Announcement 2008-41

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Internal Revenue Bulletin:

2008-19 May 12, 2008

Announcement 2008-41

Section 1221(a)(4) Capital Asset Exclusion for Accounts and Notes Receivable



Internal Revenue Service (IRS), Treasury.


Withdrawal of notice of proposed rulemaking.


This document withdraws a notice of proposed rulemaking (REG-109367-06, 2006-2 C.B. 683) relating to the circumstances in which accounts or notes receivable are “acquired ... for services rendered” within the meaning of section 1221(a)(4).


K. Scott Brown, (202) 622-7454 (not a toll-free call).



On August 7, 2006, the Treasury Department and the IRS published in the Federal Register (71 FR 44600) proposed regulations § 1.1221-1(e) under section 1221(a)(4) of the Internal Revenue Code. These regulations sought to clarify the circumstances in which accounts or notes receivable are “acquired ... for services rendered” within the meaning of section 1221(a)(4).

Written comments were received from interested parties, and public hearings to discuss these regulations were held on November 7, 2006, and August 22, 2007. Most of the comments focused on the decisions in Burbank Liquidating Corp. v. Commissioner, 39 T.C. 999 (1963), acq. sub nom. United Assocs., Inc., 1965-1 C.B. 3, aff’d in part and rev’d in part on other grounds, 335 F.2d 125 (9th Cir. 1964) and Federal National Mortgage Association v. Commissioner, 100 T.C. 541 (1993). The Treasury Department and the IRS considered the comments and have decided to withdraw the proposed regulations.

The IRS will not challenge return reporting positions of taxpayers under section 1221(a)(4) that apply existing law, including Burbank Liquidating; Federal National Mortgage Association; and Bieldfeldt v. Commissioner, 231 F.3d 1035 (7th Cir. 2000), cert. denied, 534 U.S. 813 (2001). See also Rev. Rul. 80-56, 1980-1 C.B. 154, and Rev. Rul. 80-57, 1980-1 C.B. 157. The IRS and the Treasury Department will continue to study this area and may issue guidance in the future.

* * * * *

Withdrawal of Notice of Proposed Rulemaking

Accordingly, under the authority of 26 U.S.C. 7805, the notice of proposed rulemaking (REG-109367-06) published in the Federal Register on August 7, 2006 (71 FR 44600) is withdrawn.

Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.


(Filed by the Office of the Federal Register on April 22, 2008, 8:45 a.m., and published in the issue of the Federal Register for April 23, 2008, 73 F.R. 21861)

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