In This Issue

Statement of Principles of Internal Revenue Tax

Administration in

Introduction ili

Foreword iv

Abbreviations V

Numerical Finding List vi

Finding List of Previously Published Rulings

Currently Mentioned ix

Finding List of Obsolete Published Rulings xi

Tax Court 1

Part 1.-Rulings and Decisions Under the Internal

Revenue Code of 1954, except those pertaining

to Alcohol, Tobacco, and Firearms 5

Part II.-Rulings and Decisions Under the Internal

Revenue Code of 1939 and Other Laws, except

those pertaining to Alcohol, Tobacco, and

Firearms 428

Part IV.—Treaties and Tax Legislation

Table of Contents 433

Subpart A.—Tax Conventions 434

Subpart B.—Legislation 437

Subpart C.-Committee Reports 446

Part 1.—Administrative, Procedural and Miscel-

laneous Matters

Table of Contents 459

Index 513

Statement of Principles

of Internal Revenue

Tax Administration

The Service also has the responsibility of apply.
ing and administering the law in a reasonable,
practical manner. Issues should only be raised by

examining officers when they have merit, never

arbitrarily or for trading purposes. At the same

time, the examining officer should never hesitate

to raise a meritorious issue. It is also important

that care be exercised not to raise an issue or to

ask a court to adopt a position inconsistent with

an established Service position.

The function of the Internal Revenue Service is to
administer the Internal Revenue Code. Tax policy
for raising revenue is determined by Congress.

With this in mind, it is the duty of the Service to

carry out that policy by correctly applying the laws

enacted by Congress; to determine the reason-

able meaning of various Code provisions in light

of the Congressional purpose in enacting them;

and to perform this work in a fair and impartial

manner, with neither a government nor a tax-

payer point of view.

At the heart of administration is interpretation of

the Code. It is the responsibility of each person in

the Service, charged with the duty of interpreting

the law, to try to find the true meaning of the

statutory provision and not to adopt a strained

construction in the belief that he is “protecting

the revenue." The revenue is properly protected

only when we ascertain and apply the true mean-

ing of the statute.

Administration should be both reasonable and

vigorous. It should be conducted with as little

delay as possible and with great courtesy and con-

siderateness. It should never try to overreach, and

should be reasonable within the bounds of law

and sound administration. It should, however, be

vigorous in requiring compliance with law and it

should be relentless in its attack on unreal tax

devices and fraud.

Introduction

do not have the force and effect of Treasury De-
partment Regulations, but they may be used as
precedents. Unpublished rulings will not be relied
on, used, or cited as precedents by Service per-
sonnel in the disposition of other cases. In apply-
ing published rulings and procedures, the effect
of subsequent legislation, regulations, court deci-
sions, rulings, and procedures must be consid-
ered, and Service personnel and others concerned
are cautioned against reaching the same conclu-
sions in other cases unless the facts and circum-

stances are substantially the same.

The Internal Revenue Bulletin is the authoritative
instrument of the Commissioner of Internal Reve-
nue for announcing official rulings and procedures
of the Internal Revenue Service and for publish-
ing Treasury Decisions, Executive Orders, tax con-
ventions, legislation, court decisions, and other
items of general interest.
It is the policy of the Service to publish in the
Bulletin all substantive rulings necessary to pro-
mote a uniform application of the tax laws, in-

cluding all rulings that supersede, revoke, modify,
or amend any of those previously published in the

Bulletin. All published rulings apply retroactively

unless otherwise indicated. Procedures relating

solely to matters of internal management are not

published; however, industry regulations appear-

ing in internal management documents and

statements of internal practices and procedures

that affect the rights and duties of taxpayers are

published.

Revenue Rulings represent the conclusions of the

Service on the application of the law to the entire

state of facts involved. In those that are based on

positions taken in rulings to taxpayers or techni-

cal advice to service field offices, identifying de-

tails and confidential information are deleted to

prevent unwarranted invasions of privacy and to

comply with statutory requirements, such as 18

U.S.C. 1905 and 26 U.S.C. 7213 concerning dis-

closure of information obtained from members of

the public.

Rulings and procedures reported in the Bulletin

Cumulative Bulletin 1973-2 is a consolidation of

all items of a permanent nature published in the

weekly Bulletins 1973-27 through 1973-53 for

the period of July 1 through December 31, 1973.

It includes a cumulative list of announcements

relating to decisions of the Tax Court published

in the Internal Revenue Bulletins.

The Bulletin Index-Digest System, a research and
reference service supplementing the Bulletin,

may be obtained from the Superintendent of

Documents on a subscription basis. It consists of

four Services: 1-Income Tax, 2-Estate and

Gift Taxes, 3—Employment Taxes, and 4 Excise

Taxes. Each Service consists of a basic volume

and a cumulative supplement that provide (1) find-

ing lists of items published in the Bulletin, (2)

digests of Revenue Rulings, Revenue Procedures,

and other published items, and (3) topical indexes

of Public Laws, Treasury Decisions, and Tax Con-

ventions.

The contents of this publication are not copyrighted and may be
reprinted freely, a citation of the Cumulative Bulletin as the
source would be appropriate.

Foreword

The Internal Revenue Cumulative Bulletin is prepared in five parts as follows: Part 1.—1954 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1954 other than those pertaining to alcohol, tobacco, and firearms. Arrangement is sequential according to Code and regulations sections. The Code section is shown at the top of each page. Part 11.-1939 Code. This part includes decisions based on provisions of the Internal Revenue Code of 1939 and other laws, except those pertaining to alcohol, tobacco, and firearms. Part III.- Reserved. (This part contained all matters pertaining to alcohol, tobacco, firearms, and explosives prior to the transfer of the Alcohol, Tobacco and Firearms Division from the Internal

Revenue Service to the Bureau of Alcohol, Tobacco and Firearms, Department of the Treasury, effective July 1, 1972, Treasury Department Order No. 221, 1972-2 C.B. 899.) Part IV.—Treaties and Tax Legislation. This part is divided into three subparts as follows: Subpart A, Revenue Ruling related to Tax Conventions; Subpart B, Legislation; Subpart C, Committee Reports. House, Senate, and Conference Committee Reports printed in the Bulletin do not include the portion entitled "Changes in Existing Law."

Part V.-Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross-references to these subjects are contained in the other parts and Subparts. Included in this Part is a list of persons disbarred or suspended from practice before the Internal Revenue Service.

The synopses preceding Revenue Rulings, Revenue Procedures, and Court Decisions are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.

Abbreviations

The following abbreviations in current use and formerly used will appear in material published in the Bulletin. A, B, C, etc. The names of individuals. A.R.R. Committee on Appeals and Review recom

mendation. A.T. Alcohol and tobacco tax ruling. B.T.A. Board of Tax Appeals. C.B. Cumulative Bulletin. C.F.R. Code of Federal Regulations. C.T. Carriers Taxing Act of 1937. Ct. D. Court Decision. Del. Order. Delegation Order. D.C. Treasury Department circular. DISC Domestic International Sales Corporations. E.O. Executive Order. E.T. Estate and gift tax ruling. Em. T. Employment tax ruling. F.A.A.A. Federal Alcohol Administration Act. F.I.C.A. Federal Insurance Contributions Act. F.R. Federal Register. FUTA Federal Unemployment Tax Act. G.C.M. Chief Counsel's memorandum (formerly

General Counsel's memorandum).

I.R.B. Internal Revenue Bulletin.
IR-Mim. Published IR-Mimeograph.
I.T. Income tax ruling.
M, N, X, Y, Z, etc. The names of corporations,

places or businesses, according to context. M.T. Miscellaneous tax ruling. Mim. Published mimeograph. 0.D. Office Decision. P.L. Public Law. PS Pension, profit-sharing, stock bonus or annuity

plan ruling.
Rev. Proc. Revenue Procedure.
Rev. Rul. Revenue Ruling.
R.S. Revised Statute.
S.M. Solicitor's Memorandum.
Sol. Op. Solicitor's Opinion.
S.P.R. Statement of Procedural Rules.
S.R. Solicitor's Recommendation.
S.S.T. Social Security Tax.
S.T. Sales tax ruling.
Stat. Statutes at Large.
T.C. The Tax Court of the United States.
T.D. Treasury Decision.
T.I.R. Technical Information Release.
U.S.C. United States Code.

x and y are used to represent certain numbers and when used with the word "dollars" represent sums of money.