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Internal Revenue Bulletin No IRB 1998-33 8/12/98 11:04 AM Page 1 Internal Revenue Bulletin No. 1998–33 bulletin August 17, 1998 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 EMPLOYMENT TAX Rev. Rul. 98–39, page 4 Notice 98–43, page 13. All events test; cooperative advertising. Under the all Tax Court review of worker classification and section events test of section 461 of the Code, an accrual method 530 determinations. This notice describes new proce- manufacturer’s liability for cooperative advertising services dures that the Service has implemented to comply with new of a retailer is incurred in Year 1, the year the services are section 7436 of the Code. performed, provided the manufacturer is able to reasonably estimate the liability, even though the retailer does not sub- ADMINISTRATIVE mit the required claim form until Year 2. Rev. Proc. 97–37 modified and amplified. Notice 98–39, page 11. Church plans; nondiscrimination; safe harbors. This no- Rev. Rul. 98–40, page 4. tice extends the effective date of the applicable nondiscrimi- Fringe benefits aircraft valuation formula. For pur- nation regulations for certain church plans. poses of section 1.61–21(g) of the Income Tax Regulations, relating to the rule for valuing noncommercial flights on em- Notice 98–41, page 12. ployer-provided aircraft, the Standard Industry Fare Level 1998 enhanced oil recovery credit. The enhanced oil (SIFL) cents-per-mile rates and terminal charges in effect for recovery credit for taxable years beginning in the 1998 cal- the second half of 1998 are set forth. endar year is determined without regard to the phase-out for crude oil price increases provided in section 43(b) of the T.D.8776, page 6. Code. REG–110332–98, page 18. Final, proposed, and temporary regulations under section Notice 98–42, page 12. 985 of the Code provide guidance regarding certain federal 1998 marginal production rates. This notice announces tax consequences arising from the introduction of the euro. the applicable percentage to be used in determining per- A public hearing on the proposed regulations will be held on centage depletion for marginal properties for the 1998 cal- October 20, 1998. endar year. Finding Lists begin on page 21. Department of the Treasury Internal Revenue Service IRB 1998-33 8/12/98 11:04 AM Page 2 Mission of the Service The purpose of the Internal Revenue Service is to collect ucts and services; and perform in a manner warranting the proper amount of tax revenue at the least cost; serve the highest degree of public confidence in our integrity, effi- the public by continually improving the quality of our prod- ciency, and fairness. Statement of Principles of Internal Revenue Tax Administration The function of the Internal Revenue Service is to adminis- The Service also has the responsibility of applying and ter the Internal Revenue Code. Tax policy for raising revenue administering the law in a reasonable, practical manner. is determined by Congress. Issues should only be raised by examining officers when they have merit, never arbitrarily or for trading purposes. With this in mind, it is the duty of the Service to carry out that At the same time, the examining officer should never hesi- policy by correctly applying the laws enacted by Congress; tate to raise a meritorious issue. It is also important that to determine the reasonable meaning of various Code provi- care be exercised not to raise an issue or to ask a court to sions in light of the Congressional purpose in enacting them; adopt a position inconsistent with an established Service and to perform this work in a fair and impartial manner, with position. neither a government nor a taxpayer point of view. Administration should be both reasonable and vigorous. It At the heart of administration is interpretation of the Code. It should be conducted with as little delay as possible and is the responsibility of each person in the Service, charged with great courtesy and considerateness. It should never with the duty of interpreting the law, to try to find the true try to overreach, and should be reasonable within the meaning of the statutory provision and not to adopt a bounds of law and sound administration. It should, howev- strained construction in the belief that he or she is “protect- er, be vigorous in requiring compliance with law and it ing the revenue.” The revenue is properly protected only should be relentless in its attack on unreal tax devices and when we ascertain and apply the true meaning of the statute. fraud. 2 IRB 1998-33 8/12/98 11:04 AM Page 3 Introduction The Internal Revenue Bulletin is the authoritative instrument dures must be considered, and Service personnel and oth- of the Commissioner of Internal Revenue for announcing offi- ers concerned are cautioned against reaching the same con- cial rulings and procedures of the Internal Revenue Service clusions in other cases unless the facts and circumstances and for publishing Treasury Decisions, Executive Orders, Tax are substantially the same. Conventions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained The Bulletin is divided into four parts as follows: from the Superintendent of Documents on a subscription basis. Bulletin contents of a permanent nature are consoli- dated semiannually into Cumulative Bulletins, which are sold Part I.—1986 Code. on a single-copy basis. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. It is the policy of the Service to publish in the Bulletin all sub- Part II.—Treaties and Tax Legislation. stantive rulings necessary to promote a uniform application This part is divided into two subparts as follows: Subpart A, of the tax laws, including all rulings that supersede, revoke, Tax Conventions, and Subpart B, Legislation and Related modify, or amend any of those previously published in the Committee Reports. Bulletin. All published rulings apply retroactively unless other- wise indicated. Procedures relating solely to matters of in- ternal management are not published; however, statements Part III.—Administrative, Procedural, and Miscellaneous. of internal practices and procedures that affect the rights To the extent practicable, pertinent cross references to and duties of taxpayers are published. these subjects are contained in the other Parts and Sub- parts. Also included in this part are Bank Secrecy Act Admin- istrative Rulings. Bank Secrecy Act Administrative Rulings Revenue rulings represent the conclusions of the Service on are issued by the Department of the Treasury’s Office of the the application of the law to the pivotal facts stated in the Assistant Secretary (Enforcement). revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature Part IV.—Items of General Interest. are deleted to prevent unwarranted invasions of privacy and With the exception of the Notice of Proposed Rulemaking to comply with statutory requirements. and the disbarment and suspension list included in this part, none of these announcements are consolidated in the Cumu- lative Bulletins. 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 The first Bulletin for each month includes a cumulative index will not be relied on, used, or cited as precedents by Service for the matters published during the preceding months. personnel in the disposition of other cases. In applying pub- These monthly indexes are cumulated on a semiannual basis lished rulings and procedures, the effect of subsequent leg- and are published in the first Bulletin of the succeeding semi- islation, regulations, court decisions, rulings, and proce- annual period, respectively. 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. 3 IRB 1998-33 8/12/98 11:04 AM Page 4 Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 Section 61.–Gross Income fice of the Associate Chief Counsel (Em- vices incurred in Year 1 when those ser- Defined ployee Benefits and Exempt Organiza- vices are provided by the retailer, or in tions). For further information regarding Year 2 when the retailer submits the re- 26 CFR 1.61–21: Taxation of fringe benefits. this revenue ruling contact, Ms. Smith on quired claim form for those services? Fringe benefits aircraft valuation (202) 622-6050 (not a toll-free call). FACTS formula. For purposes of section 1.61–21(g) of the Income Tax Regula- X, an accrual method taxpayer using a tions, relating to the rule for valuing non- Section 451.—General Rule for calendar year as its taxable year, manufac- commercial flights on employer-provided Taxable Year of Inclusion tures various consumer products, including aircraft, the Standard Industry Fare Level 26 CFR 1.451–1: General rule for taxable year of product M. Retailers engaged in the busi- (SIFL) cents-per-mile rates and terminal inclusion. ness of selling merchandise to consumers purchase product M from X for resale. In charges in effect for the second half of Under the all events test of § 461 of the Code, is 1998 are set forth. an accrual method manufacturer’s liability to pay a August of Year 1, X made a written offer to retailer for cooperative advertising services incurred pay each of these retailers $1 for each case Rev.
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