Internal Revenue Bulletin: 2007-21
May 21, 2007
Table of Contents
Section 1035; certain exchanges of insurance policies. A taxpayer’s receipt of a check issued by an insurance company under a non-qualified annuity contract is treated as a taxable distribution, even if the check is endorsed to a second insurance company for the purchase of a second annuity. The transaction is not characterized as a tax-free exchange under section 1035(a)(3) of the Code unless there is a direct exchange or assignment of the original contract.
Income attributable to domestic production activities; qualifying in-kind partnerships. This ruling provides that a partnership engaged in the extraction and processing of minerals within the United States is a qualifying in-kind partnership for purposes of section 199 of the Code. Each partner of a qualifying in-kind partnership is treated as having manufactured, produced, grown, or extracted (MPGE) property MPGE by the partnership that is distributed to that partner.
Contributions to the capital of a corporation; nonshareholder contributions. This ruling provides that payments received by a corporation under the federal universal service support mechanisms do not represent a nonshareholder contribution to capital under section 118(a) of the Code. The federal universal service support mechanisms are funded by contributions from telecommunications carriers. Telecommunications carriers receive support payments to provide discounted telecommunications services or telecommunication services in high cost areas.
Accrual of interest. This ruling requires an accrual method bank with a reasonable expectancy of receiving future payments on a loan to include accrued interest (determined under regulations section 1.446-2(a)(2)) in gross income for the taxable year in which the right to receive the interest becomes fixed, notwithstanding bank regulatory rules that prevent accrual of the interest for regulatory purposes. The ruling also provides guidance as to the period in which a bank that has elected the conformity method of accounting under regulations section 1.166-2(d)(3) can treat uncollected interest as worthless. Rev. Rul. 81-18 distinguished.
Real estate investment trust (REIT) foreign currency. This ruling provides that section 988 gain that is recognized by a REIT will be qualifying income under section 856(c)(2) or (3) of the Code to the extent that the underlying income so qualifies.
Renewable electricity production, refined coal production, and Indian coal production; calendar year 2007 inflation adjustment factors and reference prices. This notice announces the calendar year 2007 inflation adjustment factors and reference prices for the renewable electricity production credit, refined coal production credit, and Indian coal production credit under section 45 of the Code.
The Department of Treasury and the Service invite public comments on recommendations for items that should be included on the 2007-2008 Guidance Priority List. Taxpayers may submit recommendations for guidance at any time during the year. Recommendations submitted by May 31, 2007, will be reviewed for possible inclusion on the original 2007-2008 Guidance Priority List. Recommendations received after May 31, 2007, will be reviewed for inclusion in the next periodic update.
This notice provides guidance to real estate investment trusts (REITs) concerning the circumstances under which section 856(c)(2) or (3) of the Code characterizes section 987 gain as qualifying income for REIT qualification.
This document provides the exclusive procedures under which a bank may change its method of accounting for uncollected interest to an elective safe harbor method based on the bank’s collection experience. Rev. Proc. 2002-9 modified and amplified.
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