INTRODUCTION

The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for the announcement of official rulings and procedures of the Internal Revenue Service, and for the publication of Treasury Decisions, Executive Orders, tax conventions, legislation, and court decisions pertaining to internal revenue matters. Other items considered to be of general interest are also published in the Bulletin, such as announcements relating to proposed regulations published with notice of proposed rulemaking, announcements relating to decisions of the Tax Court of the United States, announcements of the disbarment and suspension of attorneys and agents from practice before the Treasury Department, Delegation Orders, etc.

It is the policy of the Service to publish in the Bulletin all substantive and procedural rulings of importance or of general interest, the publication of which is considered necessary to promote a uniform application of the laws administered by the Service. It is also the policy to publish all rulings and statements of procedures which supersede, revoke, modify, or amend any published ruling or procedure. Except where otherwise indicated, published rulings and procedures apply retroactively. Rulings and statements of procedures relating solely to matters of internal management are not published. However, statements of internal practices and procedures affecting rights or duties of taxpayers, or industry regulation, which appear in internal management documents, are published. Revenue Rulings and Revenue Procedures are based upon rulings and internal management documents prepared in the various divisions of the National Office, including the Office of the Chief Counsel for the Internal Revenue Service. In the preparation of these, caution is exercised to conceal the identity of the taxpayer, as well as any confidential personal and business information. All Revenue Rulings published in the Bulletin have received the consideration and concurrence of the Chief Counsel.

Revenue Rulings and Revenue Procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations (including Treasury Decisions), but are published to provide precedents to be used in the disposition of other cases, and may be cited and relied upon for that purpose. Since each published ruling represents the conclusion of the Service as to the application of the law to the entire state of facts involved, Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. (Continued on page 4)

DEPOSITED BY THE

HEL STATES OF AMERICE

3

HIGHLIGHTS OF THIS ISSUE-Continued from page 1

INCOME TAX-Continued

page 26.

The tax on royalties imposed under Brazilian Decree Rev. Rul. 59–70,
No. 36,733 is allowable as a credit against United
States income tax under section 901 of the 1954 Code,
but the additional “tax” imposed by Article 3 of Law
No. 1474 is not.

The Revenue Service discusses the determination of the
foreign tax credit, under section 902(d) of the 1954
Code, with respect to certain distributions made by a
wholly-owned foreign subsidiary corporation to its
domestic parent corporation.

Regulations have been issued under section 613(d) of
the 1954 Code, relating to percentage depletion rates
for certain taxable years ending in 1954.
The regulations relating to losses on securities held by
banks, real property subdivided for sale, and gain
from the sale of property between spouses or be-
tween an individual and a controlled corporation have
been amended to conform to the Technical Amend-
ments Act of 1958.

Rev. Rul. 59–71, page 29.

T.D. 6361,

page 21.

T.D. 6362,

page 20.

Certain organizations exempt from Federal income tax Announcement may now obtain retroactive Social Security coverage 59-22, page 48. for their employees by promptly filing Form SS-15b.

page 9.

Regulations have been proposed under section 501(c) Announcement,
(3) and (4) of the 1954 Code, relating to the exemp-
tion from tax of certain religious, charitable, etc.,
organizations and civic organizations.
Amendments have been proposed to the regulations Announcement,
relating to property used in the trade or business and
involuntary conversions, options to buy or sell, and
the sale or exchange of patents.

page 9.

page 9.

Proposed regulations would amend Regulations 118 to Announcement,
conform to section 99 of the Technical Amendments
Act of 1958, relating to amounts received by certain
motor carriers in settlement of claims against the
United States.

EMPLOYMENT TAX:

The Revenue Service discusses the application of the
employment taxes to payments made by an employer
to the beneficiary of a deceased employee represent-
ing his salary during his last illness, salary for re-
mainder of month in which he died, and accrued
vacation pay.

ESTATE TAX:

Rev. Rul. 59–64, page 10.

The credit allowable for tax on prior transfers is not Rev. Rul. 59-73,
limited to the actual tax paid by the estate of the
immediately preceding transferor.

GIFT TAX:

page 33.

A gift in trust for a minor under terms requiring the Rev. Rul. 59-78,
trustee to use the property for the benefit of the
donee as if held by him as guardian of the donee

constitutes a gift of a present interest.

page 44.

(Continued on page 5)

INTRODUCTION-Continued from page 2

In applying rulings and procedures published in the Bulletin, personnel of the Service and others concerned must consider the effect of subsequent legislation, regulations, court decisions, rulings and procedures.

Each published ruling is designated as a "Revenue Ruling," and each published procedure is designated as a "Revenue Procedure.” These should be cited by reference to the year of issuance and the Bulletin and page where reported. Thus, Revenue Ruling No. 11 for 1959, which is reported on page 18 of Bulletin No. 2 for 1959, should be cited as "Rev. Rul. 59-11, I.R.B. 1959-2, 18," until it appears in the Cumulative Bulletin, when it should be cited as "Rev. Rul. 59–11, C.B. 1959-1, -." Similarly, Revenue Procedure No. 1 for 1959, which is reported on page 61 of Bulletin No. 6 for 1959, should be cited as "Rev. Proc. 59-1, I.R.B. 1959-6, 61," until such time as it appears in the Cumulative Bulletin. Revenue Rulings are keyed to the applicable sections of the Internal Revenue Code and regulations. The Bulletin is published weekly and may be obtained on a subscription basis from the Superintendent of Documents, as indicated below. The contents of the Bulletin are consolidated at least semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single-copy basis. Subscribers to the weekly Bulletin will be notified when copies of the Cumulative Bulletins are available.

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 25, D.C. Price 20 cents (single copy). Subscription price: $6.00

a year; $2.75 additional for foreign mailing.

HIGHLIGHTS OF THIS ISSUE-Continued from page 3

EXCISE TAXES:

page 36.

The sale, at cost, of imported automobile parts or ac- Rev. Rul. 59–74, cessories by the importing corporation to another corporation which is owned and managed by the same stockholders is considered to be at less than the fair market price and otherwise than at arm's length, requiring the determination of a constructive sale price. Prior to its repeal, the tax on transportation of property did not apply to payments for the shifting, by towboats, of vessels being repaired or constructed and outfitted in a shipyard, where the shifting was essential to and an integral part of these operations; Revenue Ruling 54–321, amplified.

A transit company is entitled to the payment provided by section 6421(a) of the Code with respect to gasoline used in snow plows, sanders, supervisory cars, or repair trucks only if those vehicles are not registered or required to be registered for highway use.

FIREARMS:

Rev. Rul. 59-75, page 38.

Rev. Rul. 59-76,

page 42.

page 41.

Under the National Firearms Act, a "dealer" is defined Rev. Rul. 59-77, as one engaged within the United States in repeated commercial sales of firearms with profit as the principal objective.

Regulations have been amended to reflect the provisions of the Excise Tax Technical Changes Act of 1958 with regard to the special (occupational) tax and transfer tax on firearms.

ADMINISTRATIVE:

T.D. 6363,

page 40.

Taxpayers are reminded of the deposit requirements Announcement for various taxes and of the penalty provisions of law for failure to make required deposits.

59-23, page 47.

Announcement of action on decisions of the Tax Court Page 7. of the United States.

FOREWORD

The Internal Revenue Bulletin is prepared in six parts as follows: I. Part I includes rulings and decisions which are based on the application of provisions of the Internal Revenue Code of 1954 and, unless otherwise stated in the ruling or decision, are published without consideration as to any application of the provisions of the Internal Revenue Code of 1939 or other related public laws.

II. Part II includes rulings and decisions which are based on the application of the Internal Revenue Code of 1939, the Federal Firearms Act, and other public laws except those pertaining to the various alcohol taxes; and, unless otherwise noted therein, they are published without consideration as to any application of the provisions of the Internal Revenue Code of 1954. Part II is subdivided into three subparts according to matters issued under the Internal Revenue Code of 1939 (Subpart A), the Federal Firearms Act (Subpart B), and other public laws (Subpart C).

III. Part III contains rulings and decisions pertaining to the various alcohol taxes. This part is subdivided into four subparts according to matters issued under the Internal Revenue Code of 1954 (Subpart A), the Internal Revenue Code of 1939 (Subpart B), the Federal Alcohol Administration Act (Subpart C), and other public laws (Subpart D).

IV. Part IV contains treaties and tax legislation, including related committee and Conference Reports. This part is subdivided into three subparts according to tax conventions, Treasury Decisions and Revenue Rulings issued with respect thereto (Subpart A), legislation (Subpart B), and Committee Reports (Subpart C). House, Senate and Conference Committee Reports printed in the Bulletin do not include the portion entitled 'Changes in Existing Law."

V. Part V is devoted to administrative, procedural and miscellaneous matters.

VI. Part VI includes general announcements which are deemed to be of interest to the general public. With the exception of the disbarment list included in this part, none of the other announcements will be consolidated in the Cumulative Bulletin.

The Highlights of this Bulletin include a reference to each item published in the Bulletin. Because these are grouped according to the type of tax involved, the Highlights for a particular issue serve as an index to matters published therein. The Bulletin service carries a cumulative index on a monthly basis. That index appears in the first Bulletin for each month and indexes matters published during the preceding month. These monthly indexes are cumulated on a quarterly and semiannual basis, and the indexes so cumulated are published in the first Bulletin of the succeeding quarterly period, respectively.