[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.642(i)-2]

[Page 53-54]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.642(i)-2  Definitions.

    (a) Taxable cemetery corporation. For purposes of section 642(i) and 
this section, the meaning of the term taxable cemetery corporation is 
limited to a corporation (within the meaning of section 7701(a)(3)) 
engaged in the business of owning and operating a cemetery that either 
(1) is not exempt from Federal tax, or (2) is subject to tax under 
section 511 with respect to its cemetery activities.
    (b) Pursuant to local law. A cemetery perpetual care fund is created 
pursuant to local law if:
    (1) The governing law of the relevant jurisdiction (State, district, 
county, parish, etc.) requires or expressly permits the creation of such 
a fund, or
    (2) The legally enforceable bylaws or contracts of a taxable 
cemetery corporation require a perpetual care fund.
    (c) Gravesite. A gravesite is any type of interment right that has 
been sold by a cemetery, including, but not limited to, a burial lot, 
mausoleum, lawn crypt, niche, or scattering ground. For purposes of 
Sec. 1.642 (i)-1, the term gravesites includes only those gravesites 
with respect to which the care fund or cemetery has an obligation for 
care and maintenance within the meaning of Sec. 1.642 (i)-1(c)(1).
    (d) Care and maintenance. For purposes of section 642(i) and this 
section, the term care and maintenance of gravesite shall be generally 
defined in accordance with the definition of such term under the local 
law pursuant to which the cemetery perpetual care fund is created. If 
the applicable local law contains no definition, care and maintenance of 
gravesites may include the upkeep, repair and preservation of those 
portions of cemetery property in which gravesites (as defined in 
paragraph (c) of this section) have been sold; including gardening, road 
maintenance, water line and drain repair and other activities reasonably 
necessary to the preservation of cemetery property. The costs for care 
and maintenance include, but are not limited to, expenditures for the 
maintenance, repair and replacement of machinery, tools, and equipment, 
compensation of employees performing such work, insurance premiums, 
reasonable payments for employees' pension and other benefit plans, and 
the costs of maintaining necessary records of lot ownership, transfers 
and burials. However, if some of the expenditures of the cemetery 
corporation, such as officers' salaries, are for both care and 
maintenance and for other purposes, the expenditures must be properly 
allocated between care and maintenance of gravesites and the other 
purposes. Only

[[Page 54]]

those expenditures that are properly allocable to those portions of 
cemetery property in which gravesites have been sold qualify as 
expenditures for care and maintenance of gravesites.

[T.D. 7651, 44 FR 61596, Oct. 26, 1979]