Bulletin No. 2004-19 May 10, 2004 HIGHLIGHTS of THIS ISSUE

Bulletin No. 2004-19 May 10, 2004 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. INCOME TAX EXEMPT ORGANIZATIONS Rev. Rul. 2004–44, page 885. Notice 2004–35, page 889. Federal rates; adjusted federal rates; adjusted federal Net investment income of private foundation.Thisnotice long-termrateandthelong-termexemptrate. For pur- announces that the Treasury Department and the Service poses of sections 382, 642, 1274, 1288, and other sections intend to propose regulations modifying regulations section of the Code, tables set forth the rates for May 2004. 53.4940–1(d)(2) to provide that a private foundation’s net investment income for purposes of section 4940 of the Code T.D. 9120, page 881. does not include distributions from trusts and estates and that REG–129447–01, page 894. until further guidance is promulgated, income distributions Final, temporary, and proposed regulations under section 861 from trusts and estates will not retain their character in the of the Code provide an alternative method for valuing assets hands of a distributee private foundation for purposes of for purposes of apportioning interest expense under the tax determining the foundation’s net investment income under book value method contained in temporary regulations section section 4940(c). This notice also provides instructions on how 1.861–9T(g). For that limited purpose, the alternative method a private foundation should fill out its applicable returns and allows taxpayers to determine the adjusted basis of all tangi- how to claim refunds. ble property under the alternative depreciation system of section 168(g). The regulations also provide guidance on electing Notice 2004–36, page 889. the alternative method. The alternative method provides tax- Distributable amount of a private foundation. This no- payers with the option of determining the adjusted bases of tice states that the Treasury Department and the Service in- both foreign and domestic assets under one consistent depre- tend to propose regulations modifying regulations under sec- ciation regime for temporary regulations section 1.861–9T(g) tion 4942 of the Code in a manner consistent with the holding apportionment purposes and helps reduce the basis disparity of the Tax Court and the Ninth Circuit in Ann Jackson Family between foreign and domestic assets which can occur under Foundation. It also states that until further guidance is promul- the current regulations. A public hearing on the proposed reg- gated, private foundations should compute the distributable ulations is scheduled for July 19, 2004. amount under section 4942(d) without regard to regulations section 53.4942(a)–2(b)(2). Accordingly, income distributions T.D. 9122, page 886. received from section 4947(a)(2) trusts are not included in a Final regulations under section 1502 of the Code relate to the private foundation’s distributable amount for purposes of sec- determination of the basis of the stock of the common parent tion 4942. The notice also includes instructions for filling out of a consolidated group when such stock is acquired in a trans- the private foundation’s applicable information and excise tax action that qualifies as a group structure change. These regula- returns and how to claim a refund pursuant to this notice. tions amend current regulations section 1.1502–31 modifying the application of the net asset basis rule in group structure changes. (Continued on the next page) Finding Lists begin on page ii. Announcement 2004–34, page 895. A list is provided of organizations now classified as private foundations. ADMINISTRATIVE Rev. Proc. 2004–26, page 890. This procedure provides guidance for representatives of certain military or civilian employees of the United States who die as a result of injuries incurred in a terrorist or military action. It provides guidance for having tax forgiven or for claiming refunds of tax under section 692(c) of the Code, as amended by the Victims of Terrorism Tax Relief Act of 2001, Pub. L. No. 107–134. It also provides procedures by which the Sec- retary will determine whether a terrorist or military action has occurred. Rev. Proc. 85–35 obsoleted. May 10, 2004 2004-19 I.R.B. The IRS Mission Provide America’s taxpayers top quality service by helping applying the tax law with integrity and fairness to all. them understand and meet their tax responsibilities and by Introduction The Internal Revenue Bulletin is the authoritative instrument of court decisions, rulings, and procedures must be considered, the Commissioner of Internal Revenue for announcing official and Service personnel and others concerned are cautioned rulings and procedures of the Internal Revenue Service and for against reaching the same conclusions in other cases unless publishing Treasury Decisions, Executive Orders, Tax Conven- the facts and circumstances are substantially the same. tions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the The Bulletin is divided into four parts as follows: Superintendent of Documents on a subscription basis. Bulletin contents are compiled semiannually into Cumulative Bulletins, which are sold on a single-copy basis. Part I.—1986 Code. This part includes rulings and decisions based on provisions of It is the policy of the Service to publish in the Bulletin all sub- the Internal Revenue Code of 1986. stantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, mod- Part II.—Treaties and Tax Legislation. ify, or amend any of those previously published in the Bulletin. This part is divided into two subparts as follows: Subpart A, All published rulings apply retroactively unless otherwise indi- Tax Conventions and Other Related Items, and Subpart B, Leg- cated. Procedures relating solely to matters of internal man- islation and Related Committee Reports. agement are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also Revenue rulings represent the conclusions of the Service on the included in this part are Bank Secrecy Act Administrative Rul- application of the law to the pivotal facts stated in the revenue ings. Bank Secrecy Act Administrative Rulings are issued by ruling. In those based on positions taken in rulings to taxpayers the Department of the Treasury’s Office of the Assistant Sec- or technical advice to Service field offices, identifying details retary (Enforcement). and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbar- ment and suspension lists, and announcements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be The last Bulletin for each month includes a cumulative index relied on, used, or cited as precedents by Service personnel in for the matters published during the preceding months. These the disposition of other cases. In applying published rulings and monthly indexes are cumulated on a semiannual basis, and are procedures, the effect of subsequent legislation, regulations, published in the last Bulletin of each semiannual period. The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. 2004-19 I.R.B. May 10, 2004 Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 Section 42.—Low-Income Section 483.—Interest on method of valuing assets for purposes of Housing Credit Certain Deferred Payments apportioning expenses under the tax book value method of §1.861–9T. The alter- The adjusted applicable federal short-term, mid- The adjusted applicable federal short-term, mid- native tax book value method, which is term, and long-term rates are set forth for the month term, and long-term rates are set forth for the month elective, allows taxpayers to determine, of May 2004. See Rev. Rul. 2004-44, page 885. of May 2004. See Rev. Rul. 2004-44, page 885. for purposes of apportioning expenses, the tax book value of all tangible property Section 280G.—Golden Section 642.—Special that is subject to a depreciation deduction Parachute Payments Rules for Credits and under section 168 by using the straight Deductions line method, conventions, and recovery Federal short-term, mid-term, and long-term rates aresetforthforthemonthofMay2004.SeeRev. periods of the alternative depreciation Federal short-term, mid-term, and long-term rates system under section 168(g)(2). The alter- Rul. 2004-44, page 885. are set forth for the month of May 2004. See Rev. Rul. 2004-44, page 885. native method provided in the temporary regulations is intended to minimize basis Section 382.—Limitation disparities between foreign and domestic on Net Operating Loss Section 807.—Rules for assets of taxpayers that may arise when Carryforwards and Certain Certain Reserves taxpayers use adjusted tax basis to value Built-In Losses Following assets under the tax book value method Ownership Change The adjusted applicable federal short-term, mid- term, and long-term rates are set forth for the month of expense apportionment. The text of these temporary regulations also serves The adjusted applicable federal long-term rate is of May 2004. See Rev. Rul. 2004-44, page 885. set forth for the month of May 2004. See Rev.

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