Internal Revenue Bulletin: 2003-52
December 29, 2003
Table of Contents
Worthless security deduction. This ruling discusses when a shareholder is, and is not, allowed a worthless security deduction under section 165(g)(3) of the Code when an election is made to change the federal tax classification of an entity from a corporation to a disregarded entity. Rev. Rul. 70-489 superseded and Rev. Rul. 59-296 amplified.
Interest rates; underpayments and overpayments. The rate of interest determined under section 6621 of the Code for the calendar quarter beginning January 1, 2004, will be 4 percent for overpayments (3 percent in the case of a corporation), 4 percent for underpayments, and 6 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 1.5 percent.
Hedge identification. This ruling holds that for purposes of the income timing rules in regulations section 1.446-4, the hedging transaction definition in section 1.1221-2(b) is not modified by section 1.1221-2(g)(2), which deals with the effects on income characterization of a mis-identification or failure to identify a hedging transaction. If a taxpayer has used a method of accounting for a type of hedging transaction but, under section 1.446-4, that method is impermissible for those transactions, the taxpayer must obtain the Commissioner's consent before changing to a method of accounting that is permitted.
LIFO; price indexes; department stores. The October 2003 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, October 31, 2003.
Temporary and proposed regulations under section 1502 of the Code amend proposed regulations (REG-132760-03, 2003-43 I.R.B. 933) and temporary regulations (T.D. 9089, 2003-43 I.R.B. 906). These regulations provide guidance concerning how a corporation that is a member of a consolidated group reduces its tax attributes when that member realizes discharge of indebtedness income that is excluded from gross income under section 108.
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