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26 USCS 7701

UNITED STATES CODE SERVICE
Copyright 1999, LEXIS Law Publishing, a division of Reed Elsevier Inc.
All rights reserved.

*** THIS SECTION IS CURRENT THROUGH 106-30, APPROVED 5/21/99 ***

TITLE 26. INTERNAL REVENUE CODE  
SUBTITLE F. PROCEDURE AND ADMINISTRATION  
CHAPTER 79. DEFINITIONS

26 USCS 7701 (1999)

7701.  Definitions.

(a) When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof--
   (1) Person. The term 'person' shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation.
   (2) Partnership and partner. The term 'partnership' includes a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a trust or estate or a corporation; and the term 'partner' includes a member in such a syndicate, group, pool, joint venture, or organization.
   (3) Corporation. The term 'corporation' includes associations, joint-stock companies, and insurance companies.
   (4) Domestic. The term 'domestic' when applied to a corporation or partnership means created or organized in the United States or under the law of the United States or of any State unless, in the case of a partnership, the Secretary provides otherwise by regulations.
   (5) Foreign. The term 'foreign' when applied to a corporation or partnership means a corporation or partnership which is not domestic.
   (6) Fiduciary. The term 'fiduciary' means a guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person.
   (7) Stock. The term 'stock' includes shares in an association, joint-stock company, or insurance company.
   (8) Shareholder. The term 'shareholder' includes a member in an association, joint-stock company, or insurance company.
   (9) United States. The term 'United States' when used in a geographical sense includes only the States and the District of Columbia.
   (10) State. The term 'State' shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.
   (11) Secretary of the Treasury and Secretary.
      (A) Secretary of the Treasury. The term 'Secretary of the Treasury' means the Secretary of the Treasury, personally, and shall not include any delegate of his.
      (B) Secretary. The term 'Secretary' means the Secretary of the Treasury or his delegate.
   (12) Delegate.
      (A) In general. The term 'or his delegate'--
         (i) when used with reference to the Secretary of the Treasury, means any officer, employee, or agency of the Treasury Department duly authorized by the Secretary of the Treasury directly, or indirectly by one or more redelegations of authority, to perform the function mentioned or described in the context; and
         (ii) when used with reference to any other official of the United States, shall be similarly construed.
      (B) Performance of certain functions in Guam or American Samoa. The term 'delegate,' in relation to the performance of functions in Guam or American Samoa with respect to the taxes imposed by chapters 1, 2, and 21, also includes any officer or employee of any other department or agency of the United States, or of any possession thereof, duly authorized by the Secretary (directly, or indirectly by one or more redelegations of authority) to perform such functions.
   (13) Commissioner. The term 'Commissioner' means the Commissioner of Internal Revenue.
   (14) Taxpayer. The term 'taxpayer' means any person subject to any internal revenue tax.
   (15) Military or naval forces and armed forces of the United States. The term 'military or naval forces of the United States' and the term 'Armed Forces of the United States' each includes all regular and reserve components of the uniformed services which are subject to the jurisdiction of the Secretary of Defense, the Secretary of the Army, the Secretary of the Navy, or the Secretary of the Air Force, and each term also includes the Coast Guard. The members of such forces include commissioned officers and personnel below the grade of commissioned officers in such forces.
   (16) Withholding agent. The term 'withholding agent' means any person required to deduct and withhold any tax under the provisions of sections 1441, 1442, 1443, or 1461.
   (17) Husband and wife. As used in sections 152(b)(4), 682, and 2516, if the husband and wife therein referred to are divorced, wherever appropriate to the meaning of such sections, the term 'wife' shall be read 'former wife' and the term 'husband' shall be read 'former husband'; and, if the payments described in such sections are made by or on behalf of the wife or former wife to the husband or former husband instead of vice versa, wherever appropriate to the meaning of such sections, the term 'husband' shall be read 'wife' and the term 'wife' shall be read 'husband.'
   (18) International organization. The term 'international organization' means a public international organization entitled to enjoy privileges, exemptions, and immunities as an international organization under the International Organizations Immunities Act (22 U.S.C. 288-288f).
   (19) Domestic building and loan association. The term 'domestic building and loan association' means a domestic building and loan association, a domestic savings and loan association, and a Federal savings and loan association--
      (A) which either (i) is an insured institution within the meaning of section 401(a) of the National Housing Act (12 U.S.C., sec. 1724(a)), or (ii) is subject by law to supervision and examination by State or Federal authority having supervision over such associations;
      (B) the business of which consists principally of acquiring the savings of the public and investing in loans; and
      (C) at least 60 percent of the amount of the total assets of which (at the close of the taxable year) consists of--
         (i) cash,
         (ii) obligations of the United States or of a State or political subdivision thereof, and stock or obligations of a corporation which is an instrumentality of the United States or of a State or political subdivision thereof, but not including obligations the interest on which is excludable from gross income under section 103,
         (iii) certificates of deposit in, or obligations of, a corporation organized under a State law which specifically authorizes such corporation to insure the deposits or share accounts of member associations,
         (iv) loans secured by a deposit or share of a member,
         (v) loans (including redeemable ground rents, as defined in section 1055) secured by an interest in real property which is (or, from the proceeds of the loan, will become) residential real property or real property used primarily for church purposes, loans made for the improvement of residential real property or real property used primarily for church purposes, provided that for purposes of this clause, residential real property shall include single or multifamily dwellings, facilities in residential developments dedicated to public use or property used on a nonprofit basis for residents, and mobile homes not used on a transient basis,
         (vi) loans secured by an interest in real property located within an urban renewal area to be developed for predominantly residential use under an urban renewal plan approved by the Secretary of Housing and Urban Development under part A or part B of title I of the Housing Act of 1949, as amended, or located within any area covered by a program eligible for assistance under section 103 of the Demonstration Cities and Metropolitan Development Act of 1966, as amended, and loans made for the improvement of any such real property,
         (vii) loans secured by an interest in educational, health, or welfare institutions or facilities, including structures designed or used primarily for residential purposes for students, residents, and persons under care, employees, or members of the staff of such institutions or facilities,
         (viii) property acquired through the liquidation of defaulted loans described in clause (v), (vi), or (vii),
         (ix) loans made for the payment of expenses of college or university education or vocational training, in accordance with such regulations as may be prescribed by the Secretary,
         (x) property used by the association in the conduct of the business described in subparagraph (B), and
         (xi) any regular or residual interest in a REMIC, and any regular interest in a FASIT, but only in the proportion which the assets of such REMIC or FASIT consist of property described in any of the preceding clauses of this subparagraph; except that if 95 percent or more of the assets of such REMIC or FASIT are assets described in clauses (i) through (x), the entire interest in the REMIC or FASIT shall qualify.
      At the election of the taxpayer, the percentage specified in this subparagraph shall be applied on the basis of the average assets outstanding during the taxable year, in lieu of the close of the taxable year, computed under regulations prescribed by the Secretary. For purposes of clause (v), if a multifamily structure securing a loan is used in part for nonresidential purposes, the entire loan is deemed a residential real property loan if the planned residential use exceeds 80 percent of the property's planned use (determined as of the time the loan is made). For purposes of clause (v), loans made to finance the acquisition or development of land shall be deemed to be loans secured by an interest in residential real property if, under regulations prescribed by the Secretary, there is reasonable assurance that the property will become residential real property within a period of 3 years from the date of acquisition of such land; but this sentence shall not apply for any taxable year unless, within such 3-year period, such land becomes residential real property. For purposes of determining whether any interest in a REMIC qualifies under clause (xi), any regular interest in another REMIC held by such REMIC shall be treated as a loan described in a preceding clause under principles similar to the principles of clause (xi); except that, if such REMIC's are part of a tiered structure, they shall be treated as 1 REMIC for purposes of clause (xi).
   (20) Employee. For the purpose of applying the provisions of section 79 with respect to group-term life insurance purchased for employees, for the purpose of applying the provisions of sections 104, 105, and 106 with respect to accident and health insurance or accident and health plans, and for the purpose of applying the provisions of subtitle A with respect to contributions to or under a stock bonus, pension, profit-sharing, or annuity plan, and with respect to distributions under such a plan, or by a trust forming part of such a plan, and for purposes of applying section 125 with respect to cafeteria plans, the term 'employee' shall include a full-time life insurance salesman who is considered an employee for the purpose of chapter 21, or in the case of services performed before January 1, 1951, who would be considered an employee if his services were performed during 1951.
   (21) Levy. The term 'levy' includes the power of distraint and seizure by any means.
   (22) Attorney General. The term 'Attorney General' means the Attorney General of the United States.
   (23) Taxable year. The term 'taxable year' means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. 'Taxable year' means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
   (24) Fiscal year. The term 'fiscal year' means an accounting period of 12 months ending on the last day of any month other than December.
   (25) Paid or incurred, paid or accrued. The terms 'paid or incurred' and 'paid or accrued' shall be construed according to the method of accounting upon the basis of which the taxable income is computed under subtitle A.
   (26) Trade or business. The term 'trade or business' includes the performance of the functions of a public office.
   (27) Tax Court. The term 'Tax Court' means the United States Tax Court.
   (28) Other terms. Any term used in this subtitle with respect to the application of, or in connection with, the provisions of any other subtitle of this title shall have the same meaning as in such provisions.
   (29) Internal Revenue Code. The term 'Internal Revenue Code of 1986' means this title, and the term 'Internal Revenue Code of 1939' means the Internal Revenue Code enacted February 10, 1939, as amended.
   (30) United States person. The term 'United States person' means--
      (A) a citizen or resident of the United States,
      (B) a domestic partnership,
      (C) a domestic corporation,
      (D) any estate (other than a foreign estate, within the meaning of paragraph (31)), and
      (E) any trust if--
         (i) a court within the United States is able to exercise primary supervision over the administration of the trust, and
         (ii) one or more United States persons have the authority to control all substantial decisions of the trust.
   (31) Foreign estate or trust.
      (A) Foreign estate. The term 'foreign estate' means an estate the income of which, from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States, is not includible in gross income under subtitle A.
      (B) Foreign trust. The term 'foreign trust' means any trust other than a trust described in subparagraph (E) of paragraph (30).
   (32) Cooperative bank. The term 'cooperative bank' means an institution without capital stock organized and operated for mutual purposes and without profit, which--
      (A) either--
         (i) is an insured institution within the meaning of section 401(a) of the National Housing Act (12 U.S.C., sec. 1724(a)), or
         (ii) is subject by law to supervision and examination by State or Federal authority having supervision over such institutions, and
      (B) meets the requirements of subparagraphs (B) and (C) of paragraph (19) of this subsection (relating to definition of domestic building and loan association).
   In determining whether an institution meets the requirements referred to in subparagraph (B) of this paragraph, any reference to an association or to a domestic building and loan association contained in paragraph (19) shall be deemed to be a reference to such institution.
   (33) Regulated public utility. The term 'regulated public utility' means--
      (A) A corporation engaged in the furnishing or sale of--
         (i) electric energy, gas, water, or sewerage disposal services, or
         (ii) transportation (not included in subparagraph (C)) on an intrastate, suburban, municipal, or interurban electric railroad, on an intrastate, municipal, or suburban trackless trolley system, or on a municipal or suburban bus system, or
         (iii) transportation (not included in clause (ii)) by motor vehicle--
      if the rates for such furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof, by an agency or instrumentality of the United States, by a public service or public utility commission or other similar body of the District of Columbia or of any State or political subdivision thereof, or by a foreign country or an agency or instrumentality or political subdivision thereof.
      (B) A corporation engaged as a common carrier in the furnishing or sale of transportation of gas by pipe line, if subject to the jurisdiction of the Federal Energy Regulatory Commission.
      (C) A corporation engaged as a common carrier (i) in the furnishing or sale of transportation by railroad, if subject to the jurisdiction of the Surface Transportation Board, or (ii) in the furnishing or sale of transportation of oil or other petroleum products (including shale oil) by pipe line, if subject to the jurisdiction of the Federal Energy Regulatory Commission or if the rates for such furnishing or sale are subject to the jurisdiction of a public service or public utility commission or other similar body of the District of Columbia or of any State.
      (D) A corporation engaged in the furnishing or sale of telephone or telegraph service, if the rates for such furnishing or sale meet the requirements of subparagraph (A).
      (E) A corporation engaged in the furnishing or sale of transportation as a common carrier by air, subject to the jurisdiction of the Secretary of Transportation.
      (F) A corporation engaged in the furnishing or sale of transportation by a water carrier subject to jurisdiction under subchapter II of chapter 135 of title 49 [49 USCS §§ 13521 et seq.].
      (G) A rail carrier subject to part A of subtitle IV of title 49 [49 USCS §§ 10101 et seq.], if (i) substantially all of its railroad properties have been leased to another such railroad corporation or corporations by an agreement or agreements entered into before January 1, 1954, (ii) each lease is for a term of more than 20 years, and (iii) at least 80 percent or more of its gross income (computed without regard to dividends and capital gains and losses) for the taxable year is derived from such leases and from sources described in subparagraphs (A) through (F), inclusive. For purposes of the preceding sentence, an agreement for lease of railroad properties entered into before January 1, 1954, shall be considered to be a lease including such term as the total number of years of such agreement may, unless sooner terminated, be renewed or continued under the terms of the agreement, and any such renewal or continuance under such agreement shall be considered part of the lease entered into before January 1, 1954.
      (H) A common parent corporation which is a common carrier by railroad subject to part A of subtitle IV of title 49 [49 USCS §§ 10101 et seq.] if at least 80 percent of its gross income (computed without regard to capital gains or losses) is derived directly or indirectly from sources described in subparagraphs (A) through (F), inclusive. For purposes of the preceding sentence, dividends and interest, and income from leases described in subparagraph (G), received from a regulated public utility shall be considered as derived from sources described in subparagraphs (A) through (F), inclusive, if the regulated public utility is a member of an affiliated group (as defined in section 1504) which includes the common parent corporation.
   The term 'regulated public utility' does not (except as provided in subparagraphs (G) and (H)) include a corporation described in subparagraphs (A) through (F), inclusive, unless 80 percent or more of its gross income (computed without regard to dividends and capital gains and losses) for the taxable year is derived from sources described in subparagraphs (A) through (F), inclusive. If the taxpayer establishes to the satisfaction of the Secretary that (i) its revenue from regulated rates described in subparagraph (A) or (D) and its revenue derived from unregulated rates are derived from the operation of a single interconnected and coordinated system or from the operation of more than one such system, and (ii) the unregulated rates have been and are substantially as favorable to users and consumers as are the regulated rates, then such revenue from such unregulated rates shall be considered, for purposes of the preceding sentence, as income derived from sources described in subparagraph (A) or (D).
   (34) Repealed.
   (35) Enrolled actuary. The term 'enrolled actuary' means a person who is enrolled by the Joint Board for the Enrollment of Actuaries established under subtitle C of the title III of the Employee Retirement Income Security Act of 1974.
   (36) Income tax return preparer.
      (A) In general. The term 'income tax return preparer' means any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any return of tax imposed by subtitle A or any claim for refund of tax imposed by subtitle A. For purposes of the preceding sentence, the preparation of a substantial portion of a return or claim for refund shall be treated as if it were the preparation of such return or claim for refund.
      (B) Exceptions. A person shall not be an 'income tax return preparer' merely because such person--
         (i) furnishes typing, reproducing, or other mechanical assistance,
         (ii) prepares a return or claim for refund of the employer (or of an officer or employee of the employer) by whom he is regularly and continuously employed,
         (iii) prepares as a fiduciary a return or claim for refund for any person, or
         (iv) prepares a claim for refund for a taxpayer in response to any notice of deficiency issued to such taxpayer or in response to any waiver of restriction after the commencement of an audit of such taxpayer or another taxpayer if a determination in such audit of such other taxpayer directly or indirectly affects the tax liability of such taxpayer.
   (37) Individual retirement plan. The term 'individual retirement plan' means--
      (A) an individual retirement account described in section 408(a), and
      (B) an individual retirement annuity described in section 408(b).
   (38) Joint return. The term 'joint return' means a single return made jointly under section 6013 by a husband and wife.
   (39) Persons residing outside United States. If any citizen or resident of the United States does not reside in (and is not found in) any United States judicial district, such citizen or resident shall be treated as residing in the District of Columbia for purposes of any provision of this title relating to--
      (A) jurisdiction of courts, or
      (B) enforcement of summons.
   (40) Indian tribal government.
      (A) In general. The term 'Indian tribal government' means the governing body of any tribe, band, community, village, or group of Indians, or (if applicable) Alaska Natives, which is determined by the Secretary, after consultation with the Secretary of the Interior, to exercise governmental functions.
      (B) Special rule for Alaska natives. No determination under subparagraph (A) with respect to Alaska Natives shall grant or defer any status or powers other than those enumerated in section 7871. Nothing in the Indian Tribal Governmental Tax Status Act of 1982, or in the amendments made thereby, shall validate or invalidate any claim by Alaska Natives of sovereign authority over lands or people.
   (41) TIN. The term 'TIN' means the identifying number assigned to a person under section 6109.
   (42) Substituted basis property. The term 'substituted basis property' means property which is--
      (A) transferred basis property, or
      (B) exchanged basis property.
   (43) Transferred basis property. The term 'transferred basis property' means property having a basis determined under any provision of subtitle A (or under any corresponding provision of prior income tax law) providing that the basis shall be determined in whole or in part by reference to the basis in the hands of the donor, grantor, or other transferor.
   (44) Exchanged basis property. The term 'exchanged basis property' means property having a basis determined under any provision of subtitle A (or under any corresponding provision of prior income tax law) providing that the basis shall be determined in whole or in part by reference to other property held at any time by the person for whom the basis is to be determined.
   (45) Nonrecognition transaction. The term 'nonrecognition transaction' means any disposition of property in a transaction in which gain or loss is not recognized in whole or in part for purposes of subtitle A.
   (46) Determination of whether there is a collective bargaining agreement. In determining whether there is a collective bargaining agreement between employee representatives and 1 or more employers, the term 'employee representatives' shall not include any organization more than one-half of the members of which are employees who are owners, officers, or executives of the employer. An agreement shall not be treated as a collective bargaining agreement unless it is a bona fide agreement between bona fide employee representatives and 1 or more employers.
 
(b) Definition of resident alien and nonresident alien.
   (1) In general. For purposes of this title (other than subtitle B)--
      (A) Resident alien. An alien individual shall be treated as a resident of the United States with respect to any calendar year if (and only if) such individual meets the requirements of clause (i), (ii), or (iii):
         (i) Lawfully admitted for permanent residence. Such individual is a lawful permanent resident of the United States at any time during such calendar year.
         (ii) Substantial presence test. Such individual meets the substantial presence test of paragraph (3).
         (iii) First year election. Such individual makes the election provided in paragraph (4).
      (B) Nonresident alien. An individual is a nonresident alien if such individual is neither a citizen of the United States nor a resident of the United States (within the meaning of subparagraph (A)).
   (2) Special rules for first and last year of residency.
      (A) First year of residency.
         (i) In general. If an alien individual is a resident of the United States under paragraph (1)(A) with respect to any calendar year, but was not a resident of the United States at any time during the preceding calendar year, such alien individual shall be treated as a resident of the United States only for the portion of such calendar year which begins on the residency starting date.
         (ii) Residency starting date for individuals lawfully admitted for permanent residence. In the case of an individual who is a lawfully permanent resident of the United States at any time during the calendar year, but does not meet the substantial presence test of paragraph (3), the residency starting date shall be the first day in such calendar year on which he was present in the United States while a lawful permanent resident of the United States.
         (iii) Residency starting date for individuals meeting substantial presence test. In the case of an individual who meets the substantial presence test of paragraph (3) with respect to any calendar year, the residency starting date shall be the first day during such calendar year on which the individual is present in the United States.
         (iv) Residency starting date for individuals making first year election. In the case of an individual who makes the election provided by paragraph (4) with respect to any calendar year, the residency starting date shall be the 1st day during such calendar year on which the individual is treated as a resident of the United States under that paragraph.
      (B) Last year of residency. An alien individual shall not be treated as a resident of the United States during a portion of any calendar year if--
         (i) such portion is after the last day in such calendar year on which the individual was present in the United States (or, in the case of an individual described in paragraph (1)(A)(i), the last day on which he was so described),
         (ii) during such portion the individual has a closer connection to a foreign country than to the United States, and
         (iii) the individual is not a resident of the United States at any time during the next calendar year.
      (C) Certain nominal presence disregarded.
         (i) In general. For purposes of subparagraphs (A)(iii) and (B), an individual shall not be treated as present in the United States during any period for which the individual establishes that he has a closer connection to a foreign country than to the United States.
         (ii) Not more than 10 days disregarded. Clause (i) shall not apply to more than 10 days on which the individual is present in the United States.
   (3) Substantial presence test.
      (A) In general. Except as otherwise provided in this paragraph, an individual meets the substantial presence test of this paragraph with respect to any calendar year (hereinafter in this subsection referred to as the 'current year') if--
         (i) such individual was present in the United States on at least 31 days during the calendar year, and
         (ii) the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier determined under the following table) equals or exceeds 183 days: 
 
    In the case of                         The applicable  
     days in:                              multiplier is:  
    Current year ....................................  1  
    1st preceding year ...........................   1/3  
    2nd preceding year ...........................   1/6  
 
      (B) Exception where individual is present in the United States during less than one-half of current year and closer connection to foreign country is established. An individual shall not be treated as meeting the substantial presence test of this paragraph with respect to any current year if--
         (i) such individual is present in the United States on fewer than 183 days during the current year, and
         (ii) it is established that for the current year such individual has a tax home (as defined in section 911(d)(3) without regard to the second sentence thereof) in a foreign country and has a closer connection to such foreign country than to the United States.
      (C) Subparagraph (B) not to apply in certain cases. Subparagraph (B) shall not apply to any individual with respect to any current year if at any time during such year--
         (i) such individual had an application for adjustment of status pending, or
         (ii) such individual took other steps to apply for status as a lawful permanent resident of the United States.
      (D) Exception for exempt individuals or for certain medical conditions. An individual shall not be treated as being present in the United States on any day if--
         (i) such individual is an exempt individual for such day, or
         (ii) such individual was unable to leave the United States on such day because of a medical condition which arose while such individual was present in the United States.
   (4) First-year election.
      (A) An alien individual shall be deemed to meet the requirements of this subparagraph if such individual--
         (i) is not a resident of the United States under clause (i) or (ii) of paragraph (1)(A) with respect to a calendar year (hereinafter referred to as the 'election year'),
         (ii) was not a resident of the United States under paragraph (1)(A) with respect to the calendar year immediately preceding the election year,
         (iii) is a resident of the United States under clause (ii) of paragraph (1)(A) with respect to the calendar year immediately following the election year, and
         (iv) is both--
            (I) present in the United States for a period of at least 31 consecutive days in the election year, and
            (II) present in the United States during the period beginning with the first day of such 31-day period and ending with the last day of the election year (hereinafter referred to as the 'testing period') for a number of days equal to or exceeding 75 percent of the number of days in the testing period (provided that an individual shall be treated for purposes of this subclause as present in the United States for a number of days during the testing period not exceeding 5 days in the aggregate, notwithstanding his absence from the United States on such days).
      (B) An alien individual who meets the requirements of subparagraph (A) shall, if he so elects, be treated as a resident of the United States with respect to the election year.
      (C) An alien individual who makes the election provided by subparagraph (B) shall be treated as a resident of the United States for the portion of the election year which begins on the 1st day of the earliest testing period during such year with respect to which the individual meets the requirements of clause (iv) of subparagraph (A).
      (D) The rules of subparagraph (D)(i) of paragraph (3) shall apply for purposes of determining an individual's presence in the United States under this paragraph.
      (E) An election under subparagraph (B) shall be made on the individual's tax return for the election year, provided that such election may not be made before the individual has met the substantial presence test of paragraph (3) with respect to the calendar year immediately following the election year.
      (F) An election once made under subparagraph (B) remains in effect for the election year, unless revoked with the consent of the Secretary.
   (5) Exempt individual defined. For purposes of this subsection--
      (A) In general. An individual is an exempt individual for any day if, for such day, such individual is--
         (i) a foreign government-related individual,
         (ii) a teacher or trainee,
         (iii) a student, or
         (iv) a professional athlete who is temporarily in the United States to compete in a charitable sports event described in section 274(l)(1)(B).
      (B) Foreign government-related individual. The term 'foreign government-related individual' means any individual temporarily present in the United States by reason of--
         (i) diplomatic status, or a visa which the Secretary (after consultation with the Secretary of State) determines represents full-time diplomatic or consular status for purposes of this subsection,
         (ii) being a full-time employee of an international organization, or
         (iii) being a member of the immediate family of an individual described in clause (i) or (ii).
      (C) Teacher or trainee. The term 'teacher or trainee' means any individual--
         (i) who is temporarily present in the United States under subparagraph (J), (M), or (Q) of section 101(15) of the Immigration and Nationality Act (other than as a student), and
         (ii) who substantially complies with the requirements for being so present.
      (D) Student. The term 'student' means any individual--
         (i) who is temporarily present in the United States--
            (I) under subparagraph (F) or (M) of section 101(15) of the Immigration and Nationality Act, or
            (II) as a student under subparagraph (J), (M), or (Q) of such section 101(15), and
         (ii) who substantially complies with the requirements for being so present.
      (E) Special rules for teachers, trainees, and students.
         (i) Limitation on teachers and trainees. An individual shall not be treated as an exempt individual by reason of clause (ii) of subparagraph (A) for the current year if, for any 2 calendar years during the preceding 6 calendar years, such person was an exempt person under clause (ii) or (iii) of subparagraph (A). In the case of an individual all of whose compensation is described in section 872(b)(3), the preceding sentence shall be applied by substituting '4 calendar years' for '2 calendar years'.
         (ii) Limitation on students. For any calendar year after the 5th calendar year for which an individual was an exempt individual under clause (ii) or (iii) of subparagraph (A), such individual shall not be treated as an exempt individual by reason of clause (iii) of subparagraph (A), unless such individual establishes to the satisfaction of the Secretary that such individual does not intend to permanently reside in the United States and that such individual meets the requirements of subparagraph (D)(ii).
   (6) Lawful permanent resident. For purposes of this subsection, an individual is a lawful permanent resident of the United States at any time if--
      (A) such individual has the status of having been lawfully accorded the privilege of residing permanently in the United States as an immigrant in accordance with the immigration laws, and
      (B) such status has not been revoked (and has not been administratively or judicially determined to have been abandoned).
   (7) Presence in the United States. For purposes of this subsection--
      (A) In general. Except as provided in subparagraph (B), (C), or (D) an individual shall be treated as present in the United States on any day if such individual is physically present in the United States at any time during such day.
      (B) Commuters from Canada or Mexico. If an individual regularly commutes to employment (or self-employment) in the United States from a place of residence in Canada or Mexico, such individual shall not be treated as present in the United States on any day during which he so commutes.
      (C) Transit between 2 foreign points. If an individual, who is in transit between 2 points outside the United States, is physically present in the United States for less than 24 hours, such individual shall not be treated as present in the United States on any day during such transit.
      (D) Crew members temporarily present. An individual who is temporarily present in the United States on any day as a regular member of the crew of a foreign vessel engaged in transportation between the United States and a foreign country or a possession of the United States shall not be treated as present in the United States on such day unless such individual otherwise engages in any trade or business in the United States on such day.
   (8) Annual statements. The Secretary may prescribe regulations under which an individual who (but for subparagraph (B) or (D) of paragraph (3)) would meet the substantial presence test of paragraph (3) is required to submit an annual statement setting forth the basis on which such individual claims the benefits of subparagraph (B) or (D) of paragraph (3), as the case may be.
   (9) Taxable year.
      (A) In general. For purposes of this title, an alien individual who has not established a taxable year for any prior period shall be treated as having a taxable year which is the calendar year.
      (B) Fiscal year taxpayer. If--
         (i) an individual is treated under paragraph (1) as a resident of the United States for any calendar year, and
         (ii) after the application of subparagraph (A), such individual has a taxable year other than a calendar year,
      he shall be treated as a resident of the United States with respect to any portion of a taxable year which is within such calendar year.
   (10) Coordination with section 877. If--
      (A) an alien individual was treated as a resident of the United States during any period which includes at least 3 consecutive calendar years (hereinafter referred to as the 'initial residency period'), and
      (B) such individual ceases to be treated as a resident of the United States but subsequently becomes a resident of the United States before the close of the 3rd calendar year beginning after the close of the initial residency period,
   such individual shall be taxable for the period after the close of the initial residency period and before the day on which he subsequently became a resident of the United States in the manner provided in section 877(b). The preceding sentence shall apply only if the tax imposed pursuant to section 877(b) exceeds the tax which, without regard to this paragraph, is imposed pursuant to section 871.
   (11) Regulations. The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.
 
(c) Includes and including. The terms 'includes' and 'including' when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.
 
(d) Commonwealth of Puerto Rico. Where not otherwise distinctly expressed or manifestly incompatible with the intent thereof, references in this title to possessions of the United States shall be treated as also referring to the Commonwealth of Puerto Rico.
 
(e) Treatment of certain contracts for providing services, etc. For purposes of chapter 1--
   (1) In general. A contract which purports to be a service contract shall be treated as a lease of property if such contract is properly treated as a lease of property, taking into account all relevant factors including whether or not--
      (A) the service recipient is in physical possession of the property,
      (B) the service recipient controls the property,
      (C) the service recipient has a significant economic or possessory interest in the property,
      (D) the service provider does not bear any risk of substantially diminished receipts or substantially increased expenditures if there is nonperformance under the contract,
      (E) the service provider does not use the property concurrently to provide significant services to entities unrelated to the service recipient, and
      (F) the total contract price does not substantially exceed the rental value of the property for the contract period.
   (2) Other arrangements. An arrangement (including a partnership or other pass-thru entity) which is not described in paragraph (1) shall be treated as a lease if such arrangement is properly treated as a lease, taking into account all relevant factors including factors similar to those set forth in paragraph (1).
   (3) Special rules for contracts or arrangements involving solid waste disposal, energy, and clean water facilities.
      (A) In general. Notwithstanding paragraphs (1) and (2), and except as provided in paragraph (4), any contract or arrangement between a service provider and a service recipient--
         (i) with respect to--
            (I) the operation of a qualified solid waste disposal facility,
            (II) the sale to the service recipient of electrical or thermal energy produced at a cogeneration or alternative energy facility, or
            (III) the operation of a water treatment works facility, and
         (ii) which purports to be a service contract, shall be treated as a service contract.
      (B) Qualified solid waste disposal facility. For purposes of subparagraph (A), the term 'qualified solid waste disposal facility' means any facility if such facility provides solid waste disposal services for residents of part or all of 1 or more governmental units and substantially all of the solid waste processed at such facility is collected from the general public.
      (C) Cogeneration facility. For purposes of subparagraph (A), the term 'cogeneration facility' means a facility which uses the same energy source for the sequential generation of electrical or mechanical power in combination with steam, heat, or other forms of useful energy.
      (D) Alternative energy facility. For purposes of subparagraph (A), the term 'alternative energy facility' means a facility for producing electrical or thermal energy if the primary energy source for the facility is not oil, natural gas, coal, or nuclear power.
      (E) Water treatment works facility. For purposes of subparagraph (A), the term 'water treatment works facility' means any treatment works within the meaning of section 212(2) of the Federal Water Pollution Control Act.
   (4) Paragraph (3) not to apply in certain cases.
      (A) In general. Paragraph (3) shall not apply to any qualified solid waste disposal facility, cogeneration facility, alternative energy facility, or water treatment works facility used under a contract or arrangement if--
         (i) the service recipient (or a related entity) operates such facility,
         (ii) the service recipient (or a related entity) bears any significant financial burden if there is nonperformance under the contract or arrangement (other than for reasons beyond the control of the service provider),
         (iii) the service recipient (or a related entity) receives any significant financial benefit if the operating costs of such facility are less than the standards of performance or operation under the contract or arrangement, or
         (iv) the service recipient (or a related entity) has an option to purchase, or may be required to purchase, all or a part of such facility at a fixed and determinable price (other than for fair market value).
      For purposes of this paragraph, the term 'related entity' has the same meaning as when used in section 168(h).
      (B) Special rules for application of subparagraph (A) with respect to certain rights and allocations under the contract. For purposes of subparagraph (A), there shall not be taken into account--
         (i) any right of a service recipient to inspect any facility, to exercise any sovereign power the service recipient may possess, or to act in the event of a breach of contract by the service provider, or
         (ii) any allocation of any financial burden or benefits in the event of any change in any law.
      (C) Special rules for application of subparagraph (A) in the case of certain events.
         (i) Temporary shut-downs, etc. For purposes of clause (ii) of subparagraph (A), there shall not be taken into account any temporary shut-down of the facility for repairs, maintenance, or capital improvements, or any financial burden caused by the bankruptcy or similar financial difficulty of the service provider.
         (ii) Reduced costs. For purposes of clause (iii) of subparagraph (A), there shall not be taken into account any significant financial benefit merely because payments by the service recipient under the contract or arrangement are decreased by reason of increased production or efficiency or the recovery of energy or other products.
   (5) Exception for certain low-income housing. This subsection shall not apply to any property described in clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B) (relating to low-income housing) if--
      (A) such property is operated by or for an organization described in paragraph (3) or (4) of section 501(c), and
      (B) at least 80 percent of the units in such property are leased to low-income tenants (within the meaning of section 167(k)(3)(B) (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).
   (6) Regulations. The Secretary may prescribe such regulations as may be necessary or appropriate to carry out the provisions of this subsection.
 
(f) Use of related persons or pass-thru entities. The Secretary shall prescribe such regulations as may be necessary or appropriate to prevent the avoidance of those provisions of this title which deal with--
   (1) the linking of borrowing to investment, or
   (2) diminishing risks,
 
through the use of related persons, pass-thru entities, or other intermediaries.
 
(g) Clarification of fair market value in the case of nonrecourse indebtedness. For purposes of subtitle A, in determining the amount of gain or loss (or deemed gain or loss) with respect to any property, the fair market value of such property shall be treated as being not less than the amount of any nonrecourse indebtedness to which such property is subject.
 
(h) Motor vehicle operating leases.
   (1) In general. For purposes of this title, in the case of a qualified motor vehicle operating agreement which contains a terminal rental adjustment clause--
      (A) such agreement shall be treated as a lease if (but for such terminal rental adjustment clause) such agreement would be treated as a lease under this title, and
      (B) the lessee shall not be treated as the owner of the property subject to an agreement during any period such agreement is in effect.
   (2) Qualified motor vehicle operating agreement defined. For purposes of this subsection--
      (A) In general. The term 'qualified motor vehicle operating agreement' means any agreement with respect to a motor vehicle (including a trailer) which meets the requirements of subparagraphs (B), (C), and (D) of this paragraph.
      (B) Minimum liability of lessor. An agreement meets the requirements of this subparagraph if under such agreement the sum of--
         (i) the amount the lessor is personally liable to repay, and
         (ii) the net fair market value of the lessor's interest in any property pledged as security for property subject to the agreement,
      equals or exceeds all amounts borrowed to finance the acquisition of property subject to the agreement. There shall not be taken into account under clause (ii) any property pledged which is property subject to the agreement or property directly or indirectly financed by indebtedness secured by property subject to the agreement.
      (C) Certification by lessee; notice of tax ownership. An agreement meets the requirements of this subparagraph if such agreement contains a separate written statement separately signed by the lessee--
         (i) under which the lessee certifies, under penalty of perjury, that it intends that more than 50 percent of the use of the property subject to such agreement is to be in a trade or business of the lessee, and
         (ii) which clearly and legibly states that the lessee has been advised that it will not be treated as the owner of the property subject to the agreement for Federal income tax purposes.
      (D) Lessor must have no knowledge that certification is false. An agreement meets the requirements of this subparagraph if the lessor does not know that the certification described in subparagraph (C)(i) is false.
   (3) Terminal rental adjustment clause defined.
      (A) In general. For purposes of this subsection, the term 'terminal rental adjustment clause' means a provision of an agreement which permits or requires the rental price to be adjusted upward or downward by reference to the amount realized by the lessor under the agreement upon sale or other disposition of such property.
      (B) Special rule for lessee dealers. The term 'terminal rental adjustment clause' also includes a provision of an agreement which requires a lessee who is a dealer in motor vehicles to purchase the motor vehicle for a predetermined price and then resell such vehicle where such provision achieves substantially the same results as a provision described in subparagraph (A).
 
(i) Taxable mortgage pools.
   (1) Treated as separate corporations. A taxable mortgage pool shall be treated as a separate corporation which may not be treated as an includible corporation with any other corporation for purposes of section 1501.
   (2) Taxable mortgage pool defined. For purposes of this title--
      (A) In general. Except as otherwise provided in this paragraph, a taxable mortgage pool is any entity (other than a REMIC or a FASIT) if--
         (i) substantially all of the assets of such entity consists of debt obligations (or interests therein) and more than 50 percent of such debt obligations (or interests) consists of real estate mortgages (or interests therein),
         (ii) such entity is the obligor under debt obligations with 2 or more maturities, and
         (iii) under the terms of the debt obligations referred to in clause (ii) (or underlying arrangement), payments on such debt obligations bear a relationship to payments on the debt obligations (or interests) referred to in clause (i).
      (B) Portion of entities treated as pools. Any portion of an entity which meets the definition of subparagraph (A) shall be treated as a taxable mortgage pool.
      (C) Exception for domestic building and loan. Nothing in this subsection shall be construed to treat any domestic building and loan association (or portion thereof) as a taxable mortgage pool.
      (D) Treatment of certain equity interests. To the extent provided in regulations, equity interest of varying classes which correspond to maturity classes of debt shall be treated as debt for purposes of this subsection.
   (3) Treatment of certain REIT's. If --
      (A) a real estate investment trust is a taxable mortgage pool, or
      (B) a qualified REIT subsidiary (as defined in section 856(i)(2)) of a real estate investment trust is a taxable mortgage pool,
   under regulations prescribed by the Secretary, adjustments similar to the adjustments provided in section 860E(d) shall apply to the shareholders of such real estate investment trust.
 
(j) Tax treatment of Federal Thrift Savings Fund
   (1) In general. For purposes of this title--
      (A) the Thrift Savings Fund shall be treated as a trust described in section 401(a) which is exempt from taxation under section 501(a);
      (B) any contribution to, or distribution from, the Thrift Savings Fund shall be treated in the same manner as contributions to or distributions from such a trust; and
      (C) subject to section 401(k)(4)(B) and any dollar limitation on the application of section 402(e)(3), contributions to the Thrift Savings Fund shall not be treated as distributed or made available to an employee or Member nor as a contribution made to the Fund by an employee or Member merely because the employee or Member has, under the provisions of subchapter III of chapter 84 of title 5, United States Code, and section 8351 of such title 5, an election whether the contribution will be made to the Thrift Savings Fund or received by the employee or Member in cash.
   (2) Nondiscrimination requirements. Notwithstanding any other provision of law, the Thrift Savings Fund is not subject to the nondiscrimination requirements applicable to arrangements described in section 401(k) or to matching contributions (as described in section 401(m)), so long as it meets the requirements of this section.
   (3) Coordination with Social Security Act. Paragraph (1) shall not be construed to provide that any amount of the employee's or Member's basic pay which is contributed to the Thrift Savings Fund shall not be included in the term 'wages' for the purposes of section 209 of the Social Security Act or section 3121(a) of this title.
   (4) Definitions. For purposes of this subsection, the terms 'Member' , 'employee', and 'Thrift Savings Fund' shall have the same respective meanings as when used in subchapter III of chapter 84 of title 5, United States Code.
   (5) Coordination with other provisions of law. No provision of law not contained in this title shall apply for purposes of determining the treatment under this title of the Thrift Savings Fund or any contribution to, or distribution from, such Fund.
 
(k) Treatment of certain amounts paid to charity. In the case of any payment which, except for section 501(b) of the Ethics in Government Act of 1978, might be made to any officer or employee of the Federal Government but which is made instead on behalf of such officer or employee to an organization described in section 170(c)--
   (1) such payment shall not be treated as received by such officer or employee for all purposes of this title and for all purposes of any tax law of a State or political subdivision thereof, and
   (2) no deduction shall be allowed under any provision of this title (or of any tax law of a State or political subdivision thereof) to such officer or employee by reason of having such payment made to such organization.
 
For purposes of this subsection, a Senator, a Representative in, or a Delegate or Resident Commissioner to, the Congress shall be treated as an officer or employee of the Federal Government.
 
(l) Regulations relating to conduit arrangements. The Secretary may prescribe regulations recharacterizing any multiple-party financing transaction as a transaction directly among any 2 or more of such parties where the Secretary determines that such recharacterization is appropriate to prevent avoidance of any tax imposed by this title.
 
(m) Cross references.
   (1) Other definitions. For other definitions, see the following sections of Title 1 of the United States Code:
      (1) Singular as including plural, section 1.
      (2) Plural as including singular, section 1.
      (3) Masculine as including feminine, section 1.
      (4) Officer, section 1.
      (5) Oath as including affirmation, section 1.
      (6) County as including parish, section 2.
      (7) Vessel as including all means of water transportation, section 3.
      (8) Vehicle as including all means of land transportation, section 4.
      (9) Company or association as including successors and assigns, section 5.
   (2) Effect of cross references. For effect of cross references in this title, see section 7806(a).

HISTORY; ANCILLARY LAWS AND DIRECTIVES
 
Amendments:
   In 1997, P.L. 105-34, Sec. 1151(a) (applicable to partnerships created or organized after the date determined under Code Sec. 7805(b) (without regard to paragraph (2) thereof) with respect to such regulations, as provided by Sec. 1151(b), which appears as a note to this section), amended subsec. (a)(4) by inserting "unless, in the case of a partnership, the Secretary provides otherwise by regulations".
   --P.L. 105-34, Sec. 1174(b)(1) (applicable as provided by Sec. 1174(c), which appears as a note to this section), amended subsec. (b)(7) by substituting ", (C), or (D)" for "or (C)" in subpara. (A), and adding subpara. (D).
   --P.L. 105-34, Sec. 1601(i)(3)(A) (effective as if included in the provisions of P.L. 104-188 to which it relates, as provided by Sec. 1601(j)(1), which appears as a note to Code Sec. 23), amended subsec. (a)(3)(E)(ii) by substituting "persons" for "fiduciaries".
   In 1996, P.L. 104-188, Sec. 1402(b)(3) (applicable with respect to decedents dying after 8/20/96, pursuant to Sec. 1402(c), which appears as 26 USCS Sec. 101 note), deleted ", for the purpose of applying the provisions of section 101(b) with respect to employees' death benefits" following "health plans" in subsec. (a)(20).
   --P.L. 104-188, Sec. 1621(b)(8), (9) (effective 9/1/97, as provided by Sec. 1621(d), which appears as 26 USCS 26 note), amended subsec. (a)(19)(C) by substituting cl. (xi) for one which read: "(xi) any regular or residual interest in a REMIC, but only in the proportion which the assets of such REMIC consist of property described in any of the preceding clauses of this subparagraph; except that if 95 percent or more of the assets of such REMIC are assets described in clauses (i) through (x), the entire interest in the REMIC shall qualify."; and amended subsec. (i)(2) by inserting "or a FASIT".
   --P.L. 104-188, Sec. 1907(a)(1), (2) (applicable as provided by Sec. 1907(a)(3) of P.L. 104-188, which appears as a note to this section), amended subsec. (a) by substituting subparas. (D) and (E) of para. (30) for former subpara. (D), which read: "(D) any estate or trust (other than a foreign estate or foreign trust, within the meaning of section 7701(a)(31)).", and by substituting para. (31) for one which read: "(31) Foreign estate or trust. The terms 'foreign estate' and 'foreign trust' mean an estate or trust, as the case may be, the income of which, from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States, is not includible in gross income under subtitle A.".
   In 1995, P.L. 104-88, Sec. 304(d) (effective 1/1/96, as provided by 2 of such Act, which appears as 49 USCS 701 note), amended subsec. (a)(33) by substituting "Federal Energy Regulatory Commission" for "Federal Power Commission" in subpara. (B), by substituting "Surface Transportaion Board" for "Interstate Commerce Commission" in cl. (i) of subpara. (C), by substituting "Federal Energy Regulatory Commission" for "Interstate Commerce Commission" in cl. (ii) of subpara. (C), by substituting "a water carrier subject to jurisdiction under subchapter II of chapter 135 of title 49" for "common carrier by water, subject to the jurisdiction of the Interstate Commerce Commission under subchapter III of chapter 105 of title 49, or subject to the jurisdiction of the Federal Maritime Board under the Intercoastal Shipping Act, 1933" in subpara. (F), by substituting "rail carrier subject to part A of subtitle IV" for "railroad corporation subject to subchapter I of chapter 105" in subpara. (G), and by substituting "part A of subtitle IV" for "subchapter I of chapter 105" in subpara. (H).
   In 1994, P.L. 103-296, Sec. 320(a)(3) (effective with the calendar quarter following enactment, as provided by Sec. 320(c) of such Act, which appears as 26 USCS 871 note), amended subsec. (b)(5) by substituting "subparagraph (J), (M), or (Q)" for "subparagraph (J)".
   In 1993, P.L. 103-66, Sec. 13238, redesignated subsec. (l) as subsec. (m) and added new subsec. (l).
   In 1992, P.L. 102-318, Sec. 521(b)(43), substituted "section 402(e)(3)" for "section 402(a)(8)", in subpara. (j)(1)(C), effective for distributions after 12/31/92. For special rule, see Sec. 521(e)(2) of this Act which reads as follows:
      "(2) Special rule for partial distributions. For purposes of section 402(a)(5)(D)(i)(II) of the Internal Revenue Code of 1986 (as in effect before the amendments made by this section), a distribution before January 1, 1993, which is made before or at the same time as a series of periodic payments shall not be treated as one of such series if it is not substantially equal in amount to other payments in such series."
   In 1991, P.L. 102-90, Sec. 314(e), amended the sentence at the end of subsec. (k), effective 1/1/92.
   Prior to amendment, the sentence at the end of subsec. (k) read as follows:
   "For purposes of this subsection, a Representative in, or a Delegate or Resident Commissioner to, the Congress shall be treated as an officer or employee of the Federal Government and a Senator or officer (except the Vice President) or employee of the Senate shall not be treated as an officer or employee of the Federal Government."
   In 1990, P.L. 101-508, Sec. 11704(a)(34), substituted "(C) subject to section 401(k)(4)(B) and any dollar limitation on the application of section 402(a)(8)," for "(C) subject to, section 401(k)(4)(B), [and] any dollar limitation on the application of section 402(a)(8)," in subpara. (j)(1)(C), effective 11/5/90.
   --P.L. 101-508, Sec. 11812(b)(13), added "(as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990)" before the period at the end of subpara. (e)(5)(B), effective for property placed in service after 11/5/90, except as provided in Sec. 11812(c)(2) of this Act reproduced in note following Code Sec. 42.
   In 1989, P.L. 101-194, Sec. 602, redesignated subsec. (k) as subsec. (1), and added new subsec. (k), effective as provided in Sec. 603 of this Act, which reads as follows:
   "Sec. 603. Effective date.
      "The amendments made by this title shall take effect on January 1, 1991. Such amendments shall cease to be effective if the provisions of section 703 [of P.L. 101-194] are subsequently repealed, in which case the laws in effect before such amendments shall be deemed to be reenacted."
   In 1988, P.L. 100-647, Sec. 1(c), substituted "of 1986" for "of 1954" in para. (a)(29).
   --P.L. 100-647, Sec. 1001(d)(2)(D), substituted "subparagraph (F) or (M)" "for subparagraph (F)" in subclause (b)(5)(D)(i)(I), effective for tax. yrs. begin. after 12/31/86, but only in the case of scholarships and fellowships granted after 8/16/86.
   --P.L. 100-647, Sec. 1002(a)(2), amended Sec. 201(d)(14)(B) of P.L. 99-514, by substituting "within the meaning of section 168(c)(2)(F)" for "section 168(c)(2)(F)" see below.
   --P.L. 100-647, Sec. 1002(c)(3), of this Act provides:
      "(3) Notwithstanding section 203 of the Reform Act, the amendments made by section 201 of the Reform Act shall apply to any real property which was acquired before January 1, 1987, and was converted on or after such date from personal use to a use for which depreciation is allowable."
   --P.L. 100-647, Sec. 1006(t)(12), substituted "are assets described" for "are loans described" in clause (a)(19)(C)(xi) . . . Sec. 1006(t)(25)(A), added the sentence at the end of para. (a)(19), effective for tax. yrs. begin. after 12/31/86.
   --P.L. 100-647, Sec. 1006(w)(1), amended Sec. 675(a) of P.L. 99-514, the effective date for changes made by Sec. 671(b)(3) of P.L. 99-514, by substituting "the amendments made by this subtitle shall take effect on January 1, 1987" for "the amendments made by this part shall apply to taxable years beginning after December 31, 1986," see below.
   --P.L. 100-647, Sec. 1011A(m)(1), added ", section 401(k)(4)(B)" after "paragraph (2)" in subpara. (j)(1)(C), effective 10/22/87.
   --P.L. 100-647, Sec. 1011B(e)(1), substituted "and 106" for "106, and 125," in para. (a)(20) . . . Sec. 1011B(e)(2), added "and for purposes of applying section 125 with respect to cafeteria plans," before "the term" in para. (a)(20), effective for tax. yrs. begin. after 12/31/85.
   --P.L. 100-647, Sec. 1018(g)(3), substituted "section 274(1)(1)(B)" for "section 274(k)(2)" in clause (b)(5)(A)(iv), effective for periods after 10/22/86.
   --P.L. 100-647, Sec. 6138(a), and (b) of this Act provide:
   "(a) In general. The Secretary of the Treasury or his delegate shall conduct a study of section 7701(b) of the Internal Revenue Code of 1986, relating to the determination as to whether a person is a United States resident for purposes of Federal tax laws. Such study shall include an examination of--
      "(1) the effect such determination has on Federal tax administration and investment flows between the United States and other countries,
      "(2) the coordination of such determination with any treaty obligations of the United States,
      "(3) how such determination compares with the way such determination is made by our major trading partners, and
      "(4) any estimated revenue gain or loss which would result from modifying such determination.
   "(b) Report. The Secretary of the Treasury or his delegate shall report before May 1, 1989, the results of the study conducted under subsection (a) to the Committee on Finance of the Senate and the Committee on Ways and Means of the House of Representatives."
   In 1987, P.L. 100-202, Sec. 101(m)(1), deleted "the provisions of paragraph (2) and" following "subject to" in subpara. (j)(1)(C) . . . Sec. 101(m)(2), amended para. (j)(2) effective 12/22/87.
   Prior to amendment, para. (j)(2) read as follows:
      "(2) Nondiscrimination requirements. Paragraph (1)(C) shall not apply to the Thrift Savings Fund unless the Fund meets the antidiscrimination requirements (other than any requirement relating to coverage) applicable to arrangements described in section 401(k) and to matching contributions. Rules similar to the rules of sections 401(k)(8) and 401(m)(8) (relating to no disqualification if excess contributions distributed) shall apply for purposes of the preceding sentence."
   In 1986, P.L. 99-514, Sec. 201(c), redesignated subsec. (h) as subsec. (i) and added new subsec. (h) . . . Sec. 201(d)(14)(A), substituted "section 168(h)" for "section 168(j)" in subpara. (e)(4)(A) [as amended by Sec. 1802(a)(9)(C) of this Act, see below] . . . Sec. 201(d)(14)(B), [as amended by Sec. 1002(a)(2) of P.L. 100-647, see above] substituted "property described in clause (i), (ii), (iii), or (iv) of section 1250(a)(1)(B) (relating to low-income housing)" for "low-income housing (within the meaning of section 168(c)(2)(F))" in para. (e)(5) [as amended by Sec. 1899A (64) of this Act, see below], effective for property placed in service after 12/31/86, in tax. yrs. ending after 12/31/86. For transitional rules see Sec. 203(b)-(e) of this Act reproduced in note following Code Sec. 168. Sec. 203(a)(1)(B) of this Act provides:
         "(B) Election to have amendments made by section 201 apply. A taxpayer may elect (at such time and in such manner as the Secretary of the Treasury or his delegate may prescribe) to have the amendments made by section 201 apply to any property placed in service after July 31, 1986, and before January 1, 1987."
   --P.L. 99-514, Sec. 671(b)(3), [as amended by P.L. 100-647, Sec. 1006(w)(1), see above] deleted "and" at the end of clause (a)(19)(C)(ix), substituted "and" for the period at the end of the clause (a)(19)(C)(x), and added clause (a)(19)(C)(xi), effective for tax. yrs. begin. after 12/31/86.
   --P.L. 99-514, Sec. 673, redesignated subsec. (i) [as redesignated by Sec. 201(c) of this Act, see above] as subsec. (j), and added new subsec. (i), effective 1/1/92. Secs. 675(c)(2) and (c)(3) of this Act provides special rules as follows:
      "(2) Treatment of existing entities.--The amendment made by section 673 shall not apply to any entity in existence on December 31, 1991. The preceding sentence shall cease to apply with respect to any entity as of the 1st day after December 31, 1991, on which there is a substantial transfer of cash or other property to such entity.
      "(3) Special rule for coordination with wash-sale rules.--Notwithstanding paragraphs (1) and (2), for purposes of applying section 860F(d) of the Internal Revenue Code of 1986 (as added by this part), the amendment made by section 673 shall apply to taxable years beginning after December 31, 1986."
   --P.L. 99-514, Sec. 1137, added the sentence at the end of para. (a)(46), effective 10/22/86.
   --P.L. 99-514, Sec. 1147(a), redesignated subsec. (j) [as redesignated by Sec. 673 of this Act, see above] as subsec. (k), and added new subsec. (j), effective 10/22/86.
   --P.L. 99-514, Sec. 1166(a), substituted "106, and 125" for "and 106" in para. (a)(20), effective for tax. yrs. begin. after 12/31/85.
   --P.L. 99-514, Sec. 1802(a)(9)(C), added the sentence at the end of subpara. (e)(4)(A) . . . Sec. 1810(1)(1), added the sentence at the end of clause (b)(4)(E)(i) . . . Sec. 1810(1)(2)(A), substituted "the requirements of clause (i), (ii), or (iii)" for "the requirements of clause (i) or (ii)" in subpara. (b)(1)(A) . . . Sec. 1810(1)(2)(B), added clause (b)(1)(A)(iii) . . Sec. 1810(1)(3), added clause (b)(2)(A)(iv) . . . Sec. 1810(1)(4), redesignated paras. (b)(4) through (b)(10) as paras. (b)(5) through (b)(11) respectively, and added new para. (b)(4), effective for tax yrs. begin. after 12/31/84.
   --P.L. 99-514, Sec. 1804(b)(2), amended Sec. 53(e) of P.L. 98-369, which provides the effective date for amendments made by Sec. 53(c) of P.L. 98-369, by adding special rules, see below.
   --P.L. 99-514, Sec. 1810(1)(5)(A), deleted "or" at the end of clause (b)(4)(A)(ii), substituted ", or" for the period at the end of clause (b)(4)(A)(iii), and added clause (b)(4)(A)(iv), effective for periods after 10/22/86.
   --P.L. 99-514, Sec. 1842(d), substituted ", 682, and 2516" for "and 682" in para. (a)(17), effective for transfers after 7/18/84 and for transfers after 12/31/63, and on or before 7/18/84, if both parties elect.
   --P.L. 99-514, Sec. 1899A(63), substituted "preceding" for "preceeding" in clause (b)(4)(E)(i) [before redesignation as (b)(5)(E)(i) by Sec. 1810(l)(4) of this Act, see above] . . . Sec. 1899A(64), substituted "section 168(c)(2)(F))" for "section 168(C)(2)(F))" in para. (e)(5) [before amendment by Sec. 201(d)(14)(B) of this Act, see above] , effective 10/22/86.
   In 1984, P.L. 98-443, Sec. 9(q), substituted "Secretary of Transportation" for "Civil Aeronautics Board" in subpara. (a)(33)(E), effective 1/1/85.
   --P.L. 98-369, Sec. 31(e), redesignated subsec. (e) as subsec. (f) and added new subsec. (e), effective for property placed in service by the taxpayer after 5/23/83, in tax. yrs. end. after 5/23/83, and to property placed in service by the taxpayer on or before 5/23/83, if the lease to the tax-exempt entity is entered into after 5/23/83, except for the special rule provided in Sec. 31(g)(19) of the Act (following) and subject to the special provisions in Sec. 31(g) of this Act reproduced in the note following Code Sec. 168. Sec. 31(g)(19) provides:
      "(19) Special rule for certain energy management contracts.--
         "(A) In general.--The amendments made by subsection (e) [Sec. 31(e), P.L. 98-369] shall not apply to property used pursuant to an energy management contract that was entered into prior to May 1, 1984.
         "(B) Definition of energy management contract.-- For purposes of subparagraph (A), the term "energy management contract" means a contract for the providing of energy conservation or energy management services."
   --P.L. 98-369, Sec. 43(a)(1), added paras. (a)(42), (43), (44) and (45), effective for tax. yrs. end. after 7/18/84.
   --P.L. 98-369, Sec. 53(c), redesignated subsec. (f) [as redesignated by Sec. 31(e) of the Act, see above] as subsec. (g), and added new subsec. (f), effective [as amended by Sec. 1804(b)(2) of P.L. 99-514, see above] 7/18/84. Sec. 53(e)(3)(B)-(D) of this Act provides:
         "(B) Special rule for purposes of section 265(2).--The amendment made by subsection (c) insofar as it relates to section 265(2) of the Internal Revenue Code of 1954 shall apply to--
            "(i) term loans made after July 18, 1984, and
            "(ii) demand loans outstanding after July 18, 1984 (other than any loan outstanding on July 18, 1984, and repaid before Septermber 18, 1984).
         "(C) Treatment of renegotiations, etc.--For purposes of this paragraph, any loan renegotiated, extended, or revised after July 18, 1984, shall be treated as a loan made after such date.
         "(D) Definition of term and demand loans.--For purposes of this paragraph, the terms "demand loan" and "term loan" have the respective meanings given such terms by paragraphs (5) and (6) of section 7872(f) of the Internal Revenue Code of 1954, except that the second sentence of such paragraph (5) shall not apply."
   --P.L. 98-369, Sec. 75(c), redesignated subsec. (g) [as redesignated by Sec. 53(c) of this Act, see above] as subsec. (h), and added new subsec. (g), effective for distributions, sales, and exchanges made after 3/31/84 in tax. yrs. end. after 3/31/84.
   --P.L. 98-369, Sec. 138(a), redesignated subsecs. (b), (c) and (d) as subsecs. (c), (d) and (e), and added new subsec. (b), effective for tax. yrs. begin. after 12/31/84. Secs. 138(b)(2)-(3) of the Act provide transitional rules as follows:
      "(2) Transitional rule for applying substantial presence test.--
         "(A) If an alien individual was not a resident of the United States as of the close of calendar year 1984, the determination of whether such individual meets the substantial presence test of section 7701(b)(3) of the Internal Revenue Code of 1954 (as added by this section) shall be made by only taking into account presence after 1984.
         "(B) If an alien individual was a resident of the United States as of the close of calendar year 1984, but was not a resident of the United States as of the close of calendar year 1983, the determination of whether such individual meets such substantial presence test shall be made by only taking into account presence in the United States after 1983.
      "(3) Transitional rule for applying lawful residence test.--In the case of any individual who--
         "(A) was a lawful permanent resident of the United States (within the meaning of section 7701(b)(5) of the Internal Revenue Code of 1954, as added by this section) throughout calendar year 1984, or
         "(B) was present in the United States at any time during 1984 while such individual was a lawful permanent resident of the United States (within the meaning of such section 7701(b)(5)),
   for purposes of section 7701(b)(2)(A) of such Code (as so added), such individual shall be treated as a resident of the United States during 1984."
   --P.L. 98-369, Sec. 412(b)(11), deleted para. (a)(34), effective for tax. yrs. begin. after 12/31/84.
   Prior to deletion, para. (a)(34) read as follows:
      "(34) Estimated income tax. The term 'estimated income tax' means--
         "(A) in the case of an individual, the estimated tax as defined in section 6015(d), or
         "(B) in the case of a corporation, the estimated tax as defined in section 6154(c)."
   --P.L. 98-369, Sec. 422(d)(3), substituted "152(b)(4) and 682" for "71, 152(b)(4), 215, and 682" in para. (a)(17), effective for divorce or separation instruments (as defined in Code Sec. 71(b)(2)) executed after 12/31/84. Sec. 422(e)(2) of this Act provides as follows:
      "(2) Modifications of instruments executed before January 1, 1985.--The amendments made by this section shall also apply to any divorce or separation instrument (as so defined) executed before January 1, 1985, but modified on or after such date if the modification expressly provides that the amendments made by this section shall apply to such modification."
   --P.L. 98-369, Sec. 474(r)(29)(K), deleted "1451," from para. (a)(16), effective as provided in Sec. 475(b) of this Act, which reads as follows:
   "(b) Tax-free covenant bonds.--The amendments made by subsections (j) and (r)(29) of section 474 [P.L. 98-369] shall not apply with respect to obligations issued before January 1, 1984."
   --P.L. 98-369, Sec. 491(d)(53), deleted subpara. (a)(37)(C), substituted a period for ", and" at the end of subpara. (a)(37)(B) and added "and" at the end of subpara. (a)(37)(A), effective for obligations issued after 12/31/83.
   Prior to deletion, subpara. (a)(37)(C) read as follows:
         "(C) a retirement bond described in section 409."
   --P.L. 98-369, Sec. 526(c)(1), added para. (a)(46), effective 4/1/84.
   --P.L. 98-216, Sec. 3(c)(2), substituted "subchapter I of chapter 105 of title 49" for "part I of the Interstate Commerce Act" in subpara. (a)(33)(G), effective 2/14/84.
   In 1983, P.L. 98-67, Sec. 104(d)(1), added para. (a)(41), effective for payments made after 12/31/83.
   --P.L. 97-473, Sec. 203, added para. (a)(40).
   --P.L. 97-449, Sec. 5(e)(1), substituted "subchapter III of chapter 105 of title 49" for "part III of the Interstate Commerce Act" in subpara. (a)(33)(F) . . . Sec. 5(e)(2), substituted "subchapter I of chapter 105 of title 49" for "part I of the Interstate Commerce Act" in subpara. (a)(33)(H).
   --P.L. 97-448, Sec. 306(a)(1)(A)(i), redesignated the second Sec. 201(c) of P.L. 97-248 as Sec. 201(d) of P.L. 97-248, see below.
   --P.L. 97-448, Sec. 306(b)(3), redesignated para. (a)(38) [as added by Sec. 336 of P.L. 97-248, see below] as para. (a)(39), effective 9/4/82.
   In 1982, P.L. 97-248, Sec. 201(d)(10), [as redesignated by Sec. 306(a)(1)(A)(i) of P.L. 97-448, see above], added para. (a)(38), effective for tax. yrs. begin. after 12/31/82.
   --P.L. 97-248, Sec. 336(a), added para. (a)(39) [as redesignated by Sec. 306(b)(3) of P.L. 97-448, see above], effective 9/4/82.
   In 1981, P.L. 97-34, Sec. 725(c)(4), substituted "6015(d)" for "6015(c)" in subpara. (a)(34)(A), effective for estimated tax for tax. yrs. begin. after 12/31/80.
   In 1980, P.L. 96-605, Sec. 402, provides:
   "Sec. 402. Treatment of authors and artists as employees.
   "(a) In general.
      "An author or artist performing services under contract with a corporation shall be considered as an employee of the corporation for the purpose of applying the provisions specified in section 7701(a)(20) of the Internal Revenue Code of 1954, if, on December 31, 1977, such author or artist was a participant in one or more of the pension, profit-sharing or annuity plans of such corporation which are described in subsection (b)(2).
   "(b) Definitions.
      "For purposes of this section--
      "(1) Contract. The term "contract" means a contract which during its term--
         "(A) requires such author or artist to give the corporation first reading or first refusal on writings or drawings of specified types, and prohibits him from offering any such writing or drawing to any other publication unless it has been offered to and rejected by the corporation; or
         "(B) requires such author or artist to use his best efforts to produce work of specified types for the corporation.
      "(2) Corporation. The term 'corporation' means a corporation which for at least 15 years prior to January 1, 1978, had in effect one or more pension, profit-sharing and annuity plans, each of which--
         "(A) had contained from its inception a definition of the term "employee" that included the category of "authors and artists under contract", and
         "(B) had been determined by the Secretary of the Treasury (taking into account the definition described in subparagraph (A)) to be a qualified plan within part I of subchapter D of chapter 1 of subtitle A of the Internal Revenue Code of 1954 for all of such years.
   "(c) Effective date.
      "The provisions of this section shall apply to taxable years ending after December 31, 1980."
   In 1978, P.L. 95-600, Sec. 701(cc)(2), amended clause (a)(36)(B)(iii), effective for documents prepared after 12/31/76.
   Prior to amendment, clause (a)(36)(B)(iii) read as follows:
            "(iii) prepares a return or claim for refund for any trust or estate with respect to which he is a fiduciary, or".
   --P.L. 95-600, Sec. 157(k)(2), added para. (a)(37), effective for tax. yrs. begin. after 12/31/74.
   In 1976, P.L. 94-455, Sec. 1203(a), added para. (a)(36), effective for documents prepared after 12/31/76.
   --P.L. 94-455, Sec. 1906(a)(57)(A), amended para. (a)(11) . . . Sec. 1906(a)(57)(B), amended subpara. (a)(12)(A) . . . Sec. 1906(b)(13)(A), substituted "Secretary" for "Secretary or his delegate" each place it appeared in Code Sec. 7701 . . . Sec. 1906(c)(3), deleted "or Territory" after "of any State" in para. (a)(4), effective 2/1/77.
   Prior to amendment, para. (a)(11) read as follows:
      "(11) Secretary. The term "Secretary" means the Secretary of the Treasury."
   Prior to amendment, subpara. (a)(12)(A) read as follows:
         "(A) In general. The term Secretary or his delegate means the Secretary of the Treasury, or any officer, employee, or agency of the Treasury Department duly authorized by the Secretary (directly, or indirectly by one or more redelegations of authority) to perform the function mentioned or described in the context, and the term or his delegate when used in connection with any other official of the United States shall be similarly construed."
   In 1974, P.L. 93-406, Sec. 3043, added para. (a)(35), effective 9/2/74.
   In 1972, P.L. 92-606, Sec. 1(f)(4), substituted "chapters 1, 2," for "chapters 2" in subpara. (a)(12)(B), effective for tax. yrs. begin. after 12/31/72.
   In 1969, P.L. 91-172, Sec. 432(c), amended para. (a)(19) . . . Sec. 432(d)(1), amended subpara. (a)(32)(B) . . . Sec. 432(d)(2), deleted the third sentence of para. (a)(32) effective for tax. yrs. begin. after 7/11/69.
   Prior to amendment, para. (a)(19) read as follows:
      "(19) Domestic building and loan association.
      "The term 'domestic building and loan association' means a domestic building and loan association, a domestic savings and loan association, and a Federal savings and loan association--
         "(A) which either (i) is an insured institution within the meaning of section 401(a) of the National Housing Act (12 U.S.C., sec. 1724(a)), or (ii) is subject by law to supervision and examination by State or Federal authority having supervision over such associations;
         "(B) substantially all of the business of which consists of acquiring the savings of the public and investing in loans described in subparagraph (C);
         "(C) at least 90 percent of the amount of the total assets of which (as of the close of the taxable year) consists of (i) cash, (ii) obligations of the United States or of a State or political subdivision thereof, stock or obligations of a corporation which is an instrumentality of the United States or of a State or political subdivision thereof, and certificates of deposit in, or obligations of, a corporation organized under a State law which specifically authorizes such corporation to insure the deposits or share accounts of member associations, (iii) loans secured by an interest in real property and loans made for the improvement of real property, (iv) loans secured by a deposit or share of a member, (v) property acquired through the liquidation of defaulted loans described in clause (iii), and (vi) property used by the association in the conduct of the business described in subparagraph (B);
         "(D) of the assets of which taken into account under subparagraph (C) as assets constituting the 90 percent of total assets--
            "(i) at least 80 percent of the amount of such assets consists of assets described in clauses (i), (ii), (iv), and (vi) of such subparagraph and of loans secured by an interest in real property which is (or, from the proceeds of the loan, will become) residential real property or real property used primarily for church purposes, loans made for the improvement of residential real property or real property used primarily for church purposes, or property acquired through the liquidation of defaulted loans described in this clause; and
            "(ii) at least 60 percent of the amount of such assets consists of assets described in clauses (i), (ii), (iv), and (vi) of such subparagraph and of loans secured by an interest in real property which is (or, from the proceeds of the loan, will become) residential real property containing 4 or fewer family units or real property used primarily for church purposes, loans made for the improvement of residential real property containing 4 or fewer family units or real property used primarily for church purposes, or property acquired through the liquidation of defaulted loans described in this clause;
         "(E) not more than 18 percent of the amount of the total assets of which (as of the close of the taxable year) consists of assets other than those described in clause (i) of subparagraph (D), and not more than 36 percent of the amount of the total assets of which (as of the close of the taxable year) consists of assets other than those described in clause (ii) of subparagraph (D); and
         "(F) except for property described in subparagraph (C), not more than 3 percent of the assets of which consists of stock of any corporation.
      "The term 'domestic building and loan association' also includes any association which, for the taxable year, would satisfy the requirements of the first sentence of this subparagraph if "41 percent" were substituted for "36 percent" in subparagraph (E). Except in the case of the taxpayer's first taxable year beginning after the date of the enactment of the Revenue Act of 1962, the second sentence of this paragraph shall not apply to an association for the taxable year unless such association (i) was a domestic building and loan association within the meaning of the first sentence of this paragraph for the first taxable year preceding the taxable year, or (ii) was a domestic building and loan association solely by reason of the second sentence of this paragraph for the first taxable year preceding the taxable year (but not for the second preceding taxable year). At the election of the taxpayer, the percentages specified in this paragraph shall be applied on the basis of the average assets outstanding during the taxable year, in lieu of the close of the taxable year, computed under regulations prescribed by the Secretary or his delegate."
   Prior to amendment, subpara. (a)(32)(B) read as follows:
         "(B) meets the requirements of subparagraphs (B), (C), (D), (E), and (F) of paragraph (19) of this subsection (relating to definition of domestic building and loan association) determined with the application of the second, third, and fourth sentences of paragraph (19).
      "In determining whether an institution meets the requirements referred to in subparagraph (B) of this paragraph, any reference to an association or to a domestic building and loan association contained in paragraph (19) shall be deemed to be a reference to such institution. In the case of an institution which, for the taxable year, is a co-operative bank within the meaning of the first sentence of this paragraph by reason of the application of the second and third sentences of paragraph (19) of this subsection, the deduction otherwise allowable under section 166(c) for a reasonable addition to the reserve for bad debts shall, under regulations prescribed by the Secretary or his delegate, be reduced in a manner consistent with the reductions provided by the table contained in section 593(b)(5)."
   --P.L. 91-172, Sec. 960(j), substituted "United States Tax Court" for "Tax Court of the United States" in para. (a)(27), effective 12/30/69.
   In 1968, P.L. 90-364, Sec. 103(e)(6), substituted "section 6154(c)" for "section 6016(b)" in subpara. (a)(34)(B), effective for tax. yrs. begin. after 12/31/67 except as provided in Sec. 104 of this Act, reproduced in note following Code Sec. 6425.
   In 1966, P.L. 89-809, Sec. 103(l)(1), substituted ", from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States," for "from sources without the United States" in para. (a)(31), effective for tax. yrs. begin. after 12/31/66.
   --P.L. 89-368, Sec. 102(b)(5), added para. (a)(34), effective for tax. yrs. begin. after 12/31/66.
   In 1964, P.L. 88-272, Sec. 204(a)(3), substituted "For the purpose of applying the provisions of section 79 with respect to group-term life insurance purchased for employees, for the purpose of applying the provisions of sections 104" for "For the purpose of applying the provisions of sections 104" in para. (a)(20), effective for group-term life insurance provided after 12/31/63 in tax. yrs. end. after 12/31/63.
   --P.L. 88-272, Sec. 234(b)(3), added para. (a)(33), effective for tax. yrs. begin. after 12/31/63.
   In 1962, P.L. 87-834, Sec. 6(c), amended para. (a)(19), effective for tax. yrs. begin. after 10/16/62.
   Prior to amendment, para. (a)(19) read as follows:
      "(19) Domestic building and loan association. The term 'domestic building and loan association' means a domestic building and loan association, a domestic savings and loan association, and a Federal savings and loan association, substantially all the business of which is confined to making loans to members."
   --P.L. 87-834, Sec. 7(h), added paras. (a)(30) and (31), effective 10/17/62.
   --P.L. 87-870, Sec. 5(a), added para. (a)(32), effective for tax. yrs. begin. after 10/16/62.
   In 1960, P.L. 86-624, Sec. 18(i), deleted ", the Territory of Hawaii," in para. (a)(9) . . . Sec. 18(j), deleted "the Territory of Hawaii and" in para. (a)(10), effective 8/21/59.
   --P.L. 86-778, Sec. 103(t), amended para. (a)(12), effective as provided in the sentence at the end of Sec. 103(v)(1) of this Act, which reads as follows:
      "The amendments made by subsections (j), (s), and (t) shall take effect on the date of the enactment of this Act [9/13/60]; and there are authorized to be appropriated such sums as may be necessary for the performance by any officer or employee of functions delegated to him by the Secretary of the Treasury in accordance with the amendment made by such subsection (t)."
   Prior to amendment, para. (a)(12) read as follows:
      "(12) Delegate. The term "Secretary or his delegate" means the Secretary of the Treasury, or any officer, employee, or agency of the Treasury Department duly authorized by the Secretary (directly, or indirectly by one or more redelegations of authority) to perform the function mentioned or described in the context, and the term "or his delegate" when used in connection with any other official of the United States shall be similarly construed."
   In 1959, P.L. 86-70, Sec. 22(g), substituted "the Territory of Hawaii" for "the Territories of Alaska and Hawaii" in para. (a)(9) . . . Sec. 22(h), substituted "Territory of Hawaii" for "Territories" in para. (a)(10), effective 1/3/59. 
 
Other provisions:
   Application of Aug. 20, 1996 amendments of subsec. (a)(30), (31). Act Aug. 20, 1996, P.L. 104-188, Title I, Subtitle I, 1907(a)(3), 110 Stat. 1916; Aug. 5, 1997, P.L. 105-34, Title XI, Subtitle G, 1161(a), 111 Stat. 987 (effective as if included in the amendments made by section 1907(a) of Act Aug. 20, 1996, as provided by 1161(b) of Act Aug. 5, 1997), provides:
   "The amendments made by this subsection shall [amending subsec. (a)(30) and (31) of this section] apply--
      "(A) to taxable years beginning after December 31, 1996, or
      "(B) at the election of the trustee of a trust, to taxable years ending after the date of the enactment of this Act.
   Such an election, once made, shall be irrevocable. To the extent prescribed in regulations by the Secretary of the Treasury or his delegate, a trust which was in existence on August 20, 1996 (other than a trust treated as owned by the grantor under subpart E of part I of subchapter J of chapter 1 of the Internal Revenue Code of 1986), and which was treated as a United States person on the day before the date of the enactment of this Act may elect to continue to be treated as a United States person notwithstanding section 7701(a)(30)(E) of such Code.".
   Application of amendment made by 1151 of Act Aug. 5, 1997. Act Aug. 5, 1997, P.L. 105-34, Title XI, Subtitle F, 1151(b), 111 Stat. 986, provides: "Any regulations issued with respect to the amendment made by subsection (a) [amending subsec. (a)(4) of this section] shall apply to partnerships created or organized after the date determined under section 7805(b) of the Internal Revenue Code of 1986 (without regard to paragraph (2) thereof) with respect to such regulations.".
   Application of amendments made by 1174 of Act Aug. 5, 1997. Act Aug. 5, 1997, P.L. 105-34, Title XI, Subtitle H, 1174(c), 111 Stat. 989, provides:
   "(1) In general. The amendments made by this section [amending 26 USCS §§ 861, 863, and 7701] shall apply to remuneration for services performed in taxable years beginning after December 31, 1997.
   "(2) Presence. The amendment made by subsection (b) [amending subsec. (b)(7) of this section] shall apply to taxable years beginning after December 31, 1997.".
   Application of amendments made by 1907(a) of Act Aug. 20, 1996. Act Aug. 5, 1997, P.L. 105-34, Title XVI, 1601(i)(4), 111 Stat. 1093, provides:
   "The Secretary of the Treasury may by regulations or other administrative guidance provide that the amendments made by section 1907(a) of the Small Business Job Protection Act of 1996 [ 1907(a) of Act Aug. 20, 1996, P.L. 104-188, amending subsec. (a)(30), (31) of this section] shall not apply to a trust with respect to a reasonable period beginning on the date of the enactment of such Act, if--
      "(A) such trust is in existence on August 20, 1996, and is a United States person for purposes of the Internal Revenue Code of 1986 on such date (determined without regard to such amendments),
      "(B) no election is in effect under section 1907(a)(3)(B) of such Act [note to this section] with respect to such trust,
      "(C) before the expiration of such reasonable period, such trust makes the modifications necessary to be treated as a United States person for purposes of such Code (determined with regard to such amendments), and
      "(D) such trust meets such other conditions as the Secretary may require.".

NOTES:
 
                          CODE OF FEDERAL REGULATIONS
   Income tax; taxable years beginning after December 31, 1953, 26 CFR Part 1.
   Employment taxes and collection of income tax at source, 26 CFR Part 31.
   Procedure and administration, 26 CFR Part 301.
   Elections under Tax Reform Act of 1986, 26 CFR 5h.5.
   Returns as to creation of or transfers to certain foreign trusts, 26 CFR §§ 16.3-1 et seq.
   Definition of Indian Tribal Government, 26 CFR 305.7701-1.
   Practice before Internal Revenue Service, definitions, 31 CFR 10.2. 
 
                               CROSS REFERENCES
   Practice before Internal Revenue Service, definitions, USCS Administrative Rules, IRS, 31 CFR 10.2.
   "Dependent" defined for purposes of deductions for personal exemptions, 26 USCS 152.
   Definitions and rules with respect to grantors and others treated as substantial owners, 26 USCS 672.
   Definitions with respect to partners and partnerships, 26 USCS 761.
   Definition of "determination" "taxpayer" and "related taxpayer," 26 USCS 1313.
   Employment taxes, definitions, 26 USCS 3121.
   Railroad Retirement Tax Act, definitions, 26 USCS 3231.
   Federal Unemployment Tax Act, definitions, 26 USCS 3306.
   Collection of income tax at source on wages, definitions, 26 USCS 3401.
   Manufacturers excise taxes on automotive and related items, definitions, 26 USCS §§ 4072, 4082.
   Manufacturers excise taxes, definition of price, 26 USCS 4216.
   Communications tax, definitions, 26 USCS 4252.
   Air transportation tax, definition of taxable transportation, 26 USCS 4262.
   Policies issued by foreign insurers, definitions, 26 USCS 4372.
   Wagering taxes, definitions, 26 USCS 4421.
   Vehicle use taxes, definitions, 26 USCS 4482.
   Private foundation taxes, definitions, 26 USCS 4946.
   Alcohol excise taxes, definitions, 26 USCS §§ 5002, 5052, 5092, 5102, 5112, 5122, 5311, 5392, 5402, 5690.
   Tobacco and tobacco products excise taxes, definitions, 26 USCS 5702.
   Excise taxes on firearms, definitions, 26 USCS 5845.
   Deficiency defined, 26 USCS 6211.
   Person defined, 26 USCS 7343.
   Construction of title, effect of cross references, 26 USCS 7806.
   Presidential election campaign fund, definitions, 26 USCS 9002.
   Presidential primary matching payment account, definitions, 26 USCS 9032. 
 
                                RESEARCH GUIDE 
Federal Procedure:
   4A Fed Proc L Ed, Banking and Financing 8:545.
   13 Fed Proc L Ed, Foreign Relations 36:208.
   20 Fed Proc L Ed, Internal Revenue §§ 48:371, 387, 400, 647, 1171.
   27 Fed Proc L Ed, Pensions and Retirement Systems 61:18. 
 
Am Jur:
   11 Am Jur 2d, Banks 579.
   33 Am Jur 2d, Federal Taxation (1999) PP 2001, 2061.
   33A Am Jur 2d, Federal Taxation (1999) PP 4026, 4402, 4553, 4902, 5154, 6007, 8232, 8353, 12501, 13372, 14812.
   34 Am Jur 2d, Federal Taxation (1999) PP 16002, 16731, 16732, 18562, 19432, 20427, 20477, 20616--20618, 30029--30034, 30037--30041, 30046, 30366, 30528, 30701, 30953, 60502, 71753, 72073.
   34A Am Jur 2d, Federal Taxation (1999) PP 144331, 144959, 145504, 145509, 147310, 148311, 148576.
   33 Am Jur 2d, Federal Taxation (1998) PP 2001, 2061.
   33 Am Jur 2d, Federal Taxation (1997) P 2060.
   33 Am Jur 2d, Federal Taxation (1996) P 2110.
   33 Am Jur 2d, Federal Taxation (1995) P 2110.
   33A Am Jur 2d, Federal Taxation (1998) PP 4026, 4402, 4553, 4902, 5154, 6007, 8232, 8353, 12501, 13372, 14812.
   33A Am Jur 2d, Federal Taxation (1997) PP 4402, 4553, 4902, 5154, 6007, 8232, 8326, 8353, 12461, 13372, 14812.
   33A Am Jur 2d, Federal Taxation (1996) PP 4402, 4603, 4952, 5162, 5205, 6008, 8235, 8326, 8353, 9594, 12461, 13372, 14813.
   33A Am Jur 2d, Federal Taxation (1995) PP 4402, 4603, 4802, 5013, 5055, 6008, 8235, 8326, 8353, 9593, 12460, 13362, 14813.
   34 Am Jur 2d, Federal Taxation (1998) PP 16002, 16731, 16732, 18562, 19432, 20427, 20477, 20616-20618, 30029-30034, 30036-30041, 30046, 30366, 30528, 30701, 60502, 71753, 72073, 730953.
   34 Am Jur 2d, Federal Taxation (1997) PP 16002, 16731, 16732, 18521, 19432, 20427, 20477, 20616-20618, 30029-30034, 30036-30041, 30046, 30366, 30528, 30701, 30953, 60502, 71753, 72073.
   34 Am Jur 2d, Federal Taxation (1996) PP 16002, 16730, 16731, 18565, 19707, 20472, 20477, 20616, 20618, 30029-30037, 30039-30045, 30047, 30366, 30528, 30701, 30953, 60502, 71753, 72073.
   34 Am Jur 2d, Federal Taxation (1995) PP 16002, 16730, 16731, 18564, 19707, 20427, 20477, 20616, 20617, 30029-30037, 30039-30043, 30045, 30364, 30528, 30701, 30953, 71752, 72113.
   34A Am Jur 2d, Federal Taxation (1998) PP 144,331, 144,959, 145,504, 145,509, 147,310, 148,311, 148,576.
   34A Am Jur 2d, Federal Taxation (1997) PP 144331, 144959, 145504, 145509, 147310, 148102, 148311, 148576.
   34A Am Jur 2d, Federal Taxation (1995) PP 147,310, 148,102, 148,310, 148,567.8.
   60A Am Jur 2d, Pensions and Retirement Funds 52, 220, 759. 
 
Immigration:
   2 Immigration Law Service, Waiver of Excludability 16:29.
   2A Immigration Law Service, Taxation §§ 26:1, 2, 4--9, 11, 29. 
 
Social Security:
   1 Soc Sec LP, Overview; Covered Employment 2:27.
   2 Soc Sec LP, Benefit Programs 21:42. 
 
CBC Coordinators:
   3 Employment Coord, Other Employee Benefits (A to Z) PP B-18,303, 18,935.
   3 Employment Coord, Health, Life and Disability Benefits PP B-12,312, 14,418.
   4 Employment Coord, Choosing A Retirement Plan--Plan Options and Design PP B-22,114, 22,602. 
 
RIA Coordinators:
   2 Benefits Coord, Health Care; Disability P 10,905.
   2 Benefits Coord, Life Insurance; Death Benefits P 17,016.
   3 Benefits Coord, Prefunding; Cafeteria Plans; Other Delivery Systems P 33,810.
   3 Benefits Coord, Tax, ERISA, and Other Laws Generally Governing Benefits PP 36,606, 36,608, 36,616.
   1 Employee Ben Comp Coord, Defined Benefit Pension Plans P 2,116.
   2 Employee Ben Comp Coord, Annuity Plans P 8,117.
   3 Employee Ben Comp Coord, Other Nonqualified Plans P 20,116.
   2 Estate Plan & Tax Coord, Estate Planning PP 35,601, 35,631.
   2A Estate Plan & Tax Coord, Income Tax PP 41,115, 41,273, 41,571, 42,574.
   3 Estate Plan & Tax Coord, Estate Tax PP 44,331, 44,959, 45,504, 45,509.
   3 Estate Plan & Tax Coord, Gift Tax PP 47,310, 48,102, 48,311, 48,576.
   4 Estate Plan & Tax Coord, Estate's Income Tax PP 80,058, 80,607.
   5 Estate Plan & Tax Coord, Practice and Procedure P 87,463.
   5 Estate Plan & Tax Coord, Trusts PP 85,009, 85,020, 85,313, 85,601, 85,785, 85,863, 85,878, 86,571.
   8 Fed Tax Coord 2d PP E-4304--4307, 7290--7292.
   11 Fed Tax Coord 2d PP H-1313, 1509, 1803, 2402.
   12 Fed Tax Coord 2d PP H-6503, 7652--7658.
   12A Fed Tax Coord 2d PP H-9516, 9581.
   14 Fed Tax Coord 2d PP J-3101, 3201, 3953--3955.
   15 Fed Tax Coord 2d P K-5341.
   16 Fed Tax Coord 2d PP L-4721--4725.
   17 Fed Tax Coord 2d PP L-8085--8090, 9171.
   19 Fed Tax Coord 2d PP O-1103--1105.15.
   23 Fed Tax Coord 2d PP S-1051, 1059--1061, 4208.
   25 Fed Tax Coord 2d PP V-3255, 5101.
   2 Partnership & S Corp Coord, Generally Applicable Tax Provisions P 40,720.
   2 Partnership & S Corp Coord, Partnerships PP 20,100, 20,401, 21,109, 29,008, 29,116.
   2 Partnership & S Corp Coord, S Corporations PP 31,800, 31,806, 39,102, 39,169, 39,306, 39,709.
   3 Pension Coord, General Qualification Rules PP 23,204, 24,306, 24,308, 24,312, 25,818, 27,505.
   3A Pension Coord, IRAs, SEPs, and Tax Sheltered Annuities PP 36,175, 38,303.
   4 Pension Coord, Reporting and Disclosure P 56,109.
   5 Pension Coord, Plan Termination and Withdrawal P 70,710.
   5 Pension Coord, Nonpension Benefits; Social Security PP 79,403, 79,622.
   4 Real Estate Coord, Costs of Acquiring and Maintaining Real Estate P 50,106.
   4 Real Estate Coord, Partnerships PP 20,101, 20,360.
   4 Real Estate Coord, Tax Status of Corporations PP 25,101, 25,107, 25,202, 25,207.
   4 Real Estate Coord, Other Real Estate Entities PP 41,221, 41,228.
   5 Real Estate Coord, Real Estate Financing: Income and Deductions P 58,508.
   5 Real Estate Coord, ACRS, Depreciation, Tax Credits PP 70,927--70,931, 71,081, 71,083--71,085, 71,929, 73,108.
   6 Real Estate Coord, Dispositions of Real Estate PP 80,354, 80,605, 81,453, 82,411.
   2 Exec Comp & Tax Coord, Executive Benefits PP 5,612; 6,065. 
 
Annotations:
   Determination of employer-employee relationship for social security contribution and unemployment tax purposes under 3121(d)(2) of Federal Insurance Contributions Act (26 USCS 3121(d)(2)), 3306(i) of Federal Unemployment Tax Act (26 USCS 3306(i)), and implementing regulations. 37 ALR Fed 95.
   Who is public employee under 7701(a)(26) of Internal Revenue Code of 1954 (26 USCS 7701(a)(26)), providing that term "trade or business" includes performance of functions of public office. 52 ALR Fed 395. 
 
Texts:
   Rasch, Handling Federal Estate and Gift Taxes 4th 15:7.
   1 Hoops, Family Estate Planning Guide 3d 88. 
 
Law Review Articles:
   Whelan. "Church" in the Internal Revenue Code: the Definitional Problems. 45 Fordham L Rev 885, March, 1977.
   Curtis. U.S.-West Germany Tax Treaty and the Section 7701(b) Definition of "Resident Alien". 13 Int'l Tax J 53, Winter, 1987.
   McKenna and Chudy. Tax-Leveraged Investments: Section 246A, Section 7701(f), and Other Recent Developments. 13 J Corp Tax'n 3, Spring, 1986.
   Westin. Shareholders' Liquidating Trusts After Revenue Procedure 80-54. 9 Journal of Corporate Taxation 63, Spring, 1982.
   Rands. Organizations Classified as Corporations for Federal Tax Purposes. 59 St John's L Rev 657, Summer, 1985.
   Benjamin. Definition of a preparer--Who is he? 10 The Tax Adviser 516, Sept., 1979.

                        INTERPRETIVE NOTES AND DECISIONS
 
I. PERSON [26 USCS 7701(a)(1)]
 1. Generally
 2. Parties deemed to be persons
 3. States
 
II. PARTNERSHIP AND PARTNER [26 USCS 7701(a)(2)]
 
A. Partnership
 4. Generally
 5. Factors determining partnership status
 6. Law governing nature of status
 7. Requirement for written agreement
 8. Particular firms constituting partnerships
 9. Particular firms not recognized as partnerships
 10. Limited partnership
 11. --Factors determining status
 12. Syndicate
 13. Joint venture
 
B. Partner
 14. Generally
 15. Family members as partners
 16. --Husband and wife
 17. Subsidiary corporations as partners
 18. Trusts as partners
 
III. CORPORATION [26 USCS 7701(a)(3)]
 
A. In General
 
1. General Considerations
 19. Generally
 20. Effect of state law
 
2. Characteristics of Corporations
 21. Generally
 22. Existence under state law
 23. Business activity
 24. Business purpose
 25. --Avoidance of state usury limitations
 26. Limitation of liability
 27. Continuity of life
 28. Observance of corporate formalities
 
3. Particular Organizations
 29. Professional service corporation
 30. Joint stock company
 31. Insurance company
 32. Corporate shells and alter egos
 33. Political organizations
 34. Others
 
B. Associations
 
1. In General
 35. Generally
 36. Congressional intent
 37. State law
 38. Intent of parties
 
2. Characteristics of Association
 39. Generally
 40. Joint enterprise or obligation
 41. Income or profit
 42. Corporate organization
 43. Formal organization under statute
 44. Immunity from personal liability
 
3. Particular Organizations Recognized as Associations
 45. Employees' organizations
 46. Oil and gas producing organizations
 47. Miscellaneous
 
C. Trusts
 
1. In General
 48. Generally
 49. Law governing status for tax purposes
 50. Department regulations
 
2. Factors Determining Status For Tax Purposes
 51. Generally
 52. Use of corporate form or formalities
 53. Centralized management
 54. Business test
 55. Intent or purpose
 56. --Liquidation, preservation, or distribution of property
 57. Transferability of interest
 58. Limitation of liability
 59. Continuity
 60. Beneficiary protection or control
 61. Number of beneficiaries
 62. Powers of trustees
 63. Number or identity of trustees
 64. Size
 65. Associates
 66. Terms of trust instrument
 67. Charity as beneficiary
 
3. Investment Trusts
 68. Generally
 69. Factors determining status for tax purposes
 70. Extent of managerial powers
 71. --Powers of substitution
 72. --Fixed investment trusts
 
4. Real Estate Trusts
 73. Generally
 74. Corporate attributes
 75. --Transferability of interests
 76. Trust powers
 77. --Holding title
 78. --Receipt of rental income
 79. --Operation of business enterprise
 80. ----Real estate subdivision
 81. ----Collection of land sale contracts
 82. Testementary trust
 83. Liquidating trust
 
5. Other Trusts
 84. Massachusetts trusts
 85. Successors to business enterprises
 86. Trusts controlling petroleum or mineral rights
 87. Mortgage pools
 88. Cemetery company
 89. Family trusts
 
6. Practice and Procedural Matters
 90. Res judicata
 91. Appeal
 
IV. FIDUCIARY [26 USCS 7701(a)(6)]
 92. Generally
 93. Particular persons
 
V. TAXPAYER [26 USCS 7701(a)(14)]
 94. Generally
 95. Taxpayer for refund purposes
 96. Payer of tax imposed on another
 97. Subsidiary corporation
 98. Transferees
 99. Withholding agent
 
VI. "PAID OR INCURRED" AND "PAID OR ACCRUED" [26 USCS 7701(a)(25)]
 100. Generally
 101. Application
 
VII. TRADE OR BUSINESS [26 USCS 7701(a)(26)]
 102. Public office
 103. Particular parties
 104. --Congressmen
 105. --Judges
 106. --Municipal employees
 
VIII. OTHER TERMS
 107. United States [26 USCS 7701(a)(9)]
 108. State [26 USCS 7701(a)(10)]
 109. Delegate [26 USCS 7701(a)(12)]
 110. Military or Naval Forces [26 USCS 7701(a)(15)]
 111. Withholding agent [26 USCS 7701(a)(16)]
 112. Income tax return preparer [26 USCS 7701(a)(36)]
 113. Domestic building and loan association [26 USCS 7701(a)(9)]
 114. --Obligations of United States
 115. Stock [26 USCS 7701(a)(7)]
 116. Foreign estate [26 USCS 7701(a)(31)]
 117. Resident and nonresident alien [26 USCS 7701(b)]
 118. Service contract treated as lease [26 USCS 7701(e)]
 
I. PERSON [26 USCS 7701(a)(1)]
 
1. Generally
   In resolving ambiguity as to what is meant by "person" in predecessor to 26 USCS 2503, it was appropriate that recourse be had to pertinent congressional sources. McBrier v Commissioner (1939, CA3) 108 F2d 967, 40-1 USTC P 9128, 24 AFTR 124.
 
2. Parties deemed to be persons
   Surety who was in absolute control of funds of its principal and was in charge of making payments to creditors and determining priority of such payments was person liable for tax within meaning of 26 USCS 7701. Pacific Nat. Ins. Co. v United States (1967, ND Cal) 270 F Supp 165, 67-2 USTC P 9578, 20 AFTR 2d 5189, affd (CA9 Cal) 422 F2d 26, 70-1 USTC P 9238, 25 AFTR 2d 70-714, cert den 398 US 937, 26 L Ed 2d 269, 90 S Ct 1838, reh den 400 US 883, 27 L Ed 2d 121, 91 S Ct 116.
   Resident of Puerto Rico who organized corporation in Germany and who had acquired United States citizenship at birth by virtue of Immigration and Nationality Act (which conferred citizenship on all persons born in Puerto Rico on or after Jan. 13, 1941) is United States person. Rev Rul 74-375, 1974-2 CB 215.
   Word "person" so includes corporations existing under state laws that such corporation engaged in manufacture of distilled spirits may give bond and otherwise transact its business with United States in internal revenue matters in its corporate capacity. 15 Op Atty Gen 230.
 
3. States
   Commonwealth of Pennsylvania is "person." Pennsylvania ex rel. Schnader v Fix (1934, MD Pa) 9 F Supp 272, 35-1 USTC P 9036, 14 AFTR 1148, affd (CA3 Pa) 79 F2d 520, 35- 2 USTC P 9578, 16 AFTR 820, cert den 297 US 704, 80 L Ed 992, 56 S Ct 442.
   Word "person" does not include state. 12 Op Atty Gen 176.
 
II. PARTNERSHIP AND PARTNER [26 USCS 7701(a)(2)]
 
A. Partnership
 
4. Generally
   Partnership which serves no purpose other than create tax benefits for its partners is disregarded for tax purposes even where underlying transaction is entered for profit; partnership lacks economic substance and is disregarded where it acts merely as instrument of related, closely-held corporation through which one of partners maintained control while simultaneously passing on tax advantages to others. Merryman v Commissioner (1989, CA5) 873 F2d 879, 89-1 USTC P 9338, 64 AFTR 2d 89-5009.
   Where business entity resembles corporation in some respects and partnership in others, in determining which it is, features of similarity should be compared and marks of dissimilarity contrasted. Bert v Helvering (1937) 67 App DC 340, 92 F2d 491, 37-2 USTC P 9395, 20 AFTR 271.
   Partnership comes into being when first parties to venture acquire their respective capital interests; limited partnership comes into being on date on which final limited partnership units are issued and date stated as effective date on each copy of certificate of limited partnership; preoperating activities, such as subscriptions for partnership units and entering into contracts for which services were not performed, do not constitute beginning of operations. Countess Heart Watch Partnership v Commissioner (1989) TC Memo 1989-236, 57 TCM 403.
   Entities organized under foreign law will be classified for federal tax purpose on basis of characteristics set forth in regulations under 7701, and no foreign organization or entity is classified as association unless it has more corporate than noncorporate characteristics. Rev Rul 88-8, 1988-4 IRB 18.
 
5. Factors determining partnership status
   Partnership under federal income tax provisions must not only meet common-law concept of partnership as to factual element, but must also comply with legal concept of common-law partnership. Hanson v Birmingham (1950, ND Iowa) 92 F Supp 33, 50- 2 USTC P 9417, 39 AFTR 904, app dismd (CA8 Iowa) 190 F2d 206, 40 AFTR 995.
   Fact that taxpayer who operated gas stations kept detailed calculations regarding distributions to son (who managed business) and to bookkeeper of stations' profits, which were treated as wages, and fact that taxpayer's distribution was adjusted to compensate for payroll taxes paid for his son and bookkeeper, together with taxpayer's assertion that he could not have entered into venture without participation of his son and bookkeeper, were sufficient to overcome fact that no formal partnership agreement existed and no partnership returns were filed. Strickland v Commissioner (1986) TC Memo 1986- 85, 51 TCM 534.
   Accomplice in illegal drug transactions is not taxable as partner, but is mere part-time employee or consultant where accomplice performed various jobs for which he was paid each time and did not control activity in question but merely assisted. Govednik v Commissioner (1988) TC Memo 1988-578.
   IRS checklist outlining required information to be submitted with request for ruling on whether organization qualifies as partnership focuses on: partnership agreement and state partnership act; partnership certificate; registration statement or documents to be filed with any federal or state agency engaged in regulation of securities; net worth of general partner(s); promotional material used to sell interests in organization; description of creditors' interest in organization or its assets; capital contribution to organization by general and limited partner(s); extent of participation of general and limited partner(s) in profits and lossess; negative capital accounts; and manner and method of intended distribution of assets to partners. Rev Proc 75-16, 1975-1 CB 676.
 
6. Law governing nature of status
   Taxpayer's contention that his partnership status was question of federal and not state law is invalid where Regs 301.7701-1(c) (pertaining to classification of organizations for tax purposes, i.e., as partnerships, corporations, etc.) make local law determinative of legal relations established between members of organization. Baily v United States (1972, ED Pa) 350 F Supp 1205, 72-2 USTC P 9748, 31 AFTR 2d 73-301, motion den (ED Pa) 355 F Supp 325, 73-1 USTC P 9472, 32 AFTR 2d 73-5138.
   States of Delaware, Illinois, and Missouri are added to list of states that have enacted legislation that corresponds to Uniform Limited Partnership Act for purposes of 301.7701-2 of Regulations; Rev Rul 84-80 and its amplifications are superseded. Rev Rul 89-123, IRB 1989-47, p. 9.
   Organization formed in Great Britain by 25 United States citizens under British equivalent of corporation statute is treated as partnership for U. S. federal income tax purposes where members had unlimited liability and could not transfer their interests without prior unanimous approval of other members. Rev Rul 88-8, 1988-4 IRB 18.
   Texas is added to list of states that have enacted legislation that corresponds to Uniform Limited Partnership Act for purposes of 301.7701-2 of Regulations (Rev Rul 84-80 amplified). Rev Rul 88-23, IRB 1988-15, p 7.
   State of Florida is added to list of states that have enacted legislation that corresponds to Uniform Limited Partnership Act for purposes of 301.7701-2 of Regulations; Rev Rul 84-80 amplified. Rev Rul 88-43, IRB 1988-22, p 43.
   State of Virginia is added to list of states that have enacted legislation that corresponds to Uniform Limited Partnership Act for purposes of 301.7701-2 of regulations; Rev Rul 84-80 amplified. Rev Rul 89-38, IRB 1989-12, p 4.
   State of Mississippi is added to list of states that have enacted legislation that corresponds to Uniform Limited Partnership Act for purposes of 301.7701-2 of Regulations (Rev Rul 89-123 amplified). Rev Rul 90-18, IRB 1990-8, p. 18.
   Where U.S. citizen contributes assets and becomes member of unincorporated foreign business organization, tests and standards which will be applied in classifying organization as trust, or some other taxable entity, will be determined pursuant to definitions found in 26 USCS 7701; however, local law of foreign jurisdiction must be applied in determining legal relationship of members of organizations among themselves, and with public at large, as well as interests of members of organization in its assets. Rev Rul 73- 254, 1973-1 CB 613.
 
7. Requirement for written agreement
   Bona fide partnership does not have to be reduced to written agreement as far as income tax law is concerned if requisite elements of partnership are present. Johns v Commissioner (1950, CA5 Fla) 180 F2d 469, 50-1 USTC P 9214, 39 AFTR 21.
 
8. Particular firms constituting partnerships
   Where taxpayer and two other persons operated not as individuals, but as business unit, using their joint capital, joint credit, and joint efforts in developing and operating oil properties, and taxpayer drilled for firm as any outsider might have done, they were operating within definition of "partnership" under predecessor to 26 USCS 7701 and all taxpayer's net profit on such drillings were properly included in his income. Wegener v Commissioner (1941, CA5 Tex) 119 F2d 49, 41-1 USTC P 9380, 27 AFTR 28, cert den 314 US 643, 86 L Ed 516, 62 S Ct 84.
   Although agreements between taxpayer and corporation provided that they did not intend to enter into partnership or joint adventure, viewing agreements and conduct of parties in light of broad statutory definition of partnership contained in predecessor to 26 USCS 7701, and purpose of its adoption, partnership for tax purposes existed, and taxpayer was entitled to deduct his one-half distributive share of losses sustained. Haley v Commissioner (1953, CA5) 203 F2d 815, 53-1 USTC P 9350, 43 AFTR 853.
   Trust was business trust taxable as partnership under following circumstances: association of 1 individual with 4 other individuals entered into "Joint Venture Agreement" to build 18-unit condominium, title to which was placed in trust for benefit of 5 individuals and their wives; venture lacked characteristics of ordinary trust; purpose of arrangement was not to vest in trustees responsibility for protection and conservation of property for beneficiaries who cannot share in discharge of this responsibility; therefore individuals were associated in conduct of business for profit; moreover, there was no centralized management for construction and sales function, nor free transferability of interests; fact that any organization is technically cast in trust form by conveying title to trustees for benefit of persons designated as beneficiaries does not change real character of organization if trust does not meet tests set forth in Regs §§ 301, 7701-4(a). Grove v Commissioner (1970) 54 TC 799.
   Unincorporated organization operating under Wyoming Limited Liability Company Act is classified as partnership for federal tax purposes under 301.7701-2 of Regulations. Rev Rul 88-76, IRB 1988-38, p 14.
   Organization formed as business trust under Missouri law which has associates and business objective, but lacks at least 2 of remaining 4 corporate characteristics, is classified as partnership for federal tax purposes. Rev Rul 88-79 IRB 1988-38, p 16.
   Florida limited liability company is classified as partnership where articles of organization require dissolution of business on death, retirement, or resignation of member unless remaining members consent to continuance of business and transferees of interest are prevented from becoming members or participating in management unless there is unanimous written consent from all other members. Private Letter Ruling 9030013.
   Business trust formed to make investments, under which investors are personally liable for trust liabilities, and which is to terminate upon investor's death or insanity, constitutes partnership. Private Letter Rul 9116007.
   Nevada limited liability companies qualify as partnerships for federal income tax purposes. Rev Rul 93-30 (1993) 1993-16 IRB 4.
   Limited liability company is taxable as partnership where it does not possess continuity of life and free transferability of interests; limited liability company does not possess continuity of life where, upon occurrence of event that terminates continued membership of member, company is terminated unless all of remaining members agree to continue. Rev Rul 93-53 (1993) 1993-26 IRB 7, 93 TNT 160-13.
   West Virginia limited liability company lacks free transferability of interests where assignee or transferee of member's interest can become member only with approval of all remaining members. Rev Rul 93-50 (1993) 1993-25 IRB 13, 93 TNT 152-13.
   Illinois limited liability company is treated as partnership for federal income tax purposes and lacks continuity of life since statute provides that company dissolves upon any event which terminates membership of any member unless all remaining members elect to continue business. Rev Rul 93-49 (1993) 1993-25 IRB 11, 93 TNT 152-12.
   Rhode Island limited liability company lacks continuity of life in that articles provide for dissolution upon loss of any member unless all remaining members agree to continue within 90 days; Rhode Island limited liability company lacks free transferability of interests where, under agreement, unanimous consent of members is required for admission of a new member; due to flexibility of Rhode Island Limited Liability Company Act, classification for federal income tax purposes depends upon provisions adopted in articles of organization or operating agreement. Rev Rul 93-81 (1993) 1993-38 IRB 7, 93 TNT 242-5.
   Louisiana limited liability company which dissolves upon the termination of the membership of any member unless, within 90 days, all of remaining members elect to continue lacks corporate characteristic of continuity of life; Louisiana limited liability company lacks free transferability of interests where assignee of transferor member does not become member and does not acquire right to participate in management unless other members unanimously consent in writing. Rev Rul 94-5 (1994) 1994-2 IRB 21, 93 TNT 6-6.
   Kansas limited liability company which terminates upon occurrence of certain events unless majority in interest of remaining members consent to continuing in business lacks continuity of life; Kansas limited liability company in which additional members cannot be admitted unless remaining members unanimously consent lacks free transferability of interests. Rev Rul 94-30 (1994) 1994-19 IRB 6, 94 TNT 89-18.
   Connecticut limited liability company may be classified as a partnership or as an association, depending upon the provisions adopted in the articles of organization and the operating agreement. Rev Rul 94-79 (1994) 1994-51 IRB 7, 94 TNT 247-10.
   South Dakota limited liability company lacks continuity of life since, if any member ceases to be a member, all remiaing members must agree to continue; South Dakota limited liability company lacks free transferability of interests where assignee does not become substitute member unless all remaining members approve of transfer or assignment. Rev Rul 95-9 (1995) 1995-3 IRB 17, 95 TNT 10-5.
   New Jersey limited liability company which is dissolved on occurrence of an event which terminates the continued membership of any member unless all remaining members agree to continue lacks continuity of life. Rev Rul 94-51 (1994) 1994-32 IRB 11, 94 TNT 154-18.
   General partnership that becomes registered limited liability partnership remains partnership for federal tax purposes; conversion into registered limited liability partnership does not result in termination of partnership. Rev Rul 95-55 (1995) 1995-35 IRB 13, 95 TNT 152-8.
 
9. Particular firms not recognized as partnerships
   No partnership was found to exist despite written partnership agreement and maintenance of partnership bank account, where although property was allegedly contributed to partnership for development, ownership thereof was taken by 2 brothers individually after they had obtained, in their individual capacities, mortgage loan; without use of or title to property to be developed by family partnership there was no showing of intent to have partnership operate in fulfillment of its business purpose. Swanson v Commissioner (1975, CA8) 518 F2d 59, 75-2 USTC P 9528, 36 AFTR 2d 75- 5159.
   Where partnership arrangement was merely a reallocation of income within family group, family partnership was not entered into in good faith for tax purposes, and all earned income was taxable to parents, not to children. Parker v Westover (1956, SD Cal) 144 F Supp 933, 56-2 USTC P 9722, 50 AFTR 453, affd (CA9 Cal) 248 F2d 490, 57-2 USTC P 9978, 52 AFTR 661.
   Entity does not exist as partnership for tax purposes at time it originally is formed as "shell" partnership without assets or liabilities; partnership does not exist where those who established entity did not have good faith intention to conduct enterprise with business purpose until actually entering into sale and leaseback transaction for which entity was created. Torres v Commissioner (1987) 88 TC 702.
   "Shell" partnership which had no assets or liabilities and conducted no business until date when it was activated by addition of specified limited partners and filing of amended and restated certificate of limited partnership constitutes partnership for tax purposes on date when limited partners are admitted and amended and restated certificates of limited partnership are filed. Peters v Commissioner (1987) 89 TC 423.
   Service agreement and guarantee agreement between individual cattle owner and corporate feed operation did not constitute partnership since individual owner alone owned cattle being fattened for market, he had complete control over termination of agreement, and percentage of net profits corporate feed operator received from owner was payment for its services and use of its facilities; further, although feed lot operator would receive percentage of net profits and was obligated to make good losses on cattle feeding operation that exceeded 10 percent of owner's commitment, such profit and loss sharing arose under guarantee agreement and not because feed lot operator had proprietor's interest in net profits or proprietor's obligation to share losses. Rev Rul 75-43, 1975-1 CB 383.
   Life insurance company and real estate investment trust which were equal co-owners of apartment project were not partnership where they engaged unrelated corporation to manage project, collect rents, pay taxes, assessments and insurance, perform all other services customarily performed in connection with maintenance and repairs and in addition corporation performed additional services for tenants beyond those customarily associated with maintenance and repair which were provided to tenants for separate charge that corporation retained for its own use after having paid costs incurred in providing additional services; additional services were not furnished by co-owners directly or indirectly to render co-ownership partnership since agent (corporation) furnished them itself determining time and manner of furnishing services, paying for services and retaining income, and no part of profits from such services went to co-owners. Rev Rul 75- 374, 1975-2 CB 261.
   Delaware limited liability company which provides for management by annually elected managers, permits transferees to participate in management, and which provides for continuation upon the death, retirement, resignation, expulsion, bankruptcy or dissolution of any member is not treated as partnership but instead is treated as association taxable as corporation. Rev Rul 93-38 (1993) 1993-21 IRB 4.
 
10. Limited partnership
   Limited real estate partnership that had as sole general partner California corporation with small capital of $ 21,000 where general partner had invested no funds in syndicate and its participation in cash flow and profits was contingent on repayment first to limited partners of their after-tax investment; limited partnership agreements provided for dissolution by vote of limited partners and for removal or election of new general partner; and partnership interests were sold in California as securities and were transferable without affecting continuity of enterprise was taxable as partnership and not as corporation; partnership had limited life and limited liability (partnership attributes) and free transferability of interests and centralized management (corporation attributes); since Treasury regulations provide that 2-2 tie calls for partnership tax treatment, limited partnership was partnership; however, if case had been controlled by Morrissey v Commissioner (1935) 296 US 344, 80 L Ed 263, 56 S Ct 289, instead of by Treasury regulations IRS would have clearly won; that decision would have allowed Tax Court to weigh relative importance of each of four main factors instead of having to give them equal weight. Larson v Commissioner (1976) 66 TC 159 (Acq).
   Corporation will be disregarded where it was originally organized to be holding company for automobile companies to be acquired by stockholders of taxpayer corporation, but its only activity during tax year was to hold interest in limited partnership which had been paid for by taxpayer because taxpayer had wanted to acquire limited partnership because of its need for tax shelter but did not want to hold interest in his own name because Ford Motor Company disapproved of such investment; since corporation made no contribution to partnership and engaged in no activity with respect to it corporation was mere nominee and taxpayer was beneficial owner of partnership interest. Red Carpet Carwash, Inc. v Commissioner (1980) 73 TC 676 (Acq).
   Limited partnerships formed under California Uniform Limited Partnership Act, as amended by 15520.5, on October 1, 1973, and those formed before amendment which elect to be governed by amendment, are not taxed as corporations, because they will lack "continuity of life" from date they were formed (if under amended act), or date they elected, if formed before amendment; this lack will continue as long as amendment remains effective (until December 31, 1975). Rev Rul 74-320, 1974-2 CB 404.
   For purposes of classification of a limited partnership as a partnership under safe harbor afforded by Rev Proc 92-88, limited partnership must be formed in jurisdiction in which state limited partnership act corresponds with Uniform Limited Partnership Act; IRS has released listing of states whose adoption of the Revised Uniform Limited Partnership Act corresponds with the Uniform Limited Partnership Act. Rev Rul 94-2 (1994) 1994-1 IRB 8, 94 TNT 4-5, amplified 1994-6 IRB 12, 94 TNT 25-11.
 
11. --Factors determining status
   Limited partnership in real estate development that consisted of corporate sole general partner (owned by individual) which owned 62 percent of partnership, 10 persons who owned 16 percent as limited partners (most limited partners had been subcontractors on development), and individual (same individual that owned corporate general partner) owned 22 percent as limited partner was partnership and not association taxable as corporation since it had none of four regulation (Regs 301.7701-2) characteristics which would have caused it to be treated as corporation; partnership was organized under local (Mo) law which adopted Uniform Partnership and Limited Partnership Acts and according to these regulations partnerships organized under such acts are considered to have no continuity of life; there was no centralization of management since under these regulations there is corporate-type centralization of management if substantially all interests are owned by limited partners and here general partner owned substantial interest; under these regulations limited partnership cannot have limited liability where general partner of limited partnership has no assets; and there was no free transferability of interests since under these regulations corporate characteristic of free transferability exists when members owning "substantially all" interests in organization can without consent of other members substitute person who is not member and to meet this test here at least individual's and his corporation's interests had to be freely transferable, corporation's interest could not be freely transferable because, unless specifically provided for, transfer would result in dissolution of partnership and therefore substitute general partner would need consent of limited partners. Zuckman v United States (1975) 207 Ct Cl 712, 524 F2d 729, 75-2 USTC P 9778, 36 AFTR 2d 75-6193.
   Where same corporation is sole general partner in 2 or more partnerships, net worth non-limited liability safe harbor test under Rev Proc 89-12 is applied by first determining whether net worth of corporation is equal to at least 10 percent of total contributions to all limited partnerships and second, with respect to each partnership, whether corporate general partner's net worth less the value of its interests in that partnership is 10 percent of total contributions to that partnership. GCM 39798, (10/24/89).
   In determining classification of arrangement formed as limited partnership, for purposes of 26 USCS 7701, Internal Revenue Service will not consider presence or absence of: division of limited partnership interests into units or shares and promotion and marketing of such interests in manner similar to corporate securities, managing partner's right to retain or distribute profits according to needs of business, limited partner's right to vote on removal and election of general partners and right to vote on sale of all assets of partnership, limited partnership interests being represented by certificates, limited partnership's observance or lack of observance of corporate formalities and procedures, requirement that limited partners sign partnership agreement, and limited partnership providing means of pooling investments while limiting liability of some participants. Rev Rul 79-106, 1979-1 CB 448.
   For ruling purposes, IRS will rule that partnership lacks free transferability of interests if, throughout life of partnership, partnership agreement expressly restricts transferability of partnership interests representing more than 20 percent of interest in partnership capital, income, gain, loss, deduction and credit. Rev Proc 92-33, 1992-17 IRB 28.
   For ruling purposes, limited partnership lacks corporate characteristic of continuity of life where, under local law, bankruptcy or removal of general partner causes dissolution unless remaining general partners or majority in interest of all remaining partners agree to continue partnership. Rev Proc 92-35, 1992-18 IRB.
   Limited partnership does not have continuity of life if less than majority of interest of partnership may cause continuation upon expulsion of general partner; majority in interest requires both majority of profits interest and majority of capital interest, each determined as of date of dissolution. Rev Proc 94-46 (1994) 1994-28 IRB 129, 94 TNT 127-6.
 
12. Syndicate
   Syndicate formed to purchase real estate in order to realize profits from expected increase in value was not association, but was joint adventure members of which were taxable as individuals and had right to deduct each year their proportionate share of operating losses of syndicate. Commissioner v Gerstle (1938, CA9) 95 F2d 587, 38-1 USTC P 9225, 20 AFTR 1136.
   Members of syndicate may be partners, joint contractors, or any other relation agreed upon, and relationships, for income tax purposes, must be ascertained by examining agreement. Commissioner v N. B. Whitcomb Coca-Cola Syndicate (1938, CA5 Ga) 95 F2d 596, 38-1 USTC P 9222, 20 AFTR 1140.
   Syndicate of individual owners of fractional interests in oil lease operated by agents designated by each of such owners more resembled partnership than corporation, and was not such association as was taxable as corporation. Commissioner v Rector & Davidson (1940, CA5 Tex) 111 F2d 332, 40-1 USTC P 9401, 24 AFTR 919, cert den 311 US 672, 85 L Ed 432, 61 S Ct 33.
   Syndicate formed to deal in securities of railroad company was partnership, so that cost basis of securities was actual cost to syndicate, and not association taxable as corporation so that cost basis was fair market value at time securities were received by it. Commissioner v United States & Foreign Secur. Corp. (1945, CA3) 148 F2d 743, 45-1 USTC P 9232, 33 AFTR 1168.
   Subscriptions given by stockholders to syndicate for benefit of their corporation, engaged in lending money, under declaration of trust by which such corporation guaranteed fixed earnings in exchange for all profits above such earnings constituted business enterprise and its profits are taxable, and it is not mere security device; where guaranty runs directly to certificate holders and not to syndicate itself it is part of entire provision relating to profits and its meaning must be determined from that provision as whole, and payments under such guaranty are not taxable as income of syndicate. Fidelity-Bankers Trust Co. v Helvering (1940) 72 App DC 1, 113 F2d 14, 40-1 USTC P 9285, 25 AFTR 317, cert den 310 US 649, 84 L Ed 1415, 60 S Ct 1102.
 
13. Joint venture
   Where corporate taxpayer entered into agreement by which its two stockholders and third party should form partnership to carry on ore milling operation, and under which corporation would pay to creditor of partnership deficit which might grow out of operations, "joint adventure" did not exist under California law, and corporate taxpayer could not deduct as bad debt amount of note it gave to said creditor. Joe Balestrieri & Co. v Commissioner (1949, CA9) 177 F2d 867, 49-2 USTC P 9479, 38 AFTR 989.
   Joint venture is not partnership where sole motive in its organization is reduction of taxes, since reduction of taxes in itself is not business. Slifka v Commissioner (1950, CA2) 182 F2d 345, 50-1 USTC P 9314, 39 AFTR 527.
   Issue concerning existence of asserted joint venture is question of fact for decision by trial court. Parr v Scofield (1950, CA5 Tex) 185 F2d 535, 50-2 USTC P 9520, 39 AFTR 1306, cert den 340 US 951, 95 L Ed 686, 71 S Ct 571.
   Generally, taxability of principal amount of recovery in law suit depends upon nature of claim and basis of recovery; thus, if it is for lost profits, recovery is taxable gain, but if it is for loss of, or damage to, capital, recovery is nontaxable, being return of capital; however, income of joint venture or partnership is taxable to members when received by firm, regardless of whether it was distributed to individual members in that year; therefore, decedent's share of profits realized by joint venture in 1933 were deemed as received by him and taxable in that year, though he was ignorant of gain and did not receive his share during his lifetime, and principal amount of 1944 judgment obtained by his executor for concealed profits was not income taxable to his estate or his widow-beneficiary. Commissioner v Goldberger's Estate (1954, CA3) 213 F2d 78, 54-1 USTC P 9359, 45 AFTR 1537.
   Joint venture in which 3 public utilities construct and operate nuclear power plant is tax partnership as defined by 26 USCS 7701(a)(2) where profits realized after electricity produced has been channeled through individual facilities of each participant are divided in direct proportion to participant's ownership interest in plant. Madison Gas & Electric Co. v Commissioner (1980, CA7) 633 F2d 512, 80-2 USTC P 9754, 46 AFTR 2d 80-5955.
   Joint ventures, like partnerships, in order to be entitled to recognition, must be real and genuine within meaning of the tax laws; where taxpayer's wife provided capital with which he purchased one-third interest in egg company partnership, each had tax liability with respect to one half of one third of egg company net income, although joint venture of husband and wife was new and was established coincidentally with very inception of egg company. Rupple v Kuhl (1948, ED Wis) 81 F Supp 318, 37 AFTR 781, affd (CA7 Wis) 177 F2d 823, 49-2 USTC P 9465, 38 AFTR 845.
   Plaintiff attorney who sought to apportion amount received upon completion of litigation in which he participated with another attorney was required to prove agreement to enter into joint venture. Van Hook v United States (1951, ND Ill) 108 F Supp 32, 42 AFTR 828, revd (CA7 Ill) 204 F2d 25, 53-1 USTC P 9389, 43 AFTR 897, cert den 346 US 825, 98 L Ed 350, 74 S Ct 42.
   Manufacturer, purchaser-lessor, and end user of leased computer equipment, together with investors who enter into management agreement with manager who would collect equipment rentals and use them to pay off financing for equipment, are taxable as joint venturers since financing was joint enterprise and not have been undertaken on same terms unless there were sufficient participants who as group could finance purchase and each participant required the other participants to act in concert. Alhouse v Commissioner (1991) TC Memo 1991-652, 62 TCM 1678.
 
B. Partner
 
14. Generally
   Where issue before Tax Court was whether associate engaged by engineering partnership on only one project was partner, finding by Tax Court that associate was not joint adventurer though not erroneous was not decisive, hence case was remanded for determination as to whether associate was partner. Bartholomew v Commissioner (1951, CA8) 186 F2d 315, 51-1 USTC P 9150, 40 AFTR 63.
   Taxpayer who transfers his entire interest in partnership to corporation of which he is sole stockholder, is no longer regarded as a partner under 26 USCS 7701, although he may have exercised sufficient indicia of ownership so as to make him partner under state law. Evans v Commissioner (1971, CA7) 447 F2d 547, 71- 2 USTC P 9597, 28 AFTR 2d 71-5465.
   Limited partnership's failure to timely file certificate of limited partnership required under state law is not sufficient justification for treatment of limited partners as general partners for purpose of assessing tax deficiency where certificate is properly filed at time that tax deficiency is discovered and assessed. Gamma Farms v United States (1992, CA9) 1992 US App LEXIS 4252.
   Inclusion of taxpayer in partnership should be disregarded where there was no business reason for joining of partner, and he did not contribute to partnership with capital and management. Sheerr v Smith (1957, ED Pa) 148 F Supp 536, 57-1 USTC P 9383, 50 AFTR 1829, affd (CA3 Pa) 249 F2d 93, 57-2 USTC P 10007, 52 AFTR 723.
 
15. Family members as partners
   Members of family are as much entitled to jointly own stocks and bonds, or to become partners as result of joint venture as strangers in blood, provided of course ownership is in good faith and not merely fanciful. Beazley v Allen (1945, MD Ga) 61 F Supp 929, 45-2 USTC P 9396, 34 AFTR 208, affd (CA5 Ga) 157 F2d 970, 46- 2 USTC P 9387, 35 AFTR 344.
 
16. --Husband and wife
   In reforming partnership, where partners transferred varying interests to their wives, and wives invested no new capital and made no substantial contribution of time or services, wives, although partners under Florida law, could not be considered as such for income tax purposes; after partners had given parts of their fractional interests in plant to their wives, plant was destroyed by fire; partnership having continued its existence after fire, plant was represented by proceeds of insurance, and use thereof in building of new plant could not be considered as independent capital placed therein by wives, and husbands were liable to tax on partnership income. Simmons v Commissioner (1947, CA5 Ga) 164 F2d 220, 47-2 USTC P 9381, 36 AFTR 245.
   Wife and husband may, under certain circumstances, become partners for tax, as for other purposes; if she either invests capital originating with her or substantially contributes to control and management of business, or otherwise performs vital additional services, or does all of these things she may be partner as contemplated by predecessor to 26 USCS §§ 701, 702. Canfield v Commissioner (1948, CA6) 168 F2d 907, 48-2 USTC P 9337, 36 AFTR 1140; Rupple v Kuhl (1948, ED Wis) 81 F Supp 318, 37 AFTR 781, affd (Ca7 Wis) 177 F2d 823, 49-2 USTC P 9465, 38 AFTR 845.
   Where husband and wife started used car business by pooling their financial resources in 1933 and both wife and husband contributed services, and thereafter wife handled financial matters and husband managed business, and they held themselves out as partnership, used car business was operated as partnership, since there was bona fide intention of parties to conduct their business as partnership. Johns v Commissioner (1950, CA5 Fla) 180 F2d 469, 50-1 USTC P 9214, 39 AFTR 21.
   Husband and wife were engaged in partnership or joint enterprise where, despite lack of express oral or written agreement with respect to such enterprise, wife contributed $ 3000 in capital, husband contributed $ 1000 in capital, both worked in business of dyeing and cleaning, and title to real estate and equipment used in business was held as "joint tenants." Stoffield v Commissioner (1953, CA7) 203 F2d 667.
 
17. Subsidiary corporations as partners
   Partnership agreement between four subsidiaries of same parent to purchase crude oil storage barge and charter it to unrelated corporation was partnership because it was subject to statute corresponding to the Uniform Partnership Act; also, each of subsidiaries had business reasons for existence independent of barge venture and agreement was not entered into for purpose of avoiding or evading Federal income tax. Rev Rul 75-19, 1975-1 CB 382.
 
18. Trusts as partners
   Term "partnership" includes both subpartnership and joint venture; however, where partners, who had purportedly created subpartnership with trusts which partners had set up for their children, retained beneficial ownership of trust res, which were percentage interests in partners' holdings in partnership, and trusts did not contribute anything to partnership enterprise, trusts did not constitute partners, subpartners, or joint venturers in partnership enterprise for income tax purposes, even though valid subpartnership or joint venture may have been created under Iowa law; and, therefore, partners were properly taxed on income to such trusts. Boyt v Commissioner (1954, CA8) 209 F2d 839, 54-1 USTC P 9201, 45 AFTR 240, cert den 347 US 1014, 98 L Ed 1137, 74 S Ct 869.
   Where trustee of two separate trusts and beneficiaries thereof and person required by terms of trust to approve all purchases and sales of securities by trust agreed that 5,000 shares of stock held by trusts should be sold by each trust and that equal division of proceeds of such sales should be made between two trusts and thus neither benefit nor loss would attach to either trust by reason of possibility of variation in price of securities sold at different times, transfer from one trust to other of sum in pursuance to such agreement to equalize variations in amount received by reason of sales at different times was valid for tax purposes since trusts may enter into partnership agreements. Fidelity Trust Co. v United States (1943, WD Pa) 49 F Supp 240, 43-1 USTC P 9347, 30 AFTR 1236.
   Trust cannot qualify as partner in partnership for income tax purposes. Hanson v Birmingham (1950, ND Iowa) 92 F Supp 33, 50-2 USTC P 9417, 39 AFTR 904, app dismd (CA8 Iowa) 190 F2d 206, 40 AFTR 995.
   Where stockholders of corporation having maritime contracts set up partnership to handle certain of corporation's contracts on logical grouping and subsequently partners set up irrevocable trusts for wives and children corpus of which were interests in partnership and trusts were admitted to partnership, income derived from contracts assigned to partnership was not income to donors as trusts were "real" and partnership entitled to recognition for income tax purposes. Drechsler v United States (1958, SD NY) 161 F Supp 319, 58-1 USTC P 9473, 1 AFTR 2d 1568.
 
III. CORPORATION [26 USCS 7701(a)(3)]
 
A. In General
 
1. General Considerations
 
19. Generally
   Separate existence of corporation is disregarded where it acts simply as agent; it is not necessary to show evidence of arms length dealing with corporate agent and its principal and payment of agency fee; genuineness of agency relationship is adequately assured and tax avoidance is adequately prevented when fact that corporation is acting as agent for its shareholders with respect to asset is set forth in written agreement at time asset is required, corporation functions as agent and not principal with respect to asset for all purposes, and corporation is held out as agent and not principal in all dealings with third parties. Commissioner v Bollinger (1988) 485 US 340, 99 L Ed 2d 357, 108 S Ct 1173, 88-1 USTC P 9233, 61 AFTR 2d 88-793.
   Separate existence of corporation from commonly owned joint venture is respected where corporation does not act in name of or for account of venture, corporation did not have authority to bind venture, sales by venture to corporation were at fair market value at time of sale, and corporation realized profit that was larger than typical of agency fee. Bramblett v Commissioner (1992, CA5) 960 F2d 526, 92-1 USTC P 50252, 69 AFTR 2d 92-1344.
   Fact that corporation which was formed under local law with issuance of certificate of incorporation failed to receive capital required by its articles before commencing business operations and failed to comply with later formalities, such as issuance of stock and adoption of by-laws, did not affect its legal existence; failures merely gave state right to proceed to forfeit charter. Betson v Commissioner (1984) TC Memo 1984-264, 48 TCM 113, affd (CA9) 800 F2d 921, 86-2 USTC P 9712, 58 AFTR 2d 86-5870, op withdrawn, different results reached on reh (CA9) 802 F2d 365, 86-2 USTC P 9826.
   Entities organized under foreign law will be classified for federal tax purpose on basis of characteristics set forth in regulations under 7701, and no foreign organization or entity is classified as association unless it has more corporate then noncorporate characteristics. Rev Rul 88-8, 1988-4 IRB 18.
   Entity organized under foreign law is classified for federal tax purposes on basis of characteristics set forth in 301.7701-2 of Regulations. Rev Rul 88-8, IRB 1988-4, p 18.
 
20. Effect of state law
   For purpose of federal taxation Congress is not limited by conception of business enterprises entertained under state laws; and within its powers, Congress may determine for itself what taxes to levy, and how and when they shall fall. Sherman v Comm