Rev. Proc. 63-1

Section 1. Purpose.

The purpose of this Revenue Procedure is to modify the procedure prescribed in Revenue Procedure 59-1, C.B. 1959-1, 799, as it pertains to the filing of Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, and Form 870-AD, Offer of Waiver of Restrictions on Assessments and Collection of Deficiency in Tax and of Acceptance of Overassessment, in certain cases involving personal holding company tax deficiencies.

SEC. 2. BACKGROUND.

.01 Revenue Procedure 59-1 sets forth the conditions under which Form 2198, Determination of Liability for Personal Holding Company Tax, may be accepted by the Internal Revenue Service.

.02 Form 2198 is used in the execution of informal agreements under section 547(c)(3) of the Internal Revenue Code of 1954 relating to liability for personal holding company tax under section 541 of the Code. This agreement form is not filed on behalf of the Service unless the taxpayer has executed an appropriate agreement form, such as Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, or Form 870-AD covering the proposed adjustments both to the income tax and to the personal holding company tax for the years involved.

.03 Section 3.03 of Revenue Procedure 59-1 sets forth four conditions which the waiver of restrictions on assessment and collection filed on Form 870 or Form 870-AD should contain. These conditions are as follows:

(1) The waiver of restrictions on assessment and collection contained herein is subject to the approval of Form 2198, relating to the taxpayer's liability for Income and Personal Holding Company Tax, by the District Director or such other official to whom authority to sign Form 2198 is delegated.

(2) This agreement will not take effect until after the expiration of the 120-day period to begin with the date Form 2198 is approved by the District Director or such other official to whom authority to sign Form 2198 is delegated.

(3) If the taxpayer complies with section 547 of the Code, relating to the payment of deficiency dividends, by paying the deficiency dividends within 90 days after the date of approval of Form 2198 and filing a proper claim on Form 976, Claim for Deficiency Dividends Deduction or Credit or Refund under Section 547 of the Internal Revenue Code of 1954, within 120 days after the approval of Form 2198, the amount of the deficiency stated on this waiver shall be reduced by the amount necessary to give effect to the timely paid deficiency dividends and the remainder, if any, will be assessed.

(4) Where, at the expiration of 120-day period beginning with the date of the approval of Form 2198, a form 976 has not been filed or timely deficiency dividend payments have not been made, the entire amount of the deficiency shown on this form will be assessed.

SEC. 3. PROCEDURE.

A Form 870 or Form 870-AD is required to be signed by the taxpayer and submitted concurrently with form 2198. Form 870 should contain the four conditions outlined in section 2.03 above. However, it will ordinarily be unnecessary to insert such conditions on Form 870-AD since the acceptance on behalf of the Commissioner of Internal Revenue of Form 870-AD and Form 2198 should be concurrent.

SEC. 4. EFFECT ON OTHER DOCUMENTS.

Section 3.03 of Revenue Procedure 59-1 is modified to remove the requirement that Form 870-AD contain the conditions set forth in paragraphs (1), (2), (3), and (4) of that section. Paragraph (1) of Section 3.03 is also modified to make it applicable to cases where officials other than the District Director are authorized to approve the determination.

SEC. 5. INQUIRIES.

Inquiries relating to this Revenue Procedure should be addressed to the Assistant Commissioner (Compliance), Washington, D.C., 20224, Attention: CP:AP:MP.