It is the policy of the Internal Revenue Service to announce at an early date whether it will follow the holdings in certain cases. An Action on Decision is the document making such an announcement. An Action on Decision will be issued at the discretion of the Service only on unappealed issues decided adverse to the government. Generally, an Action on Decision is issued where its guidance would be helpful to Service personnel working with the same or similar issues. Unlike a Treasury Regulation or a Revenue Ruling, an Action on Decision is not an affirmative statement of Service position. It is not intended to serve as public guidance and may not be cited as precedent.

Actions on Decisions shall be relied upon within the Service only as conclusions applying the law to the facts in the particular case at the time the Action on Decision was issued. Caution should be exercised in extending the recommendation of the Action on Decision to similar cases where the facts are different. Moreover, the recommendation in the Action on Decision may be superseded by new legislation, regulations, rulings, cases, or Actions on Decisions.

Prior to 1991, the Service published acquiescence or nonacquiescence only in certain regular Tax Court opinions. The Service has expanded its acquiescence program to include other civil tax cases where guidance is determined to be helpful. Accordingly, the Service now may acquiesce or nonacquiesce in the holdings of memorandum Tax Court opinions, as well as those of the United States District Courts, Claims Court, and Circuit Courts of Appeal. Regardless of the court deciding the case, the recommendation of any Action on Decision will be published in the Internal Revenue Bulletin.

The recommendation in every Action on Decision will be summarized as acquiescence, acquiescence in result only, or nonacquiescence. Both "acquiescence" and "acquiescence in result only" mean that the Service ac

cepts the holding of the court in a case and that the Service will follow it in disposing of cases with the same controlling facts. However, "acquiescence" indicates neither approval nor disapproval of the reasons disapproval of the reasons assigned by the court for its conclusions; whereas, "acquiescence in result only" indicates disagreement or concern with some or all of those reasons. Nonacquiescence signifies that, although no further review was sought, the Service does not agree with the holding of the court and, generally, will not follow the decision in disposing of cases involving other taxpayers. In reference to an opinion of a curcuit court of appeals, a nonacquiescence indicates that the Service will not follow the holding on a nationwide basis. However, the Service will recognize the precedential impact of the opinion on cases arising within the venue of the deciding circuit.

The announcements published in the weekly Internal Revenue Bulletins are consolidated semiannually and annually. The semiannual consolidation appears in the first Bulletin for July and the Cumulative Bulletin for the first half of the year, and the annual consolidation appears in the first Bulletin for the following January and in the Cumulative Bulletin for the last half of the year.

The Commissioner ACQUIESCES in the following decisions:

1

Harlan E. Moore Charitable Trust v. United States, 9 F.3d 623 (7th Cir. 1993)

Kansas City Southern Industries, Inc. v. Commissioner2 98 T.C. 242 (1992)

The Commissioner does NOT ACQUIESCE in the following decisions:

Critical Care Registered Nursing, Inc. v. United States,3 776 F. Supp. 1025 (E.D. Pa. 1991)

Kansas City Southern Industries, Inc. v. Commissioner,4 98 T.C. 242 (1992)

William J. O'Neill, Jr Irrevocable Trust v. Commissioner,5 994 F.2d 302 (6th Cir. 1993)

REAG, Inc. v. United States,6 801 F. Supp. 494 (W.D. Okl. 1992)

Zabolotny v. Commissioner,7 7 F.3d 774 (8th Cir. 1993)

'Acquiescence in the issues relating to (1) whether the cropshare expense sharing arrangement between plaintiff and its tenant created a joint venture undertaking so that plaintiff's portion of the income from the farming operation is not excludable from unrelated business income as rent from real property under section 512(b)(3)(A)(i) of the Code, and (2) whether the income received by the plaintiff from the farming operation is not excludable rent from real property because the determination of such rent depends in whole or in part on the income or profits derived from the leased farming property, as provided in section 512(b)(3)(B)(ii). 2Acquiescence in result in the issue relating to whether the Commissioner abused her discretion by refusing to allow petitioner to revoke its election to amortize railroad grading under section 185 of the Code. Acquiescence "in result" means acceptance of the Court but disagreement with some or all the reasons assigned for the decision.

3Nonacquiescence in the issues relating to (1) whether a taxpayer must establish entitlement to relief under section 530 of the Revenue Act of 1978 by a preponderance of the evidence, and (2) whether relief is available under section 530 absent determination of whether the workers are employees or independent contractors under the common law standard.

"Nonacquiescence in the issues relating to (1) whether the investment tax credit (ITC) is precluded by former section 185(h) for railroad grading regardless of whether the election to amortize has been revoked, and (2) whether "side track deposits" are income to an accrualmethod railroad upon receipt from a manufacturer as an advance payment for future services. "Nonacquiescence relating to whether an irrevocable trust's deductions for investment advice are fully deductible from gross income under section 67(e) of the Code or whether they are deductible under section 67(a) only to the extent they exceed 2 percent of the trust's adjusted gross income.

"Nonacquiescence in the issues relating to (1) whether the appraisers who performed services for the plaintiff were employees of the plaintiff or independent contractors, (2) if the appraisers were employees of the plaintiff, whether the plaintiff is entitled to the industry practice safe haven under section 530(a)(2)(C) of the Revenue Act of 1978, and (3) if the appraisers were employees of the plaintiff, whether the plaintiff had some other reasonable basis for treating its employees as independent contractors under section 530 of the Revenue Act of 1978. 'Nonacquiescence relating to whether the prohibited transaction was corrected under section 4975(f)(5) of the Code.

Section 170.-Charitable, etc., Contributions and Gifts

26 CFR 1.170A-6: Charitable contributions in trust.

During calendar year 1995, if a taxpayer transfers property to a new pooled income fund that has been in existence for less than 3 taxable years, what deemed rate of return is used to value the remainder interest? See Rev. Rul. 95-1, this page.

Section 642.-Special Rules for Credits and Deductions

26 CFR 1.642(c)-6: Valuation of a remainder interest in property transferred to a pooled income fund.

(Also $8 170, 2055, 2522, 7520; 1.170A-6, 20.2055-2, 25.2522(c)-3, 1.7520-1, 20.7520-1, 25.7520-1.)

Valuation of a remainder interest in property transferred to a new pooled income fund under section 642(c)(5). The deemed rate of return computed under section 7520 of the Code is provided for transfers in calendar year 1995 to new pooled income funds that have been in existence for less than 3 taxable years.

Rev. Rul. 95-1

This revenue ruling lists the calendar year 1995 deemed rate of return computed under § 7520 of the Internal Revenue Code for pooled income funds (PIFs) described in § 642(c)(5) that have been in existence for less

the 1995 taxable year in which a transfer is made to the PIF.

Under § 7520, the value of annuities, interests for life or terms of years, and remainder or reversionary interests created after April 30, 1989, are determined by using the interest rate (rounded to the nearest 2/10ths of 1 percent) equal to 120 percent of the applicable federal midterm rate under § 1274(d)(1) for the month in which the valuation date falls and life contingencies in mortality tables prescribed in the regulations.

Section 1.642(c)-6(e)(2) of the Income Tax Regulations provides that the present value of an income interest in property transferred to a PIF is computed on the basis of life contingencies prescribed under § 20.20317(d)(6) of the Estate Tax Regulations

Rev. Rul. 95-1 Table

able years immediately preceding the taxable year in which the transfer to the PIF is made. See § 1.642(c)6(e)(2)(ii).

If a transfer is made to a new PIF after April 30, 1989, the deemed rate of return is the interest rate (rounded to the nearest 2/10ths of 1 percent) that is 1 percent less than the highest annual average of the monthly § 7520 rates for the 3 calendar years immediately preceding the calendar year in which the transfer to the PIF is made.

The deemed rate of return for transfers to a new PIF during taxable year 1995 is 6.8 percent.

The following Table lists the rates for transfers to new PIFS in 1995 and the rates for transfers to new PIFs in each of the past 6 calendar years. |