(128), regarding § 4671, has been added.

7) Section 3.01(138), regarding § 4980, has been added.

8) Section 4.01(47), regarding § 1362, has been modified.

9) Section 4.01(48), regarding § 1362, has been added.

10) Old section 5.01(16), regarding § 2056, has been removed.

11) Old section 5.01(20), regarding § 2523, has been removed.

12) Old section5.01(21), regarding §§ 2601 and 2663, has been renumbered to section 5.01(19) and modified.

13) Section 5.02, regarding general areas in which the Service is temporarily not issuing rulings or determination letters because those matters are under study, has been modified.

14) Section 6.08, regarding § 2010(c)(5)(A), has been modified.

SECTION 2. BACKGROUND, SCOPE OF APPLICATION, AND NO-RULE ISSUES PART OF INTEGRATED TRANSACTION

.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 eff of their acts or transactions, prior to the fi of returns or reports that are required by the revenue laws. In employee plans matters described in section 5.15 of Rev. Proc. 2023-1, this Bulletin, the Associate Chief Counsel (EEE) may issue letter rulings after the fi of returns or reports that are required by the revenue laws.

There are, however, certain areas in which the Service will not issue rulings or determination letters. These areas are set forth in sections 3, 4, 5, and 6 of this revenue procedure.

Section 3 sets forth those areas in which rulings or determination letters will not be issued. Section 4 sets forth those areas in which rulings or determination letters will not ordinarily be issued. Whenever used in this revenue procedure, “not ordinarily” means that unique and compelling reasons must be demonstrated to justify the issuance of a ruling or determination letter (which may include consequences of the COVID-19 pandemic). Taxpayers contemplating a request for a ruling in any of the areas set forth in section 4 are encouraged to request a pre-submission conference to consider whether unique and compelling reasons exist. See section 10.07 of Rev. Proc. 2023-1. Section 5 sets forth those areas in which the Service is temporarily not issuing rulings or determination letters because those matters are under study. Section 6 sets forth areas in which the Service has provided automatic approval procedures in lieu of issuing rulings or determination letters. The Service will not ordinarily issue rulings for these matters when a taxpayer does not qualify for automatic approval.

See Rev. Proc. 2023-1, this Bulletin, particularly section 6 captioned “Under What Circumstances Does The Service Not Issue Letter Rulings Or Determination Letters?” for general instructions and other situations in which the Service will not or ordinarily will not issue letter 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 restatements 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 because the Service may decline to issue a letter ruling or a determination letter when appropriate in the interest of sound tax administration (including due to resource constraints) or on other grounds whenever warranted by the facts or circumstances of a particular case. 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.

If the Service determines that it is not in the interest of sound tax administration to issue a letter ruling or determination letter due to resource constraints, it will adopt a consistent approach with respect to taxpayers that request a ruling on the same issue. The Service will also consider adding the issue to the no-rule list at the first opportunity. See section 6.02 of Rev. Proc. 2023-1, this Bulletin.

.02 Scope of Application.

This revenue procedure does not preclude the submission of requests for technical advice to the National Office from other offices of the Service.

.03 No-Rule Issues Part of Integrated Transaction.

If it is impossible for the Service to determine the tax consequences of an integrated transaction without knowing the resolution of an issue on which the Service will not issue rulings or determination letters under this revenue procedure involving a part of the transaction or a related transaction, the taxpayer must state in the request to the best of the taxpayer's knowledge and belief the tax consequences of the no-rule issue. The Service's ruling or determination letter will state that the Service did not consider, and no opinion is expressed upon, that issue. In appropriate cases the Service may decline to issue rulings or determination letters on such integrated transactions due to the relevance of the no-rule issue, despite the taxpayer's representation. See also section 4.02(2) of this revenue procedure.

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

.01 Specific Questions and Problems.

(1) Sections 40, 40A, 40B, 4041, 4081, 4083(a), and 6426. Alcohol, etc., Used as Fuel; Biodiesel and Renewable Diesel Used as Fuel; Sustainable Aviation Fuel; Imposition of Tax (§§ 4041 and 4081); Taxable Fuel; Credit for Alcohol Fuel, Biodiesel, and Alternative Fuel Mixtures. Whether a particular fuel or fuel mixture is subject to excise tax or whether a particular fuel or fuel mixture qualifies for an excise tax credit or payment, or a related income tax credit, under the Internal Revenue Code.

(2) Section 42. Low-Income Housing Credit. Whether under § 42(j)(4)(E) a casualty loss has been restored by reconstruction or replacement within a reasonable period of time. The Service may issue a determination letter in this case. See section 12 of Rev. Proc. 2023-1, this Bulletin.

(3) Section 45. Electricity Produced from Certain Renewable Resources, Etc. The allocation by a partnership of the § 45 credit, the validity of the partnership, or whether any taxpayer is a valid partner in the partnership.

(4) Section 45. Electricity Produced from Certain Renewable Resources, Etc. — Whether the taxpayer meets the requirements of § 45 or Notice 2010-54, 2010-40 I.R.B. 403, for refined coal.

(5) Sections 45. Electricity Produced from Certain Renewable Resources, Etc. — The application of the beginning of construction requirement under § 45.

(6) Section 45Q. — Credit for Carbon Oxide Sequestration. — The application of the beginning of construction requirement under § 45Q.

(7) Section 45Q. — Credit for Carbon Oxide Sequestration. — The allocation by a partnership of the § 45Q credit, the validity of the partnership, or whether any partner is a valid partner in the partnership.

(8) Section 47. Rehabilitation Credit. — The allocation by a partnership of the § 47 rehabilitation credit, the validity of the partnership, or whether any taxpayer is a valid partner in the partnership.

(9) Section 48. — Energy Credit. — The application of the beginning of construction requirement under § 48, including to a qualified investment credit facility for which a taxpayer makes an election under § 48(a)(5) to claim a credit under § 48 in lieu of a credit under § 45.

(10) Section 61. — Gross Income Defined. — Whether an amount is not included in a taxpayer's gross income under section 61 because the taxpayer receives the amount subject to an unconditional obligation to repay the amount.

(11) Section 61. — Gross Income Defined. — Whether amounts voluntarily deferred by a taxpayer under a deferred-compensation plan maintained by an organization described in § 501 (other than an eligible plan maintained by an eligible employer pursuant to the provisions of § 457(b)) are currently includible in the taxpayer's gross income.

(12) Section 61. — Gross Income Defined. — Whether a split-dollar life insurance arrangement is “materially modified” within the meaning of § 1.61-22(j)(2) of the Income Tax Regulations. (Also §§ 83, 301, 1401, 2501, 3121, 3231, 3306, 3401, and 7872.)

(13) Sections 61, 111, and 1001. — Gross Income Defined; Recovery of Tax Benefit Items; Determination of Amount of and Recognition of Gain or Loss. — Whether, in connection with a transaction involving the establishment or amendment of a welfare benefit fund (including Voluntary Employees' Beneficiary Associations (VEBAs)), a transfer of assets between welfare benefit funds (including VEBAs), or a new or different use of assets of a welfare benefit fund (including a VEBA), (i) the employer, plan sponsor, welfare benefit fund (including a VEBA), or covered individuals must include any amount in gross income under § 61 or the tax benefit rule, or (ii) the employer or welfare benefit fund (including a VEBA) have engaged in a sale or exchange of assets under § 1001.

(14) Sections 61, 451, and 1001. — Gross Income Defined; General Rule for Taxable Year of Inclusion; Determination of Amount of and Recognition of Gain or Loss. — Whether, under authorization by an appropriate state agency to recover certain costs pursuant to state specified cost recovery legislations, any investor-owned utility company realizes income upon: (i) the creation of an intangible property right; (ii) the transfer of that intangible property right; or (iii) the securitization of the intangible property right.

(15) 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 § 1.79-1(c)(2)(ii) of the Income Tax Regulations had the group consisted of fewer than 10 employees.

(16) 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 paid for the property involves a nonrecourse obligation.

(17) Section 83. — Property Transferred in Connection with Performance of Services. — Which corporation is entitled to the deduction under § 83(h) in cases in which a corporation undergoes a corporate division, if the facts are not similar to those described in Rev. Rul. 2002-1, 2002-1 C.B. 268.

(18) Section 101. — Certain Death Benefits. — Whether there has been a transfer for value for purposes of § 101(a) in situations involving a grantor and a trust when (i) substantially all of the trust corpus consists or will consist of insurance policies on the life of the grantor or the grantor's spouse, (ii) 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, (iii) 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 (iv) 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 §§ 673 to 677.

(19) Sections 101, 761, and 7701. — Certain Death Benefits; Terms Defined; Definitions. — Whether, in connection with the transfer of a life insurance policy to an unincorporated organization, (i) the organization will be treated as a partnership under §§ 761 and 7701, or (ii) the transfer of the life insurance policy to the organization will be exempt from the transfer for value rules of § 101, when substantially all of the organization's assets consist or will consist of life insurance policies on the lives of the members.

(20) Section 102. — Gifts and Inheritances. — Whether a transfer is a gift within the meaning of § 102(a).

(21) Section 105(h). — Amount Paid to Highly Compensated Individuals Under a Discriminatory Self-Insured Medical Expense Reimbursement Plan. — Whether a self-insured medical reimbursement plan satisfies the requirements of § 105(h) for a plan year.

(22) Section 107. — Rental Value of Parsonages. — Whether amounts distributed to a retired minister from a pension or annuity plan should be excludible from the minister's gross income as a parsonage allowance under § 107.

(23) Section 107. — Rental Value of Parsonages. — Whether an individual is a “minister of the gospel” for Federal tax purposes. (Also §§ 1402(a)(8), (c)(4), and (e), 3121(b)(8)(A), and 3401(a)(9).)

(24) Section 111. — See section 3.01(13), above.

(25) Section 115. — Income of States, Municipalities, Etc. — The results of transactions pursuant to a plan or arrangement created by state statute a primary objective of which is to enable participants to pay for the costs of a post-secondary education for themselves or a designated beneficiary, including: (i) whether the plan or arrangement, itself, is an entity separate from a state and, if so, how the plan or arrangement is treated for Federal tax purposes; and (ii) whether any contract under the plan or arrangement is a debt instrument and, if so, how interest or original issue discount attributable to the contract is treated for Federal tax purposes. (Also §§ 61, 163, 1275, 2501, and 7701.)

(26) Section 115. — Income of States, Municipalities, Etc. — Whether the income of membership organizations established by states exclusively to reimburse members for losses arising from workmen's compensation claims is excluded from gross income under § 115.

(27) Section 115. — Income of States, Municipalities, Etc. — Whether some, but not all, income of an entity is from the exercise of an essential government function in order to be excluded from gross income under § 115.

(28) Section 115. — Income of States, Municipalities, Etc. — Whether income accruing to a trust, or other entity, relating to or associated with a qualified retirement plan described in § 401(a) is excluded from gross income under § 115.

(29) Section 117. — Qualified Scholarships. — Whether amounts paid to research fellows and research associates are scholarships or fellowships excluded from wages for FICA tax purposes.

(30) Section 117. — Qualified Scholarships. — Whether an employer-related scholarship or fellowship grant is excludible from the employee's gross income, if there is no intermediary private foundation distributing the grants, as described in Rev. Proc. 76-47, 1976-2 C.B. 670.

(31) Section 118. — Contributions to the Capital of a Corporation. — Whether a transfer of an intertie as defined in section III. B. 2. of Notice 2016-36, 2016-25 I.R.B. 1029, meets all of the requirements under the safe harbor provided by Notice 2016-36.

(32) Section 119. — Meals or Lodging Furnished for the Convenience of the Employer. — Whether the value of meals or lodging is excludible from gross income by an employee who is a controlling shareholder of the employer.

(33) Section 121. — Exclusion of Gain from Sale of Principal Residence. — Whether property qualifies as the taxpayer's principal residence.

(34) Section 125. — Cafeteria Plans. — Whether amounts used to provide group-term life insurance under § 79, accident and health benefits under §§ 105 and 106, and dependent care assistance programs under § 129 are includible in the gross income of participants and considered “wages” for purposes of §§ 3401, 3121, and 3306 when the benefits are offered through a cafeteria plan.

(35) Section 162. — Trade or Business Expenses. — Whether compensation is reasonable in amount.

(36) Section 162. — Trade or Business Expenses. — Whether a taxpayer is engaged in a trade or business. This area does not include a request for a ruling that relies on a representation from a taxpayer that the taxpayer is or is not engaged in a trade or business, or a request for a ruling that relies on factual information provided by the taxpayer evidencing the active conduct of a trade or business (for example, a request that relies on the taxpayer's active conduct of a trade or business as evidenced by financial statements provided by the taxpayer).

(37) 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 in which the loan proceeds are used for commercial or business activities, or 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 §§ 61, 451, 461, 856, 1001, and 7701.)

(38) Sections 165, 381, and 1502. — Losses; Carryovers in Certain Corporate Acquisitions; Regulations. — In determining whether a loss for worthless securities is subject to § 165(g)(3), (i) whether the source of any gross receipts may be determined by reference to the source of gross receipts of a counter party to an intercompany transaction, as defined in § 1.1502-13(b)(1) (e.g., an intercompany distribution to which § 1.1502-13(f)(2) applies), other than an intercompany transaction to which § 381(a) applies, and (ii) in an intercompany transaction to which § 381(a) applies, whether the acquiring corporation takes into account historic gross receipts of the distributor or transferor corporation, if the intercompany transaction is part of a plan to claim a deduction for worthless securities under § 165(g)(3).

(39) Section 170. — Charitable, Etc., Contributions and Gifts. — Whether a charitable contribution deduction under § 170 is allowed for a transfer of an interest in a limited partnership or a limited liability company taxed as a partnership to an organization described in § 170(c).

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

(41) Section 170. — Charitable, Etc., Contributions and Gifts. — Whether an organization is or continues to be described in § 170(b)(1)(A) (other than clause (v)) or § 170(c)(2)(5), including, for example, whether changes in an organization's activities or operations will affect or jeopardize the organization's status as an organization described in those sections. The Associate Chief Counsel (EEE) will rule, however, on specific legal questions related to §§ 170(b)(1)(A) or 170(c) that are not otherwise described in this revenue procedure. See Rev. Proc. 2023-5, this Bulletin, for the procedures for obtaining determination letters on public charity status under § 170.

(42) Section 181. — Treatment of Certain Qualified Film and Television Productions. — The determination under § 1.181-1(a)(1) and (2) as to who is the owner of a qualified film or television production.

(43) Section 199. — Income Attributable to Domestic Production Activities. — The determination under § 1.199-3(f)(1) as to who is the taxpayer that has the benefits and burdens of ownership under Federal income tax principles of any qualifying production property (as defined in § 1.199-3(j)(1)), qualified film (as defined in § 1.199-3(k)), or utilities (as defined in § 1.199-3(l)) during the period in which a qualifying activity under § 199 occurs.

(44) Section 213. — 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.

(45) Section 216. — Deduction of Taxes, Interest, and Business Depreciation by Cooperative Housing Corporation Tenant-Stockholder. — Whether a unit constitutes an “apartment in a building” under § 216(b)(1)(B).

(46) Section 264. — Certain Amounts Paid in Connection with Insurance Contracts. — Whether § 264(d)(1) applies.

(47) Section 264(c)(1). — Contracts Treated as Single Premium 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.

(48) Sections 267, 304, 331, 332, 351, and 1502. Losses, Expenses, and Interest with Respect to Transactions Between Related Taxpayers; Redemption Through Use of Related Corporations; Gain or Loss to Shareholders in Corporate Liquidations; Complete Liquidations of Subsidiaries; Transfer to Corporation Controlled by Transferor; Regulations. — The treatment of transactions in which stock of a corporation is transferred with a plan or intention that the corporation be liquidated in a transaction intended to qualify under § 331.

(49) Section 269. — Acquisitions Made to Evade or Avoid Income Tax. — Whether an acquisition is within the meaning of § 269.

(50) 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 authorized by the revenue procedure providing optional rules for substantiating the amount of travel expenses for the period in which the expense was paid or incurred.

(51) Section 302. — Distributions in Redemption of Stock. — Whether § 302(b) 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 specific defaults by the corporation.

(52) Section 302. — Distributions in Redemption of Stock. — Whether § 302(b) 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.

(53) Section 302. — Distributions in Redemption of Stock. — Whether § 302(b) 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 future earnings or are subordinate to the claims of 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.

(54) Section 302. — Distributions in Redemption of Stock. — Whether the acquisition or disposition of stock described in § 302(c)(2)(B) has, or does 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. 85-19, 19851 C.B. 94; Rev. Rul. 79-67, 1979-1 C.B. 128; Rev. Rul. 77-293, 1977-2 C.B. 91; Rev. Rul. 57-387, 1957-2 C.B. 225; Rev. Rul. 56-584, 1956-2 C.B. 179; or Rev. Rul. 56-556, 1956-2 C.B. 177.

(55) Section 302(b)(4) and (e). — Redemption from Noncorporate Shareholder in Partial Liquidation; Partial Liquidation Defined. — The amount of working capital attributable to a business or portion of a business terminated that may be distributed in partial liquidation.

(56) Section 304. See section 3.01(48), above.

(57) Section 312. — Effect on Earnings and Profits. — The determination of the amount of earnings and profits of a corporation.

(58) Sections 331, 453, and 1239. — Gain or Loss to Shareholders in Corporate Liquidations; Installment Method; Gain from Sale of Depreciable Property Between Certain Related Taxpayers. — The tax effects of a transaction in which there is a transfer of property by a corporation to a partnership or other noncorporate 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.

(59) Section 331. See section 3.01(48), above.

(60) Sections 332, 351, 368, and 1036. — Complete Liquidations of Subsidiaries; Transfer to Corporation Controlled by Transferor; Definitions Relating to Corporate Reorganizations; Stock for Stock of Same Corporation. — Whether a transaction qualifies under § 332, 351, or 1036 for nonrecognition treatment or whether it constitutes a corporate reorganization within the meaning of § 368, except a transaction intended to qualify under either § 368(a)(1)(D) and § 355 or § 368(a)(1)(G) and § 355, and whether various tax consequences (such as nonrecognition and basis) result from the application of that section. The Service will instead rule only on significant issues presented in a transaction described in § 332, 351, 368, or 1036. Additionally, the Service will rule on one or more significant issues under the Code sections that address the tax consequences (such as nonrecognition and basis) that result from the qualification of a transaction under § 332, 351, 368, or 1036. See section 6.03(2) of Rev. Proc. 2023-1, this Bulletin.

SIGNIFICANT ISSUE: A significant issue is a germane and specific issue of law, provided that a ruling on the issue would not be a comfort ruling, as defined in section 6.11 of Rev. Proc. 2023-1, or the conclusion in such a ruling otherwise would not be essentially free from doubt. An issue is germane if resolution of the issue is necessary to determine an element of the tax treatment of the transaction. An issue is specific if it is the narrowest articulation of the germane issue. A change of circumstances arising after a transaction ordinarily does not present a significant issue with respect to the transaction.

OBTAINING A LETTER RULING: To obtain a letter ruling on a significant issue presented in a transaction, the taxpayer in its letter ruling request must comply with all the requirements set forth in section 6.03(2) of Rev. Proc. 2023-1, as well as Rev. Proc. 2023-1, in general.

(61) Section 332. See section 3.01(48), above.

(62) Section 351. — See sections 3.01(48) and (60), above.

(63) Section 355. — Distribution of Stock and Securities of a Controlled Corporation. — Whether the distribution of stock of a controlled corporation will be carried out for one or more corporate business purposes; whether the transaction will be used principally as a device; and whether the distribution and an acquisition by one or more persons of stock in the distributing corporation or the controlled corporation will be parts of a plan (or series of related transactions) under § 355(e) (“§ 355(e) Plan”). Notwithstanding the preceding sentence, the Service will rule with respect to a significant issue, provided the issue is a legal issue and is not inherently factual in nature, pertaining to (i) the corporate business requirement under § 1.355-2(b), (ii) the device prohibition under § 355(a)(1)(B) and § 1.355-2(d), and (iii) whether the distribution and one or more acquisitions are parts of a § 355(e) Plan, for example the effect of a redemption. The Service will rule with respect to an issue described in clause (iii) of the preceding sentence only if an adverse determination on such issue would result in the acquisition by one or more persons of stock representing a 50-percent or greater interest in the distributing corporation or the controlled corporation as part of a § 355(e) Plan.

(64) Section 358. — Basis to Distributees. — 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 § 368(a)(1)(B).

(65) Section 368. — See section 3.01(60), above.

(66) Section 381. — See section 3.01(38), above.

(67) Section 403(b). — Taxability of Beneficiary Under Annuity Purchased by Section 501(c)(3) Organization or Public School. — Whether the form of a plan satisfies the requirements of § 403(b) as provided in Rev. Proc. 2023-4, this Bulletin.

(68) Section 409A. — Inclusion in Gross Income of Deferred Compensation Under Nonqualified Deferred Compensation Plans. — The income tax consequences of establishing, operating, or participating in a nonqualified deferred compensation plan within the meaning of § 1.409A-1(a); whether a plan is described in § 1.409A-1(a)(3)(iv) or (v); whether a plan is a bona fide vacation leave, sick leave, or compensatory time plan described in § 1.409A-1(a)(5); and whether a plan provides for the deferral of compensation under § 1.409A-1(b).

(69) Section 411(d)(3). — Termination or Partial Termination; Discontinuance of Contributions. — Whether there has been a partial termination of an employee plan. The Service may issue a determination letter involving the partial termination of an employee plan. See Rev. Proc. 2023-4, this Bulletin.

(70) Section 414(d). — Governmental Plan. — Whether a plan is a governmental plan under § 414(d).

(71) Section 419(e). — Welfare Benefit Fund. — Whether a captive insurance arrangement through which an employer provides health insurance to current or retired employees is a welfare benefit fund.

(72) Section 424. — Definition and Special Rules. — Whether the substitution of a new Incentive Stock Option (ISO) for an old ISO, or the assumption of an old ISO, by an employer by reason of a corporate transaction constitutes a modification which results in the issuance of a new option by reason of failing to satisfy the spread test requirement of § 424(a)(1) or the ratio test requirement of § 1.425-1(a)(4). The Service will continue to rule on the issue of whether the new ISO or the assumption of the old ISO gives the employee additional benefits not present under the old option within the meaning of § 424(a)(2).

(73) 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.

(74) Section 451. — General Rule for Taxable Year of Inclusion. — The tax consequences of nonqualified unfunded deferred-compensation arrangements in which the arrangements fail to meet the requirements of Rev. Proc. 92-65, 19922 C.B. 428, and Rev. Proc. 71-19, 1971-1 C.B. 698.

(75) Sections 451 and 457. — General Rule for Taxable Year of Inclusion; Nonqualified Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations. — The tax consequences to unidentified independent contractors in nonqualified unfunded deferred compensation plans. This applies to plans established under § 451 by employers in the private sector and to plans of state and local governments and tax-exempt organizations under § 457. However, a ruling with respect to a specific independent contractor's participation in such a plan may be issued.

(76) Section 451. — See section 3.01(14), above.

(77) Section 453. — See section 3.01(58), above.

(78) Section 457. — See section 3.01(75), above.

(79) Section 457A. — Nonqualified Deferred Compensation from Certain Tax Indifferent Parties. — The income tax consequences of establishing, operating, or participating in a nonqualified deferred compensation plan within the meaning of § 457A(d)(3).

(80) Section 501. — Exemption from Tax on Corporations, Certain Trusts, Etc. — Whether an organization is or continues to be exempt from taxation under § 501(a) as an organization described in §§ 501(c) or 501(d), including, for example, whether changes in an organization's activities or operations will affect or jeopardize the organization's exempt status. The Associate Chief Counsel (EEE) will rule, however, on specific legal questions related to §§ 501(c) or 501(d) that are not otherwise described in this revenue procedure. For example, although the Associate Chief Counsel (EEE) would not rule on whether a change in a § 501(c)(3) organization's activities would jeopardize the organization's exempt status, the Associate Chief Counsel (EEE) would (subject to the limitations described in this revenue procedure) rule on whether such new activities would further an exempt purpose described in § 501(c)(3). See Rev. Proc. 2023-5, this Bulletin, for the procedures for issuing determination letters on tax-exempt status under § 501.

(81) Sections 501, 511, 512, 513, and 514. — Exemption from Tax on Corporations, Certain Trusts, Etc.; Imposition of Tax on Unrelated Business Income of Charitable, Etc., Organizations; Unrelated Business Taxable Income; Unrelated Trade or Business; Unrelated Debt-Financed Income. — Whether a joint venture between a tax-exempt organization and a for-profit organization affects an organization's exempt status, furthers an exempt purpose, or results in unrelated business income.

(82) Sections 507, 664, 4941, and 4945. — Termination of Private Foundation Status; Charitable Remainder Trusts; Taxes on Self-Dealing; Taxes on Taxable Expenditures. — Issues pertaining to the tax consequences of the termination of a charitable remainder trust (as defined in § 664) before the end of the trust term as defined in the trust's governing instrument in a transaction in which the trust beneficiaries receive their actuarial shares of the value of the trust assets.

(83) Section 509. — Private Foundation Defined. — Whether an organization is or continues to be described in § 509(a) including, for example, whether changes in an organization's activities or operations will affect or jeopardize the organization's status as a public charity described in § 509(a)(1)(4). The Associate Chief Counsel (EEE) will rule, however, on specific legal questions related to § 509(a) that are not otherwise described in this revenue procedure. See Rev. Proc. 2023-5, this Bulletin, for the procedures for obtaining determination letters on public charity status under § 509.

(84) Sections 511, 512, 513, and 514. — Imposition of Tax on Unrelated Business Income of Charitable, Etc., Organizations; Unrelated Business Taxable Income; Unrelated Trade or Business; Unrelated Debt-Financed Income. — Whether unrelated business income tax issues arise when charitable lead trust assets are invested with charitable organizations.

(85) Sections 511, 512, 513, and 514. — See section 3.01(81), above.

(86) Section 529. — Qualified Tuition Programs. — Whether a state-run tuition program qualifies under § 529.

(87) Sections 542, 543, and 544. — Definition of Personal Holding Company; Personal Holding Company Income; Rules for Determining Stock Ownership. — Whether the application of § 544(a) causes a corporation to meet the stock ownership requirements under § 542(a)(2), § 543(a)(4), § 543(a)(6), or § 543(a)(7).

(88) Section 641. — Imposition of Tax. — Whether the period of administration or settlement of an estate or a trust (other than a trust described in § 664) is reasonable or unduly prolonged.

(89) 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.

(90) Section 643(f). — Treatment of multiple trusts. — Whether two or more trusts shall be treated as one trust for purposes of subchapter J of chapter 1.

(91) Section 664. — Charitable Remainder Trusts. — Whether the settlement of a charitable remainder trust upon the termination of the noncharitable interest is made within a reasonable period of time.

(92) Section 664. — See section 3.01(82), above.

(93) Section 671. — Trust Income, Deductions, and Credits Attributable to Grantors and Others as Substantial Owners. — Whether the grantor will be considered the owner of any portion of a trust when (i) substantially all of the trust corpus consists or will consist of insurance policies on the life of the grantor or the grantor's spouse, (ii) 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, (iii) 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 (iv) 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 §§ 673 to 677.

(94) Section 704(b). — Determination of Distributive Share. — Whether the allocation to a partner under the partnership agreement of income, gain, loss, deduction, or credit (or an item thereof) has substantial economic effect or is in accordance with the partner's interest in the partnership.

(95) Section 761. — Terms Defined. — Matters relating to the validity of a partnership or whether a person is a partner in a partnership.

(96) Section 761. — See section 3.01(19), above.

(97) Section 856. — Definition of 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 § 856, if the activities of the corporations are integrated.

(98) Section 1001. — Determination of Amount of and Recognition of Gain or Loss. — Whether the termination of a charitable remainder trust before the end of the trust term as defined in the trust's governing instrument, in a transaction in which the trust beneficiaries receive their actuarial shares of the value of the trust assets, is treated as a sale or other disposition by the beneficiaries of their interests in the trust.

(99) Sections 1001 and 1058. — Determination of Amount of and Recognition of Gain or Loss; Transfers of Securities Under Certain Agreements. — Whether a taxpayer recognizes gain or loss on the transfer of virtual currency in exchange for a contractual obligation that requires the return of identical virtual currency to the taxpayer or on the transfer of identical virtual currency to the taxpayer in satisfaction of the contractual obligation.

(100) Section 1001. — See section 3.01(13) and (14), above.

(101) Section 1033. — Involuntary Conversions. — Whether the replacement or proposed replacement of compulsorily or involuntarily converted property does or does not qualify under § 1033(a), if the taxpayer has already filed a Federal tax return for the first taxable year in which any of the gain was realized from the converted property. The Service may issue a determination letter in this case. See section (102) 12.01 of Rev. Proc. 2023-1, this Bulletin.

(102) Section 1036. — See section 3.01(60), above.

(103) Section 1058. — See section 3.01(99), above.

(104) Section 1221. — Capital Asset Defined. — Whether specialty stock allocated to an investment account by a registered specialist on a national securities exchange is a capital asset.

(105) Section 1221. — Capital Asset Defined. — Whether the termination of a charitable remainder trust before the end of the trust term as defined in the trust's governing instrument, in a transaction in which the trust beneficiaries receive their actuarial shares of the value of the trust assets, is treated as a sale or exchange of a capital asset by the beneficiaries.

(106) Section 1239. — See section 3.01(58), above.

(107) Section 1361. — S Corporation Defined. — Whether a state law limited partnership electing under § 301.7701-3 to be classified as an association taxable as a corporation has more than one class of stock for purposes of § 1361(b)(1)(D). The Service will treat any request for a ruling on whether a state law limited partnership is eligible to elect S corporation status as a request for a ruling on whether the partnership complies with § 1361(b)(1)(D).

(108) Section 1362(f). — Inadvertent Invalid Elections or Terminations. — Principal purpose determinations regarding the one class of stock requirement. — Addressing the validity or continuation of an S election in situations regarding the one class of stock requirement that require a determination of the existence of a principal purpose because such a determination is inherently factual in nature. See section 6.02 of Rev. Proc. 2023-1 (or any successor revenue procedure). Accordingly, the IRS will not issue a PLR under § 1362(f) addressing: (a) For purposes of determining whether all outstanding shares of stock confer identical rights to distribution and liquidation proceeds under §1.1361-1(l)(2), whether a principal purpose of a commercial contractual agreement, buy-sell agreement, an agreement restricting the transferability of stock, or a redemption agreement is to circumvent the one class of stock requirement of § 1361(b)(1)(D) and § 1.1361-1(l) (see §1.1361-1(l)(2)(i) and (iii)(A)(1)); or (b) For purposes of determining whether an instrument, obligation, or arrangement is treated as a second class of stock, whether: (i) A principal purpose of issuing or entering into an instrument, obligation, or arrangement is to circumvent the rights to distribution or liquidation proceeds conferred by the outstanding shares of stock or to circumvent the limitation on eligible shareholders contained in § 1.1361-1(b)(1) (see §1.1361-1(l)(4)(ii)(A)(2)); or (ii) A principal purpose of an unwritten advance or proportionately held obligation is to circumvent the rights of the outstanding shares of stock or the limitation on eligible shareholders under § 1.1361-1(l)(4)(ii)(A) (2) (see §1.1361-1(l)(4)(ii)(B)).

(109) Section 1362(f). — Inadvertent Invalid Elections or Terminations. — Certain inadvertent errors, omissions, or missing signatures. — Addressing the validity or continuation of an S election or a QSub election: (a) Determinations of the validity or continuation of an S election with regard to one or more disproportionate distributions (as defined in section 2.03(2) of Rev. Proc. 2019-22) if the governing provisions confer identical rights to distribution and liquidation proceeds. See § 1.1361-1(l)(1) and (2); (b) Whether a missing administrative letter from the IRS accepting an election for a corporation to be an S corporation or accepting an election for a corporation to be a QSub affects the validity or continuation of the election; (c) Whether the filing of a Federal income tax return that is inconsistent with a corporation's status as an S corporation or a QSub affects the validity or continuation of the S election or QSub election (as appropriate).

(110) Section 1502. Regulations. If a member of an affilated group fails to fi Form 1122 or fails to join in the making of a consolidated return due to a mistake of law or fact, or inadvertence, whether such member will be treated as if it had filed a Form 1122. The Service may issue a determination letter in this case. See section 12.01 of Rev. Proc. 2023-1, this Bulletin. But see also section 6.07 of this revenue procedure.

(111) Section 1502. See sections 3.01(38) and (48), above.

(112) Section 1551. — Disallowance of the Benefits of the Graduated Corporate Rates and Accumulated Earnings Credit. — Whether a transfer is within § 1551.

(113) Section 2031. — Definition of Gross Estate. — Actuarial factors for valuing interests in the prospective gross estate of a living person.

(114) Section 2055. — Transfers for Public, Charitable, and Religious Uses. — Whether a charitable contribution deduction under § 2055 is allowed for the transfer of an interest in a limited partnership or a limited liability company taxed as a partnership to an organization described in § 2055(a).

(115) Section 2512. — Valuation of Gifts. — Actuarial factors for valuing prospective or hypothetical gifts of a donor.

(116) Section 2522. — Charitable and Similar Gifts. — Whether a charitable contribution deduction under § 2522 is allowable for a transfer of an interest in a limited partnership or a limited liability company taxed as a partnership to an organization described in § 2522(a).

(117) Section 2601. — Tax Imposed. — Whether a trust exempt from generation-skipping transfer (GST) tax under § 26.2601-1(b)(1), (2), or (3) of the Generation-Skipping Transfer Tax Regulations will retain its GST exempt status when there is a modification of a trust, change in the administration of a trust, or a distribution from a trust in a factual scenario that is similar to a factual scenario set forth in one or more of the examples contained in § 26.2601-1(b)(4)(i)(E).

(118) Sections 3121, 3306, and 3401. — Definitions. — For purposes of determining prospective employment status, whether an individual will be an employee or an independent contractor. A ruling with regard to prior employment status may be issued.

(119) Sections 3121, 3306, and 3401. — Definitions. — Who is the employer of an “employee-owner” as defined in § 269A(b)(2).

(120) Sections 3121, 3306, and 3401. — Definitions. — For purposes of determining worker classification pursuant to the filing of Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, whether a worker is a bona fide partner and, therefore, not an employee of the business.

(121) Sections 3121 and 3401. — Definitions. — For purposes of determining worker classification pursuant to the filing of Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, whether a state or local government worker who may be performing services under an agreement entered into pursuant to Section 218 of the Social Security Act is an employee or independent contractor for federal employment tax purposes.

(122) Section 4041. — See section 3.01(1), above.

(123) Section 4052(f)(1). — Certain Repairs and Modifications Not Treated as Manufacture. — Whether a chassis repaired or modified using a “glider kit” is treated as manufactured or produced if the cost of the repairs or modifications does not exceed 75 percent of the retail price of a comparable new chassis.

(124) Section 4081. — See section 3.01(1), above.

(125) Section 4083. — See section 3.01(1), above.

(126) Section 4191. Medical Devices. Whether a device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) intended for humans is not a “taxable medical device” within the meaning of § 4191(b)(1) due to the application of the exemption provided in § 4191(b)(2) for eyeglasses, contact lenses, hearing aids, and any other medical device determined by the Secretary to be of a type which is generally purchased by the general public at retail for individual use.

(127) Section 4216(b). — Constructive Sale Price. — Whether a particular methodology for determining the tax base is allowable under the constructive sale price rules.

(128) Section 4671. — Imposition of Tax on Imported Substances. — Whether the amount of tax or tax rate for a particular substance is correct.

(129) Sections 4940 and 4942. — Excise Tax Based on Investment Income; Taxes on Failure to Distribute Income. — Whether an organization is or continues to be an “operating foundation” described in § 4942(j)(3) or an “exempt operating foundation” described in § 4940(d)(2), including, for example, whether changes in an organization's activities or operations will affect or jeopardize the organization's status as an operating foundation or exempt operating foundation. The Associate Chief Counsel (EEE) will rule, however, on specific legal questions related to §§ 4940(d)(2) or 4942(j)(3) that are not otherwise described in this revenue procedure. See Rev. Proc. 2023-5, this Bulletin, for the procedures for obtaining determination letters on foundation status under §§ 4940 and 4942.

(130) Section 4941. — Taxes on Self-Dealing. — Whether transactions during the administration of an estate or trust meet the requirements of the exception to § 4941 set forth in §53.4941(d)-1(b)(3) of the Private Foundation Excise Tax Regulations, in cases in which a disqualified person issues a promissory note in exchange for property of an estate or trust.

(131) Section 4941. — Taxes on Self-Dealing. — Whether an act of self-dealing occurs when a private foundation (or other entity subject to § 4941) owns or receives an interest in a limited liability company or other entity that owns a promissory note issued by a disqualified person.

(132) Section 4941. — See section 3.01(82), above.

(133) Section 4942. — See section 3.01(129), above.

(134) Section 4945. — See section 3.01(82), above.

(135) Section 4958. — Taxes on Excess Benefit Transactions. — Whether a compensation or property transaction satisfies the rebuttable presumption that the transaction is not an excess benefit transaction as described in § 53.4958-6 of the Excess Benefit Transactions Excise Tax Regulations.

(136) Section 4975(d). — Exemptions. — Whether the renewal, extension, or refinancing of an exempt loan satisfies the requirements of § 4975(d)(3). Also, whether the pre-payment of employee stock ownership plan (ESOP) loans satisfies the requirements of § 4975(d)(3) other than with respect to plan termination.

(137) Section 4976(b)(1)(C). — Disqualified Benefit. — Whether a transfer of assets between welfare benefit funds (including VEBAs), or a new or different use of assets of a welfare benefit fund (including a VEBA), results in a reversion to the employer.

(138) Section 4980. — Tax on Reversion of Qualified Plan Assets to Employer. — Whether an employer reversion from a qualifiplan occurs for purposes of § 4980(c)(2) in connection with a transaction in which (1) less than 100 percent of the assets of a defined benefit plan are spun off to another defined benefit plan sponsored or maintained by the same employer (or any entity that would be considered to be in a group of employers treated as a single employer with the employer under § 414(b), (c), (m), or (o)); (2) the defined benefit plan receiving the assets that have been spun off is terminated within a short period of time after receiving those assets; and (3) assets remain in the trust of the terminated definws benefit plan after all benefiare distributed to or on behalf of all participants and their beneficiaries.

(139) Section 4980B. — Failure to Satisfy Continuation Coverage Requirements of Group Health Plans. — Whether an action is “gross misconduct” within the meaning of § 4980B(f)(3)(B). (See section 3.05 of Rev. Proc. 87-28, 1987-1 C.B. 770, 771.)

(140) Section 4980H. — Shared Responsibility for Employers Regarding Health Coverage. — Whether an employer is required to make an assessable payment under § 4980H(a) or (b).

(141) Section 6050P. — Returns Relating to the Cancellation of Indebtedness by Certain Entities. — Requests for a ruling that the creditor is not required to report a discharge that include as grounds for the request a dispute regarding the underlying liability.

(142) Section 6050P. — Returns Relating to the Cancellation of Indebtedness by Certain Entities. — Whether amounts reduced pursuant to the terms of a debt instrument are reportable under § 6050P and the regulations.

(143) Section 6050P. — Returns Relating to the Cancellation of Indebtedness by Certain Entities. — Whether amounts discharged in a nonlending transaction are reportable under § 6050P and the regulations.

(144) Section 6166. — Extension of Time for Payment of Estate Tax Where Estate Consists Largely of Interest in Closely Held Business. — Requests involving § 6166 if there is no decedent.

(145) Section 6426. — See section 3.01(1), above.

(146) Section 6901. — Transferred Assets. — Whether a taxpayer is liable for tax as a transferee.

(147) Section 7216. — Disclosure or Use of Information by Preparers of Returns. — Whether a criminal penalty is applicable for any disclosure or use of information by preparers of returns.

(148) 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.

(149) Section 7701. — Definitions. — The classification for Federal tax purposes of a fideicomiso or other land trust created under local law, applying the principles of Rev. Rul. 2013-14, 2013-26 I.R.B. 1267, or Rev. Rul. 92-105, 1992-2 C.B. 204.

(150) Section 7701. — See section 3.01(19), above.

(151) Section 7704. — Certain Publicly Traded Partnerships Treated as Corporations. — Whether interests in a partnership that are not traded on an established securities market (within the meaning of § 7704(b) and § 1.7704-1(b) of the Procedure and Administration Regulations) are readily tradable on a secondary market or the substantial equivalent thereof under § 1.7704-1(c)(1). This specifically includes, but is not limited to, whether an investment fund or portfolio supporting variable contract arrangements of life insurance companies is a publicly traded partnership.

(152) Section 9815. — Additional Market Reforms. — Whether an insured group health plan satisfies the requirements of § 2716 of the Public Health Service Act, Prohibition on Discrimination in Favor of Highly Compensated Individuals, as incorporated into the Code by § 9815.

.02 General Areas.

(1) Whether the economic substance doctrine is relevant to any transaction or whether any transaction complies with the requirements of § 7701(o).

(2) The results of transactions that lack a bona fide business purpose or have as their principal purpose the reduction of Federal taxes.

(3) 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.

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

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

(6) A matter involving the regulations governing practice before the Service under 31 CFR Part 10 (reprinted as Treasury Department Circular No. 230).

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

(8) Whether a completed transaction can be rescinded for Federal income tax purposes.

(9) The income tax (including unrelated business income tax) or excise tax consequences of the contribution of stock options to, or their subsequent exercise from, plans described in Part 1 of Subchapter D of Chapter 1 of Subtitle A of the Code.

(10) Questions that the Service determines, in its discretion, should not be answered in the general interests of sound tax administration, including due to resource constraints.

(11) Any frivolous issue, as that term is defined in section 6.10 of Rev. Proc. 20231, this Bulletin.

(12) A request that does not comply with the provisions of Rev. Proc. 2023-1, this Bulletin.

SECTION 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. — General Business Credit; Carryback and Carryforward of Unused Credits; Amount of Credit; Energy Credit. — Application of these sections if 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, if 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 the liability for the indebtedness, is in another party.

(4) Section 62(c). — Certain Arrangements Not Treated as Reimbursement Arrangements. — Whether amounts related to a salary reduction and paid under a purported reimbursement or other expense allowance arrangement will be treated as paid under an “accountable plan” in accordance with § 1.62-2(c)(2).

(5) Sections 83 and 451. — Property Transferred in Connection with Performance of Services; General Rule for Taxable Year of Inclusion. — When compensation is realized by a person who, in connection with the performance of services, is granted a nonstatutory option without a readily ascertainable fair market value to purchase stock at a price that is less than the fair market value of the stock on the date the option is granted.

(6) Sections 101 and 7702. — Certain Death Benefits; Life Insurance Contract Defined. — Whether amounts received under an arrangement with an entity that is not regulated as an insurance company may be treated as received under a “life insurance contract” within the meaning of §§ 101(a) and 7702.

(7) Section 103. — Interest on State and Local Bonds. — Whether the interest on state or local bonds will be excludible from gross income under § 103(a), 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 or local bonds prior to their expenditure.

(8) Section 141. — Private Activity Bond; Qualified Bond. — Whether state or local bonds will meet the “private business use test” and the “private security or payment test” under § 141(b)(1) and (2) in situations in which 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 available output of the facility as defined in § 1.141-7(b)(1). In similar situations, the Service will not ordinarily issue rulings concerning questions arising under paragraphs (3), (4), and (5) of § 141(b).

(9) Sections 142 and 144(a). — Exempt Facility Bond; Qualified Small Issue Bond. — Whether an issue of private activity bonds meets the requirements of § 142 or § 144(a), if the sum of —

(i) the portion of the proceeds used to finance a facility in which an owner (or related person) or a lessee (or a related person) is a user of the facility both after the bonds are issued and at any time before the bonds were issued, and

(ii) the portion used to pay issuance costs and nonqualified costs equals more than 5 percent of the net proceeds, as defined in § 150(a)(3).

(10) Sections 162 and 262. — Trade or Business Expenses; Personal, Living, and Family Expenses. — Whether expenses are nondeductible commuting expenses, except for situations governed by Rev. Rul. 99-7, 1999-1 C.B. 361.

(11) Section 162(m). — Certain Excessive Employee Remuneration. — Whether the deduction limit under § 162(m) applies to compensation attributable to services performed for a related partnership.

(12) Section 163. — See section 4.01(3), above.

(13) Section 165. — Losses. — Whether stock in a corporation has been abandoned.

(14) Section 167. — Depreciation.

(i) Useful lives of assets.

(ii) Depreciation rates.

(iii) Salvage value of assets.

(15) Sections 167 and 168. — Depreciation; Accelerated Cost Recovery System. — Application of those sections in which the formal ownership of property is in a party other than the taxpayer except when title is held merely as security.

(16) Section 170. — Charitable, Etc., Contributions and Gifts. — Whether a transfer to a pooled income fund described in § 642(c)(5) qualifies for a charitable contribution deduction under § 170(f)(2)(A).

(17) Section 170. — Charitable, Etc., Contributions and Gifts. — Whether a transfer to a charitable remainder trust described in § 664 that provides for annuity or unitrust payments for one or two measuring lives qualifies for a charitable deduction under § 170(f)(2)(A).

(18) Section 170. — 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.

(19) Section 199A. — Qualified Business Income. — Whether a taxpayer or relevant passthrough entity is engaged in a specified service trade or business.

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

(21) Section 262. — See section 4.01(10), above.

(22) Section 265(a)(2). — Interest. — Whether indebtedness is incurred or continued to purchase or carry obligations the interest on which is wholly exempt from the taxes imposed by Subtitle A.

(23) Section 302. — Distributions 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.

(24) Section 302(b)(4) and (e). — Redemption from Noncorporate Shareholder in Partial Liquidation; Partial Liquidation Defined. — Whether a distribution will qualify as a distribution in partial liquidation under § 302(b)(4) and (e)(1)(A), unless it results in a 20 percent or greater reduction in (i) gross revenue, (ii) net fair market value of assets, and (iii) employees. (Partial liquidations that qualify as § 302(e)(2) business terminations are not subject to this provision.)

(25) Section 306. — Dispositions of Certain Stock. — Whether the distribution, 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 § 306(b)(4).

(26) Sections 331 and 346(a). — Gain or Loss to Shareholders in Corporate Liquidations; Complete Liquidation. — 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.

(27) Section 351. — Transfer to Corporation Controlled by Transferor. — Whether § 351 applies to the transfer of an interest in real property by a cooperative housing corporation (as described in § 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.

(28) Section 355. — Distribution of Stock and Securities of a Controlled Corporation. — Whether the active business requirement of § 355(b) is met when, within the 5-year period described in § 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 § 351(a) or § 368(a)(1)(D).

(29) Section 355. — Distribution of Stock and Securities of a Controlled Corporation. — Any issue relating to the qualification, under § 355 and related provisions, of a distribution, or another distribution which is part of the same plan or series of related transactions, if, immediately after any such distribution, the fair market value of the gross assets of the trade(s) or business(es) on which the distributing corporation or the controlled corporation relies to satisfy the active trade or business requirement of § 355(b) is less than five percent of the fair market value of the total gross assets of such corporation.

For purposes of determining the fair market value of the total gross assets of such corporation and of the gross assets of such trade(s) or business(es), (i) all members of a separate affiliated group, within the meaning of § 355(b)(3)(B), are treated as one corporation; and (ii) if the distributing corporation or the controlled corporation relies on an active trade or business of a partnership for purposes of § 355(b), such corporation is treated as owning its ratable share of the gross assets of the partnership.

This section 4.01(29) does not apply if (i) all the stock of the controlled corporation that is distributed in the distribution is distributed to one or more members of the affiliated group, as defined in § 243(b)(2)(A), of which the distributing corporation is a member; and (ii) such distribution is not part of a plan or series of related transactions pursuant to which stock of any corporation will be distributed outside such affiliated group in a distribution described in this section 4.01(29) or section 5.01(3) of this revenue procedure. See also, section 6.03(2)(b), Rev. Proc. 2023-1, this Bulletin.

(30) Section 355. — Distribution of Stock and Securities of a Controlled Corporation. — Any issue under § 355(e) other than whether a distribution and an acquisition are part of a plan (i.e., any non-plan issue). Notwithstanding the preceding sentence, the Service generally will rule on a non-plan issue or issues (e.g., whether a corporation constitutes a predecessor of distributing) if an adverse ruling on such non-plan issue or issues would result in there being a direct or indirect acquisition by one or more persons of stock representing a 50-percent or greater interest in the distributing corporation or the controlled corporation that is part of a plan under § 355(e).

(31) Section 441(i). — Taxable Year of Personal Service Corporations. — Whether the principal activity of the taxpayer during the testing period for the taxable year is the performance of personal services within the meaning of §1.441-3(c)(1)(iii).

(32) Section 448(d)(2)(A). — Limitation on Use of Cash Method of Accounting; Qualified Personal Service Corporation. — Whether 95 percent or more of the time spent by employees of the corporation, serving in their capacity as such, is devoted to the performance of services within the meaning of § 1.448-1T(e)(4)(i).

(33) Section 451. — General Rule for Taxable Year of Inclusion. — The tax consequences of a nonqualified deferred compensation arrangement using a grantor trust if the trust fails to meet the requirements of Rev. Proc. 92-64, 1992-2 C.B. 422.

(34) Section 451. — General Rule for Taxable Year of Inclusion. — The income tax consequences as a result of being a beneficiary of a trust that an Indian tribe (as defined in 25 U.S.C. § 2703(5)) establishes to receive and invest per capita payments for its members under the Indian Gaming Regulatory Act (25 U.S.C. §§ 2701 through 2721).

(35) Section 451. — See section 4.01(5), above.

(36) Section 584. — Common Trust Funds. — Whether a common trust fund plan meets the requirements of § 584. (For § 584 plan drafting guidance, see Rev. Proc. 92-51, 1992-1 C.B. 988.)

(37) Section 642. — Special Rules for Credits and Deductions. — Whether a pooled income fund satisfies the requirements described in § 642(c)(5).

(38) Section 664. — Charitable Remainder Trusts. — Whether a charitable remainder trust that provides for annuity or unitrust payments for one or two measuring lives or for annuity or unitrust payments for a term of years satisfies the requirements described in § 664.

(39) Section 664. — Charitable Remainder Trusts. — Whether a trust that will calculate the unitrust amount under § 664(d)(3) qualifies as a § 664 charitable remainder trust when a grantor, a trustee, a beneficiary, or a person related or subordinate to a grantor, a trustee, or a beneficiary can control the timing of the trust's receipt of trust income from a partnership or a deferred annuity contract to take advantage of the difference between trust income under § 643(b) and income for Federal income tax purposes for the benefit of the unitrust recipient.

(40) Sections 671 to 679. — Grantors and Others Treated as Substantial Owners. — In a nonqualified, unfunded deferred compensation arrangement described in Rev. Proc. 92-64, 1992-2 C.B. 422, the tax consequences of the use of a trust, other than the model trust described in that revenue procedure.

(41) Sections 671 to 679. — Grantors and Others Treated as Substantial Owners. — Whether an Indian tribe (as defined in 25 U.S.C. § 2703(5)) that establishes a trust to receive and invest per capita payments for its members under the Indian Gaming Regulatory Act (25 U.S.C. §§ 2701-2721) is the grantor and owner of the trust.

(42) Section 678. Person Other than Grantor Treated as Substantial Owner. Whether a person will be treated as the owner of any portion of a trust over which that person has a power to withdraw the trust property (or had such power prior to a release or modification, but retains other powers which would cause that person to be the owner of the trust under § 671 if the person were the grantor), other than a power which would constitute a general power of appointment within the meaning of § 2041, if the trust purchases the property from that person with a note and the value of the assets with which the trust was funded by the grantor is nominal compared to the value of the property purchased.

(43) Section 679. — See sections 4.01(40) and 4.01(41), above.

(44) Section 851. — Definition of Regulated Investment Company. — Any issue relating to the treatment of a corporation as a regulated investment company under § 851 and related provisions that requires a determination whether a financial instrument or position is a security as defined in the Investment Company Act of 1940.

(45) Section 856. Definition of Real Estate Investment Trust. Whether an outdoor advertising display constitutes real property for purposes of § 856. However, if the real estate investment trust has made an election under § 1.1033(g)-1(b), the Service may rule on whether an asset that is not within the scope of the election, but is related to the outdoor advertising display, constitutes real property for purposes of § 856.

(46) Section 1031(f). — Special Rules for Exchanges Between Related Persons. — Except in the case of (i) a transaction involving an exchange of undivided interests in different properties that results in each taxpayer holding either the entire interest in a single property or a larger undivided interest in any of the properties or (ii) a disposition of property in a nonrecognition transaction in which the taxpayer or the related party receives no cash or other property that results in gain recognition, whether an exchange described in § 1031(f) involving related parties, or a subsequent disposition of property involved in the exchange, has as one of its principal purposes the avoidance of Federal income tax, or is part of a transaction (or series of transactions) structured to avoid the purposes of § 1031(f).

(47) Section 1362. — Election; Revocation; Termination. — All situations in which the Service has provided an automatic approval procedure or administrative procedure for an S corporation or its shareholders to obtain the following: (i) Relief for late S corporation elections, qualified subchapter S subsidiary elections, qualified subchapter S trust elections, or electing small business trust elections, see Rev. Proc. 2013-30, 201336 I.R.B. 173 (For instructions on how to seek this relief, see Rev. Proc. 2013-30.); or (ii) Retroactive corrective relief regarding non-identical governing provisions for S corporations meeting the eligibility requirements of Rev. Proc. 2022-19, section 3.06(2)(b) (For instructions on how to seek this relief, see Rev. Proc. 2022-19, section 3.06).

(48) Section 1362(f). — Inadvertent Invalid Elections or Terminations. — Certain inadvertent errors, omissions, or missing signatures. — Except with regard to an inadvertent error relating to a “permitted year” (as defined in § 1378(b) and § 1.1378-1), the absence of a required shareholder consent, or an officer signature for which there is no other relief as provided in Rev. Proc. 2022-19, section 3.03, the IRS will not issue a PLR under § 1362(f) addressing whether an inadvertent error or omission, or a missing required consent or signature (see § 1362(a)(2), § 1.1361-3(a)(2), and § 1.1362-6(a)(1)), on Form 2553 or Form 8869 affects the validity of the S election or QSub election.

(49) Section 1502. — Regulations. — Whether a parent cooperative housing corporation (as defined in § 216(b)(1)) 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.

(50) Sections 2035, 2036, 2037, 2038, and 2042. Adjustments for Certain Gifts Made Within Three Years of Decedent's Death; Transfers with Retained Life Estate; Transfers Taking Effect at Death; Revocable Transfers; Proceeds of Life Insurance. Whether trust assets are includible in a trust beneficiary's gross estate under § 2035, 2036, 2037, 2038, or 2042 if the beneficiary sells property (including insurance policies) to the trust or dies within 3 years of selling such property to the trust, and (i) the beneficiary has a power to withdraw the trust property (or had such power prior to a release or modification, but retains other powers which would cause that person to be the owner if the person were the grantor), other than a power which would constitute a general power of appointment within the meaning of § 2041, (ii) the trust purchases the property with a note, and (iii) the value of the assets with which the trust was funded by the grantor is nominal compared to the value of the property purchased.

(51) Section 2055. — Transfers for Public, Charitable, and Religious Uses. — Whether a transfer to a pooled income fund described in § 642(c)(5) qualifies for a charitable deduction under § 2055(e)(2)(A).

(52) Section 2055. — Transfers for Public, Charitable, and Religious Uses. — Whether a transfer to a charitable remainder trust described in § 664 that provides for annuity or unitrust payments for one or two measuring lives or a term of years qualifies for a charitable deduction under § 2055(e)(2)(A).

(53) Section 2501. Imposition of Tax. Whether the sale of property (including insurance policies) to a trust by a trust beneficiary will be treated as a gift for purposes of § 2501 if (i) the beneficiary has a power to withdraw the trust property (or had such power prior to a release or modification, but retains other powers which would cause that person to be the owner if the person were the grantor), other than a power which would constitute a general power of appointment within the meaning of § 2041, (ii) the trust purchases the property with a note, and (iii) the value of the assets with which the trust was funded by the grantor is nominal compared to the value of the property purchased.

(54) Section 2503. — Taxable Gifts. — Whether the transfer of property to a trust will be a gift of a present interest in property when (i) the trust corpus consists or will consist substantially of insurance policies on the life of the grantor or the grantor's spouse, (ii) 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, (iii) 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, (iv) the trust beneficiaries have the power to withdraw, on demand, any additional transfers made to the trust, and (v) 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 §§ 673 to 677.

(55) Section 2514. — Powers of Appointment. — If the beneficiaries of a trust permit a power of withdrawal to lapse, whether § 2514(e) will be applicable to each beneficiary in regard to the power when (i) the trust corpus consists or will consist substantially of insurance policies on the life of the grantor or the grantor's spouse, (ii) 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, (iii) 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, (iv) the trust beneficiaries have the power to withdraw, on demand, any additional transfers made to the trust, and (v) 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 §§ 673 to 677.

(56) Section 2522. — Charitable and Similar Gifts. — Whether a transfer to a pooled income fund described in § 642(c)(5) qualifies for a charitable deduction under § 2522(c)(2)(A).

(57) Section 2522. — Charitable and Similar Gifts. — Whether a transfer to a charitable remainder trust described in § 664 that provides for annuity or unitrust payments for one or two measuring lives or a term of years qualifies for a charitable deduction under § 2522(c)(2)(A).

(58) Section 2601. — Tax Imposed. — Whether a trust that is exempt from the application of the generation-skipping transfer tax because it was irrevocable on September 25, 1985, will lose its exempt status if the situs of the trust is changed from the United States to a situs outside of the United States.

(59) Section 2702. — Special Valuation Rules in Case of Transfers of Interests in Trusts. — Whether annuity interests are qualified annuity interests under § 2702 if the amount of the annuity payable annually is more than 50 percent of the initial net fair market value of the property transferred to the trust, or if the value of the remainder interest is less than 10 percent of the initial net fair market value of the property transferred to the trust. For purposes of the 10 percent test, the value of the remainder interest is the present value determined under § 7520 of the right to receive the trust corpus at the expiration of the term of the trust. The possibility that the grantor may die prior to the expiration of the specified term is not taken into account, nor is the value of any reversion retained by the grantor or the grantor's estate.

(60) Section 2702. — Special Valuation Rules in Case of Transfers of Interests in Trusts. — Whether a trust with one term holder satisfies the requirements of § 2702(a)(3)(A) and § 25.2702-5(c) to be a qualified personal residence trust.

(61) Section 2702. Special Valuation Rules in Case of Transfers of Interests in Trusts. Whether the sale of property (including insurance policies) to a trust by a trust beneficiary is subject to § 2702 if (i) the beneficiary has a power to withdraw the trust property (or had such power prior to a release or modification, but retains other powers which would cause that person to be the owner if the person were the grantor), other than a power which would constitute a general power of appointment within the meaning of § 2041, (ii) the trust purchases the property with a note, and (iii) the value of the assets with which the trust was funded by the grantor is nominal compared to the value of the property purchased.

(62) Section 3121. — Definitions. — Determinations as to which of two entities, under common law rules applicable in determining the employer-employee relationship, is the employer, when one entity is treating the worker as an employee.

(63) Section 4947(a)(2). — Split-Interest Trusts. — Whether a split-interest trust is described in § 4947(a)(2) because it has no amounts in trust for which a deduction was allowed under § 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522.

(64) Section 7702. — See section 4.01(6), above.

.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. Although it is generally inappropriate for the Service to issue a letter ruling on whether an interest in a corporation is stock or indebtedness, there may be instances in which the Service may issue a letter ruling. For example, the Service may issue a letter ruling with respect to an instrument issued by a domestic corporation if (i) the taxpayer believes that the facts strongly support the classification of the instrument as stock and (ii) the taxpayer can demonstrate that there are unique and compelling reasons to justify the issuance of a letter ruling. Before preparing the letter ruling request, the taxpayer should call the Office of Associate Chief Counsel having jurisdiction for the matters on which the taxpayer is seeking a letter ruling to discuss whether the Service will consider issuing a letter ruling for a particular factual situation. To determine which Associate office has jurisdiction over a particular issue see section 3 of Rev. Proc. 2023-1, this Bulletin. For a list of telephone numbers for the different Associate offices, see section 10.07 of Rev. Proc. 2023-1.

(2) Situations in which the requested ruling deals with only part of an integrated transaction. Generally, a letter ruling will not be issued on only part of an integrated transaction. If, however, a part of a transaction falls under a no-rule area, a letter ruling on other parts of the transaction may be issued. Before preparing the letter ruling request, the taxpayer should call the Office of Associate Chief Counsel having jurisdiction for the matters on which the taxpayer is seeking a letter ruling to discuss whether a letter ruling will be issued on part of the transaction. To determine which Associate office has jurisdiction over a particular issue, see section 3 of Rev. Proc. 2023-1, this Bulletin. For a list of telephone numbers for the different Associate offices, see section 10.07 of Rev. Proc. 2023-1.

Notwithstanding the previous paragraph, in connection with transactions described in § 332, 351, 355, or 1036 and reorganizations within the meaning of § 368, the Associate Chief Counsel (Corporate) may issue a letter ruling on part of an integrated transaction if and to the extent that the transaction presents a significant issue (within the meaning of section 3.01(60)). See section 6.03(2) of Rev. Proc. 2023-1.

(3) Situations in which two or more items or sub-methods of accounting are interrelated. If two or more items or sub-methods of accounting are interrelated, ordinarily a letter ruling will not be issued on a change in accounting method involving only one of the items or sub-methods.

(4) The tax effect of any transaction to be consummated at some indefinite future time.

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

(6) 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.

(7)(a) Situations in which the taxpayer or a related party is domiciled or organized in a foreign jurisdiction with which the United States does not have an effective mechanism for obtaining tax information with respect to civil tax examinations and criminal tax investigations, which would preclude the Service from obtaining information located in such jurisdiction that is relevant to the analysis or examination of the tax issues involved in the ruling request.

(b) The provisions of subsection (a) above do not apply if the taxpayer or affected related party (i) consents to the disclosure of all relevant information requested by the Service in processing the ruling request or in the course of an examination in order to verify the accuracy of the representations made and to otherwise analyze or examine the tax issues involved in the ruling request, and (ii) waives all claims to protection of bank or commercial secrecy laws in the foreign jurisdiction with respect to the information requested by the Service. In the event the taxpayer's or related party's consent to disclose relevant information or to waive protection of bank or commercial secrecy is determined by the Service to be ineffective or of no force and effect, then the Service may retroactively rescind any ruling rendered in reliance on such consent.

(8) A matter involving the Federal tax consequences of any proposed Federal, state, local, municipal, or foreign legislation. The Service may provide general information in response to an inquiry. However, the Office of Associate Chief Counsel (EEE) may issue letter rulings regarding the effect of proposed state, local, or municipal legislation upon an eligible deferred compensation plan under § 457(b) provided that the letter ruling request relating to the plan complies with the other requirements of Rev. Proc. 2023-1, this Bulletin.

(9) Except with respect to a Covered Transaction within the meaning of section 2.03(1)(a) of Rev. Proc. 2017–52, 2017-41 I.R.B. 283, a letter ruling will not be issued with respect to an issue that is clearly and adequately addressed by statute, regulations, decision of a court, revenue rulings, revenue procedures, notices, or other authority published in the Internal Revenue Bulletin (Comfort Ruling). However, except with respect to issues under §§ 332, 351, 368, and 1036 and the tax consequences resulting from the application of such Code sections (see generally section 6.03(2) of Rev. Proc. 2023-1, this Bulletin), an Associate office may in its discretion issue a Comfort Ruling if the Associate office is otherwise ruling on another issue arising in the same transaction.

(10) Whether an amount received (in periodic payments or as a lump sum) in connection with a legal action or a settlement of a legal action is properly allocated (including an allocation of all payments to one category) to recovery of capital, compensatory damages, punitive damages, dividends, interest, back pay, etc., for Federal tax purposes.

(11) The treatment or effects of hook equity, including as a result of its issuance, ownership, or redemption. This section 4.02(11) ordinarily will not apply if (i) an interest's status as hook equity is only transitory, such as in a triangular reorganization, or (ii) the treatment of the hook equity is not relevant to the treatment of the overall transaction and issue presented. For this purpose, “hook equity” means an ownership interest in a business entity (such as stock in a corporation) that is held by another business entity in which at least 50 percent of the interests (by vote or value) in such latter entity are held directly or indirectly by the former entity. However, if an entity directly or indirectly owns all of the equity interests in another entity, the equity interests in the latter entity are not hook equity.

(12) Whether a tax-qualified plan satisfies the requirements for qualification under §§ 401 through 420 and § 4975(e)(7). These matters are generally handled through the Employee Plans Determinations program as provided in Rev. Proc. 2023-4, this Bulletin, Rev. Proc. 2016-37, 2016-29 I.R.B. 136, Rev. Proc. 2015-36, 2015-27 I.R.B. 20 and Rev. Proc. 2017-41, 2017-29 I.R.B. 92. Notwithstanding the preceding sentence, the Office of Associate Chief Counsel (EEE) may issue a ruling if the taxpayer has demonstrated to the satisfaction of the Office of Associate Chief Counsel (EEE) that the qualified issue involved is unique and requires immediate guidance, (ii) as a practical matter, it is not likely that such issue will be addressed through the determination letter process, and (iii) the Office determines that it is in the interest of good tax administration to provide guidance to the taxpayer with respect to such qualified issue.

(13) Any issue that is being considered by the Pension Benefit Guaranty Corporation (PBGC) or the Department of Labor (DOL), and involves the same taxpayer, will be issued at the discretion of the Office of Associate Chief Counsel (EEE).

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

.01 Specific Questions and Problems.

(1) Sections 302 and 304. — Distributions in Redemption of Stock; Redemptions Through Use of Related Corporations. — Treatment of basis in a § 302 or 304 redemption. See Withdrawal of a Notice of Proposed Rulemaking published in the Federal Register (84 FR 11686) on March 28, 2019.

(2) Sections 351, 358, and 362. — Transfer to Corporation Controlled by Transferor; Basis to Distributees; Basis to Corporations. — The issues described as being under study in Rev. Rul. 2006-2, 2006-1 C.B. 261.

(3) Section 355. — Distribution of Stock and Securities of a Controlled Corporation. — Any issue relating to the qualification, under § 355 and related provisions, of a distribution, or another distribution which is part of the same plan or series of related transactions, if, at all times while any such distribution takes place and immediately thereafter, all of the following conditions exist: (i) the fair market value of the gross investment assets of the distributing corporation or the controlled corporation is two-thirds or more of the fair market value of its total gross assets; the fair market value of the gross assets of the trade(s) or business(es) on which the distributing corporation or the controlled corporation relies to satisfy the active trade or business requirement of § 355(b) is less than 10 percent of the fair market value of its gross investment assets; and (iii) the ratio of the fair market value of the gross investment assets to the fair market value of the gross assets other than the gross investment assets of the distributing corporation or the controlled corporation is three times or more of such ratio for the other corporation (i.e., the controlled corporation or the distributing corporation, respectively).

For purposes of determining the fair market value of the distributing corporation's and the controlled corporation's gross investment assets, gross assets other than gross investment assets, gross assets of the trade or business, and total gross assets, all members of such corporation's separate affiliated group, within the meaning of § 355(b)(3)(B), are treated as one corporation. If the distributing corporation or the controlled corporation relies on an active trade or business of a partnership for purposes of § 355(b), then for purposes of determining the fair market value of the gross assets of the trade(s) or business(es) on which the distributing corporation or the controlled corporation relies to satisfy the active trade or business requirement of § 355(b), such corporation is treated as owning its ratable share of the gross assets of the partnership.

For purposes of this section 5.01(3), “investment assets” has the meaning given such term by § 355(g)(2)(B), except as follows: (i) in the case of stock or securities in a corporation any stock of which is traded on (or subject to the rules of) an established financial market within the meaning of § 1.1092(d)-1(b) (publicly traded stock), § 355(g)(2)(B)(iv) is applied by substituting “50-percent” for “20-percent;” (ii) except as provided in clause (iv) of this sentence, an interest in a publicly traded partnership (as defined in § 7704(b), regardless of whether such partnership is treated as a corporation pursuant to § 7704(a)) is treated in the same manner as publicly traded stock; (iii) except as provided in clause (iv) of this sentence, an interest in a partnership that is not a publicly traded partnership is treated in the same manner as stock which is not publicly traded stock; and (iv) in the case of an interest in a partnership (other than a publicly traded partnership treated as a corporation pursuant to § 7704(a)), the active trade or business of which is taken into account by the distributing corporation or the controlled corporation for purposes of § 355(b), or would be taken into account without regard to the five-year requirement of § 355(b)(2)(B), clauses (ii) and (iii) of this sentence do not apply.

The Service also will not rule on any issue relating to the qualification, under § 355 and related provisions, of a distribution if, as part of a plan or series of related transactions, investment assets are disposed of, or property, including property qualifying as an active trade or business within the meaning of § 355(b), is acquired with a principal purpose of avoiding this section 5.01(3). This section 5.01(3) does not apply if (i) all the stock of the controlled corporation that is distributed in the distribution is distributed to one or more members of the affiliated group, as defined in § 243(b)(2)(A), of which the distributing corporation is a member; and (ii) such distribution is not part of a plan or series of related transactions pursuant to which stock of any corporation will be distributed outside such affiliated group in a distribution described in this section 5.01(3) or in section 4.01(29) of this revenue procedure. See also, section 6.03(2) (b), Rev. Proc. 2023-1, this Bulletin.

(4) Section 358. See section 5.01(2), above.

(5) Section 362. See section 5.01(2), above.

(6) Section 401. — Qualified Pension, Profit-sharing, and Stock Bonus Plans. — Whether a program providing a limited period during which certain retirees who are currently receiving lifetime annuity payments from a qualified pension plan may elect to convert their annuities into lump sums that are payable immediately (sometimes referred to as a “retiree lumpsum window”) complies with the qualification requirements under section 401. See Notice 2019-18, 2019-13 I.R.B. 915, Part III, which provides that the IRS will not issue private letter rulings with regard to retiree lump-sum windows. However, if a taxpayer is eligible to apply for and receive a determination letter, the IRS will no longer include a caveat expressing no opinion regarding the tax consequences of such a window in the letter. See Rev. Proc. 2023-4, this Bulletin, for the procedures that apply to requests for determination letters under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division, Employee Plans Rulings and Agreements.

(7) Section 613A. — Limitations on Percentage Depletion in Case of Oil and Gas Wells. — Whether the sale of oil or gas, or any product derived from oil or gas, is a bulk sale for purposes of § 613A(d)(2).

(8) Sections 661 and 662. — Deduction for Estates and Trusts Accumulating Income or Distributing Corpus; Inclusion of Amounts in Gross Income of Beneficiaries of Estates and Trusts Accumulating Income or Distributing Corpus. — Whether the distribution of property by a trustee from an irrevocable trust to another irrevocable trust (sometimes referred to as a “decanting”) resulting in a change in beneficial interests is a distribution for which a deduction is allowable under § 661 or which requires an amount to be included in the gross income of any person under § 662.

(9) Section 671. — Trust Income, Deductions, and Credits Attributable to Grantors and Others as Substantial Owners. — Whether the grantor will be considered the owner of any portion of a transfer in trust under §§ 673 to 677 that is purported to be an incomplete gift under § 2511, specifically including, but not limited to, a transfer to a trust providing for distributions at the direction of a committee to the donor and the committee members either by unanimous consent of the committee members or a majority of the committee members with the consent of the donor.

(10) Section 678. — Person other than Grantor Treated as Substantial Owner. — Whether the beneficiaries of a trust will be considered the owners of any portion of such trust when two or more of such beneficiaries have the power to distribute income or principal to themselves by unanimous consent.

(11) Section 1014. — Basis of Property Acquired from a Decedent. — Whether the assets in a grantor trust receive a § 1014 basis adjustment at the death of the deemed owner of the trust for income tax purposes when those assets are not includible in the gross estate of that owner under chapter 11 of subtitle B of the Internal Revenue Code.

(12) Section 2036. — Transfers with Retained Life Estate. — Whether the corpus of a trust will be included in a grantor's estate when the trustee of the trust is a private trust company owned partially or entirely by members of the grantor's family.

(13) Section 2038. — Revocable Transfers. — Whether the corpus of a trust will be included in a grantor's estate when the trustee of the trust is a private trust company owned partially or entirely by members of the grantor's family.

(14) Section 2041. — Powers of Appointment. — Whether the corpus of a trust will be included in an individual's estate when the trustee of the trust is a private trust company owned partially or entirely by members of the individual's family.

(15) Sections 2041 and 2514. — Powers of Appointment. — Whether the beneficiaries of a trust hold general powers of appointment over any portion of a transfer to a trust when (A) two or more of such beneficiaries have the power to distribute income or principal to themselves by unanimous consent and without the consent of the donor and either (B) such beneficiaries must be replaced upon the lapse of their powers as the result of death or otherwise or (C) all of such beneficiaries' powers described by (A) lapse upon the death of any one of the beneficiaries.

(16) Section 2501. — Imposition of Tax. — Whether the distribution of property by a trustee from an irrevocable trust to another irrevocable trust (sometimes referred to as a “decanting”) resulting in a change in beneficial interests is a gift under § 2501.

(17) Section 2511. — Transfers in General. — Whether a transfer in trust that is purported not to be considered owned by the grantor under § 671 is an incomplete gift, specifically including, but not limited to, a transfer to a trust providing for distributions at the direction of a committee to the donor and the committee members either by unanimous consent of the committee members or a majority of the committee members with the consent of the donor.

(18) Section 2514. — See section 5.01(15), above.

(19) Sections 2601 and 2663. — Tax Imposed; Regulations. — Whether the distribution of property by a trustee from an irrevocable generation-skipping transfer tax (GST) exempt trust to another irrevocable trust (sometimes referred to as a “decanting”) resulting in a change in beneficial interests causes the loss of GST exempt status or constitutes a taxable termination or taxable distribution under § 2612.

(20) Sections 4966 and 4967. — Taxes on Taxable Distributions; Taxes on Prohibited Benefits. — Issues involving interpretation of §§ 4966 and 4967 regarding distributions from donor advised funds.

(21) Section 6109. Identifying Numbers. The proper assignment or retention of an employer identification number (EIN) in the case of a reorganization within the meaning of § 368(a)(1)(F) if the transferor corporation becomes disregarded as an entity separate from its owner under § 301.7701-3.

.02 General Areas.

Any issue involving the application of a provision of the Code to the extent of any amendment made by Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly referred to as the Inflation Reduction Act of 2022. The Service may provide general information in response to an inquiry prior to the resolution of the issue.

SECTION 6. AREAS COVERED BY AUTOMATIC APPROVAL PROCEDURES IN WHICH RULINGS WILL NOT ORDINARILY BE ISSUED

.01 Section 338. — Certain Stock Purchases Treated as Asset Acquisitions. — All requests for an extension of time under § 301.9100-3 within which to make an election under § 338(g) or (h)(10) where the Service has provided an administrative procedure to seek such an extension. See Rev. Proc. 2003-33, 2003-1 C.B. 803 (extension automatically granted to certain persons required to file Form 8023 to make a valid § 338 election that have not filed Form 8023 by its due date).

.02 Section 442. — Change of Annual Accounting Period. — All requests for a change in annual accounting period where the Service has provided an automatic change procedure for obtaining such a change in annual accounting period. See Rev. Proc. 2002-39, 2002-1 C.B. 1046 (general procedures for prior approval), as clarified and modified by Notice 2002-72, 2002-2 C.B. 843, and modified by Rev. Proc. 2003-34, 2003-1 C.B. 856, and Rev. Proc. 2018-17, 2018-9 I.R.B. 384; Rev. Proc. 2006-45, 2006-2 C.B. 851 (certain corporations), as clarified and modified by Rev. Proc. 2007-64, 2007-2 C.B. 818, and modified by Rev. Proc. 2018-17, 2018-9 I.R.B. 384; Rev. Proc. 2006-46, 2006-2 C.B. 859 (partnership, S corporation, personal service corporation, or trust); and Rev. Proc. 2003-62, 2003-2 C.B. 299 (individual seeking a calendar year).

.03 Section 446. — General Rule for Methods of Accounting. — Except as otherwise specifically provided in applicable procedures published in the Internal Revenue Bulletin, all requests for a change in method of accounting where the Service has provided an automatic change request procedure for obtaining such a change in method of accounting. See the automatic change request procedures listed in section 9.22 of Rev. Proc. 2023-1, this Bulletin.

.04 Section 461. — General Rule for Taxable Year of Deduction. — All requests for making or revoking an election under § 461 where the Service has provided an administrative procedure for making or revoking such an election under § 461. See Rev. Proc. 92-29, 1992-1 C.B. 748 (dealing with the use of an alternative method for including in basis the estimated cost of certain common improvements in a real estate development).

.05 Section 704(c). — Contributed Property. — Requests from Qualified Master Feeder Structures, as described in section 4.02 of Rev. Proc. 2001-36, 2001-1 C.B. 1326, for permission to aggregate built-in gains and losses from contributed qualified financial assets for purposes of making § 704(c) and reverse § 704(c) allocations.

.06 Section 1362. — Election; Revocation; Termination. — All situations in which an S corporation qualifies for automatic late S corporation relief under Rev. Proc. 2013-30, 2013-36 I.R.B. 173.

.07 Sections 1502, 1504, and 1552. — Regulations; Definitions; Earnings and Profits. — All requests for waivers or consents on consolidated return issues where the Service has provided an administrative procedure for obtaining such waivers or consents on consolidated return issues. See Rev. Proc. 2014-24, 2014-13 I.R.B. 879 (certain subsidiary members treated as if they filed a Form 1122 even though they failed to do so); Rev. Proc. 2002-32, 2002-1 C.B. 959, as modified by Rev. Proc. 2006-21, 2006-1 C.B. 1050 (certain corporations seeking reconsolidation within the 5-year period specified in § 1504(a)(3)(A)); Rev. Proc. 90-39, 1990-2 C.B. 365, as modified by Rev. Proc. 2006-21, and as clarified by Rev. Proc. 90-39A, 1990-2 C.B. 367 (certain affiliated groups of corporations seeking, for earnings and profits determinations, to make an election or a change in their method of allocating the group's consolidated Federal income tax liability); and Rev. Proc. 89-56, 1989-2 C.B. 643, as modified by Rev. Proc. 2006-21 (certain affiliated groups of corporations seeking to file a consolidated return in which member(s) of the group use a 52-53 week taxable year).

.08 Section 2010(c)(5)(A). — Election Required. — All requests filed before the fifth anniversary of the decedent's date of death for an extension of time under § 301.9100-3 to make an election under § 2010(c)(5)(A), where the Service has provided an administrative procedure to seek such an extension. See Rev. Proc. 2022-32, 2022-30 I.R.B. 101 (procedure providing for an extension of time to certain taxpayers to make a “portability” election under § 2010(c)(5)(A)).

.09 Section 7701. — Definitions. — All requests for an extension of time under § 301.9100-3 within which to make an entity classification election under § 301.7701-3 where the Service has provided an administrative procedure to seek such an extension. See Rev. Proc. 2009-41, 2009-39 I.R.B. 439 (extension automatically granted to certain persons required to file Form 8832 to make a valid entity classification election that have not filed Form 8832 by its due date).

SECTION 7. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 2022-3, 2022-1 I.R.B.144, is superseded. Rev. Proc. 2022-19, 2022-41 I.R.B. 282, is superseded. Rev. Proc. 2022-28, 2022-27 I.R.B. 65, is superseded.

SECTION 8. EFFECTIVE DATE

This revenue procedure is effective January 3, 2023.

SECTION 9. PAPERWORK REDUCTION ACT

The collections of information contained in this revenue procedure have 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 number 1545-0123.

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 control number.

The collections of information in this revenue procedure are in sections 2.03 and 3.01(60).

This information is required to evaluate whether the request for a letter ruling or determination letter is not covered by the provisions of this revenue procedure. The collections of information are required to obtain a letter ruling or determination letter. The likely respondents are businesses or other for-profit institutions.
The estimated total annual reporting and/or recordkeeping burden of this revenue procedure, and Rev. Proc. 2023-1, this Bulletin is 316,020 hours.

The estimated annual burden per respondent/recordkeeper varies from 1 hour to 200 hours, depending on individual circumstances with an estimated average burden of 80 hours. The estimated number of respondents and/or recordkeepers is 3,956.

The estimated annual frequency of responses is on occasion.

Books or records relating to a collection of information must be retained as 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.

DRAFTING INFORMATION

The principal author of this revenue procedure is Jordan A. Proffitt of the Office of Associate Chief Counsel (Corporate). For further information about this revenue procedure, please contact Jordan A. Proffitt at (202) 317-5363 (not a toll-free call) or call the Associate office contacts listed in section 10.07 of Rev. Proc. 2023-1, this Bulletin. See section 3 of Rev. Proc. 2023-1 to determine which Associate office has jurisdiction over a particular issue.