[Code of Federal Regulations] [Title 26, Volume 18] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR301.9100-8] [Page 719-729] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED) PART 301_PROCEDURE AND ADMINISTRATION--Table of Contents General Rules Sec. 301.9100-8 Time and manner of making certain elections under the Technical and Miscellaneous Revenue Act of 1988. (a) Miscellaneous elections--(1) Elections to which this paragraph applies. This paragraph applies to the elections set forth below provided under the Technical and Miscellaneous Revenue Act of 1988, 102 Stat. 3342 (the Act). General rules regarding the time for making the elections are provided in paragraph (a)(2) of this section. General rules regarding the manner for making the elections are provided in paragraph (a)(3) of this section. Special rules regarding the time and manner for making certain elections are contained in paragraphs (a) through (i) of this section. In this paragraph (a)(1), a cross-reference to a special rule applicable to an election is shown in brackets at the end of the description of the ``Availability of Election.'' Paragraph (j) of this section lists certain elections provided under the Act that are not addressed in this section. Paragraph (k) of this section provides that additional information with respect to elections may be required by future regulations or revenue procedures. [[Page 720]] ------------------------------------------------------------------------ Description of Availability of Section of act Section of code election election ------------------------------------------------------------------------ 1002 (a)(11)(A) 168(b)(2)........ Election to For property depreciate placed in property using service after the 150 percent December 31, declining 1986, the balance method election must be for one or more made for the classes of taxable year in property for any which the taxable year. property is placed in service. For taxable years ending before January 1, 1989, taxpayers have until January 22, 1990, to amend their returns to elect the 150 percent declining balance method, regardless of whether the taxpayer had used or elected to use a different method for property placed in service during those taxable years. The election will apply to all property in the class placed in service during the taxable year for which the election is made. 1002(a)(23)(B). 168(d)(3)(B)..... Election to Available for disregard property placed property placed in service in in service and taxable years disposed of in beginning on or the same taxable before March 31, year in applying 1988. Election the 40 percent will apply to test to all property determine if the placed in mid-quarter service and convention disposed of applies. during the taxable year for which the election is made. 1002(l)(1)(A).. 42(b)(2)(A)(ii).. Election to use Available for the applicable qualified percentage for a buildings placed month other than in service after the month in December 31, which a building 1987, and with is placed in respect to which service. either a binding agreement is made as to the allocable credit dollar amount or tax-exempt bonds are issued. [See paragraph (b) of this section.] 1002(l)(2)(B).. 42(f)(1)......... Election to defer Available for the beginning of qualified the credit buildings placed period for the in service after low-income December 31, housing credit. 1986. 1002(l)(4)..... 42(d)(3)(B)...... Election to Available for exclude excess qualified costs of buildings placed disproportionate in service after units. December 31, 1986. 1002(l)(12).... 42(g)(3)(B)(i)... Election to Available for aggregate qualified buildings in a buildings placed low-income in service after housing project December 31, to satisfy the 1986. minimum set- aside requirement elected under section 42(g)(1) of the Code. 1002(l)(19)(B). 42(i)(2)(B)...... Election to Available for reduce eligible qualified basis by buildings placed outstanding in service after balance of December 31, Federal loan 1986. subsidy or proceeds of tax- exempt obligation. 1005(c)(11).... 469,163.......... Election to treat Available for certain investment carryovers of interest that is disallowed disallowed for investment the last taxable interest expense year beginning as passive before January activity 1, 1987, and is deductions for properly the first allocable to a taxable year passive activity beginning after for the first December 31, taxable year 1986. beginning after December 31, 1986. [See paragraph (c) of this section.] 1006(d)(15).... 382.............. As a general Available to any rule, a firm loss corporation commitment to which the underwriter of general rule an offering of a would otherwise loss apply. The corporation's election is to stock made be made by before September filing a 19, 1986 statement with (January 1, the District 1989, for an Director with institution whom the loss described in corporation section 591) is would file its not treated as Federal income acquiring tax return. The underwritten statement must stock if it is identify the disposed of election as an pursuant to the election under offering on or section before 60 days 1006(d)(15) of after the the Act and must initial (1) contain the offering. The taxpayer's name, loss corporation address, and may elect not to employee apply the identification general rule. number, (2) identify the transaction to which the election relates, (3) represent that the conditions for making the election have been satisfied, and (4) be signed by a person authorized to sign the Federal income tax return of the loss corporation. 1006(j)(1)(C).. 171(e)........... Election to Available for reduce interest obligations payments acquired after received on October 22, certain bonds by 1986, and before allocable bond January 1, 1988. premium in accordance with section 171(e) of the Code. [[Page 721]] 1006(t)(18)(B). 860F(e).......... Election not Available for treat a REMIC REMICs with a (real estate start-up date mortgage (as defined in investment section conduit) as a 860G(a)(9) of partnership for the Code, as in purposes of effect on determining who November 9, may sign the 1988) before REMIC return. November 10, 1988. The election is made by attaching a statement to the amended tax return for tax year 1987 or to the tax return for the first taxable year for which the election is to be effective. 1008(c)(4)(A).. 460(b)(3)........ Election not to Effective as if discount an included in the amount received Tax Reform Act or accrued after of 1986 (1986 completion of a Act) (available contract to its for contracts value as of the entered into completion of after February the contract for 28, 1986). The purposes of election must be applying the made on a look-back method. contract-by- contract basis by attaching a statement to the tax return for the first year after completion in which the taxpayer includes in income any adjustments to the contract price or deducts any adjustments to contract costs (or, if later, the first tax return filed after October 23, 1989). 1009(d)........ 165(1)........... Election to treat Available for amount of taxable years reasonably beginning after estimated loss December 31, on a deposit in 1981. [See an insolvent or paragraph (d) of bankrupt this section.] qualified financial institution as a loss described in either section 165(c) (2) or (3) of the Code and incurred in the taxable year for which the election is made. 1010(f)(1)..... 831(b)(2)(A)..... Election for Available for insurance taxable years companies other beginning after than life to use December 31, alternative tax 1986. under certain circumstances. 1010(f)(2)..... 835(a)........... Election for an Available for interinsurer or taxable years reciprocal beginning after underwirter December 31, mutual insurance 1986. company subject to section 831(a) of the Code to be subject to section 835(b) limitation. 1011(a)........ 219(g)(4)........ Election to treat Available to a a married married individual as individual who not married for (1) was an purposes of active certain participant contributions during 1987, (2) made to an lived apart from individual the other spouse retirement plan during the for 1987. entire 1987 calendar year, (3) filed a separate income tax return for 1987, (4) had adjusted gross income of not more than $35,000 for 1987, and (5) made a contribution to an individual retirement plan for 1987. 1012(d)(4)..... 865(f)........... Election to treat Shareholder-level an affiliate and election, its wholly-owned available, subsidiaries as subject to one corporation. certain conditions, to United States residents selling stock in an affiliate which is a foreign corporation. Available for taxable years beginning after December 31, 1986. 1012(d)(6)..... 865(g)(3)........ Election to treat Shareholder-level a corporation election, and its wholly- available only owned to individual subsidiaries as bona fide one corporation. residents of Puerto Rico, if the corporate group is engaged in active trade or business in Puerto Rico and meets a gross income test. Available for taxable years beginning after December 31, 1986. 1012(d)(8)..... 865(h)(2)........ Election to apply Taxpayer election treaty source for treatment of rule to treat gain on the gain from a sale disposition of of an intangible certain stocks or of stock in a and intangibles. foreign Available for corporation as taxable years foreign source. beginning after December 31, 1986. 1012(1)(2)..... 245(a)(10)....... Election to apply Available to treaty source corporations for rules to treat distributions dividends out of earnings received from a and profits for qualified 10- taxable years percent owned beginning after foreign December 31, corporation as 1986. foreign source. 1012(n)(3)..... 936.............. Election to Corporate-level reduce the election, amount of available for qualified any taxable year possession beginning in source 1987 or 1988. investment income for certain corporations that fail the 75 percent active trade or business income requirement of section 936(a)(2)(B) of the Code due to section 1231(d) of the 1986 Act. [[Page 722]] 1012(bb)(4).... 904(g)(10)....... Election to apply Available treaty source generally rules (in lieu beginning July of rules in 18, 1984 (the section 904(g) amendment is to of the Code) to take effect as treat an amount if included in derived from a the amendment U.S.-owned made in section foreign 121 of the Tax corporation as Reform Act of foreign source. 1984). 1014(c)(1)..... 664(b)........... Election by a Available for beneficiary of a taxable years trust to which beginning after section 664 of December 31, the Code applies 1986, provided to obtain the trust was certain benefits required to of section change its 1403(c)(2) of taxable year the 1986 Act, under section relating to the 1403(a) of the ratable 1986 Act. inclusion of Election is made certain income by attaching a over 4 taxable statement to an years. amended return for the trust beneficiary's first taxable year beginning after December 31, 1986. Amended return must be filed on or before January 22, 1990. If no such election is filed, the benefits of section 1403(c)(2) are waived. 1014(c)(2)..... 652, 662......... Election by any Available for trust taxable years beneficiary beginning after (other than a December 31, beneficiary of a 1986. Election trust to which is made by section 664 of attaching a the Code statement to an applies), to amended return waive the for the trust benefits of beneficiary's section first taxable 1403(c)(2) of year beginning the 1986 Act. after December 31, 1986. Amended return must be filed on or before January 22, 1990. 1014(d)(3)(B), 643(g)(2)........ Election to have Available for 1014(d)(4). certain payments taxable years of estimated tax beginning after made by a trust December 31, or estate 1986. In the treated as paid case of an by the estate, the beneficiary. election is available only for a taxable year reasonably expected to be the estate's last taxable year. Election must be made by the fiduciary of the trust or estate on or before the 65th day after the close of the taxable year for which the election is made. The election must be made by that date by filing Form 1041-T with the Internal Revenue Service Center where the trust's return for such taxable year is required to be filed. The trust's return (or amended return) for that year must include a copy of the Form 1041- T. 2004(j)(1)..... 1503(e).......... Election, made by Available to an an affiliated affiliated group group filing a filing a consolidated consolidated return upon the return in which disposition of a member intragroup stock disposes of on or before intragroup stock December 15, on or before 1987, to reduce December 15, the disposing 1987. member's basis in the indebtedness of the subsidiary member whose stock has been disposed of, in lieu of taking into account as negative basis the ``unrecaptured amount'' allocable to the stock disposed of. 2004(m)(5)..... 384.............. Election to have Available when amendments (to the acquisition the limitation date is before on use of March 31, 1988. preacquisition Election must be losses to offset made not later corporate built- than the later in gains) made of the due date by section (including 2004(m) of the extensions) for Act not apply in filing the any case where return for the the acquisition taxable year of date is before the acquiring March 31, 1988. corporation in which the acquisition date occurs or March 10, 1989. 4004(a)........ 42(j)(5)(B)...... Election to have Available for certain qualified partnerships not buildings placed treated as the in service after taxpayer to December 31, which the low- 1986, and owned income housing by partnerships credit is with 35 or more allowable. partners. [See paragraph (b) of this section.] 4008(b)........ 41(h)............ Election to have Available in any the research taxable year credit under beginning after secction 41 of December 31, the Code not 1988. The apply for any election is made taxable year. by not claiming the research credit on an original return, or by filing an amended return on which no research credit is claimed, at any time before the expiration of the 3-year period beginning on the last day prescribed by law for filing the return for the taxable year (determined without regard to extensions). The election may be revoked within the above- described 3-year period by filing an amended return on which the credit is claimed. [[Page 723]] 5012(e)(4)..... 7002A(c)(3) 72(e) Election to Available for recognize gain contracts on exchange of entered into life insurance after June 20, contracts to 1988, and before avoid the November 6, characterization 1988, which are of life exchanged before insurance February 10, contract as a 1989. modified endowment contract. 5031(a)........ 7520(a).......... Election to use Available in 120 percent of cases where the the Applicable valuation date Federal Midterm occurs on or rate for either after May 1, of the two 1989. The months preceding election is made a valuation date by attaching a in valuing statement to the certain last income, interests estate, or gift transferred to tax return filed charity for before the due which an income, date, or if a estate, or gift timely return is tax charitable not filed, the deduction is first return allowable. filed after the due date. The statement shall contain the following: (1) A statement that an election under section 7520(a) is being made; (2) the transferor's name and taxpayer identification number as they appear on the return; (3) a description of the interest being valued; (4) the recipients, beneficiaries, or donees of the transferred interest; (5) the date of the transfer; (6) the Applicable Federal Midterm rate that is used to value the transferred interest and the month to which the rate pertains. 5033(a)(2)..... 2056(d).......... Election to treat Available in the a trust for the case of estates benefit of a of decedents surviving spouse dying after who is not a November 11, U.S. citizen as 1988. The a Qualified election is made Domestic Trust, by the executor transfers to on the last which are Federal estate deductible under tax return filed section 2056(a) by the executor of the Code. before the due date of the return, or if a timely return is not filed by the executor, on the first estate tax return filed by the executor after the due date. However, elections made on or after May 5, 1991, may not be made on any return filed more than one year after the time prescribed for filing the return (including extensions). 6006(a)........ 1(i)(7).......... Election to Available for include certain taxable years unearned income beginning after of a child on December 31, the parent's 1988. The return. election must be made in the manner prescribed by the appropriate forms for the parent's return for the year for which the election is effective. The election must be made by the due date (taking extensions into account) of such tax return. 6011........... 121(d)(9)........ Election to Election may be exclude gain on made for a sale the sale of a or exchange principal after September residence by 30, 1988, by a certain taxpayer who incapacitated becomes taxpayers age 55 physically or or over. mentally incapable of self-care and meets the required use rule provided in section 121(d)(9) of the Code. For the time and manner of making the election see Sec. 1.121-4 of the Income Tax Regulations. 6026(a)........ 263A(h).......... Election for Available for the certain authors, first taxable photographers, year ending and artists to after November apply the 10, 1988. An exemption from eligible the uniform taxpayer will be capitalization treated as rules for the having made the first taxable election if the year ending taxpayer reports after November income and 10, 1988. expenses for the first taxable year ending after November 10, 1988 in accordance with the exemption from section 263A of the Code. 6026(b)(1)..... 263A(d)(1)....... Revocation of Election for any prior election taxable year under section beginning before 263A(d)(3) of January 1, 1989, the Code may be revoked (relating to the for the first capitalization taxable year of certain beginning after expenses for the December 31, production of 1988. animals). 6026(c)........ 263A(d)(3)(B).... Election by Available without eligible the consent of taxpayers not to the Commissioner have section for the first 263A of the Code taxable year apply to costs beginning after incurred in the December 31, planting, 1986, during cultivation, which the maintenance, or taxpayer engages development of in the planting, pistachio trees. cultivation, maintenance, or development of pistachio trees. Consent must be obtained from the Commissioner for the election to be made for any subsequent taxable year. [[Page 724]] 6152(a), 2056(b)(7)(C)(ii) Election to treat Available in the 6152(c)(3). a survivor case of estates annuity payable of decedents to a surviving dying after spouse that is December 31, otherwise 1981, and in no deductible under event will the section time for making 2056(b)(7)(C) of the election the Code as a expire before nondeductible November 11, terminable 1990. [See interest. paragraph (e) of this section.] 6152(b), 2523(f)(6)(B).... Election to treat Available in the 6152(c)(3). a joint and case of survivor annuity transfers made in which the after December donee spouse has 31, 1981, and in a survivorship no event will interest that is the time for otherwise making the deductible under election expire section before November 2523(f)(6)(A) of 11, 1990. [See the Code as a paragraph (f) of nondeductible this section.] terminable interest. 6152(c)(2)..... 2056(b)(7)(C)(ii) Election to treat Available to , 2523(f)(6)(B). as deductible estates of for estate or decedents dying gift tax after December purposes under 31, 1981, or to sections transfers made 2056(b)(7)(C) or after December 2523(f)(6) of 31, 1981, where: the Code, (1) the estate respectively, a or gift tax survivor's return was filed annuity payable prior to to a surviving November 11, spouse reported 1988; (2) the on an estate or annuity was not gift tax return deducted on the filed prior to return as November 11, qualified 1988, as a terminable nondeductible interest terminable property under interest. sections 2056(b)(7) or 2523(f) of the Code; and (3) the executor or donor elects to treat the interest as a deductible terminable interest under sections 2056(b)(7)(C) or 2523(f)(6) prior to November 11, 1990. [See paragraph (g) of this section.] 6180(b)(1)..... 142(i)(2)........ Election by a Available for nongovernmental bonds issued owner of a after November highspeed 10, 1988. [See intercity rail paragraph (h) of facility not to this section.] claim any deduction under section 167 or 168 of the Code and any credit under subtitle A, in order for the facility to be described in section 142(a)(11). 6181(c)(2)..... 148(f)(4)(A)..... One-time election Available for by the issuer of bonds tax-exempt bonds outstanding as outstanding as of November 11, of November 11, 1988. The 1988, other than election must be private activity made in writing bonds, to apply on the later of the amendments March 21, 1990, made by section or the first 148(b) of the date any payment Code to amounts is required deposited after under section such date in 148(f) of the bona fide debt Code. The service funds. election should be retained as part of the issuer's books and records (as defined in Sec. 1.103-10(b)(2)( vi) of the regulations) of the bond issue to which it relates. 6277........... 382, 383......... Election by a Available for loss corporation ownership that otherwise changes qualifies for described in the exception of section section 621(f)(5) of the 621(f)(5) of the 1986 Act, if a 1986 Act not to petition was apply that filed with the exception. That court before exception August 14, 1986. provides for the The election is inapplicability, to be made by in certain filing a situations, of statement with the amendments the District to sections 382 Director with and 383 of the whom the loss Code made by the corporation 1986 Act would file its (relating to Federal income limitation of tax return. The corporate statement must attributes after identify the an ownership election as an change). That election under exception section 6277 of applies with the Act and must respect to a (1) contain the loss taxpayer's name, corporation's address, and ownership change employee resulting from a identification reorganization number, (2) described in identify the section transaction to 368(a)(1)(G) of which the the Code or from election an exchange of relates, (3) debt for stock represent that in a title 11 or the conditions similar case if for making the a petition was election have filed with the been satisfied, court before and (4) be August 14, 1986. signed by a person authorized to sign the Federal income tax return of the loss corporation. 8007(a)(1)..... 3127............. Election to be An individual exempted from employer and an the taxes employee, both imposed by of whom are sections 3101 members of a and 3111 of the recognized Code. religious sect or a division thereof described in section 1402(g)(1) of the Code and adherents of established tenets or teachings of such sect or division, may, if both qualify and make elections, obtain exemptions from the taxes imposed by sections 3101 and 3111. [See paragraph (i) of this section.] ------------------------------------------------------------------------ (2) Time for making elections--(i) In general. Except as otherwise provided in this section, the elections described in paragraph (a)(1) of this section must be made by the later of-- [[Page 725]] (A) The due date (taking into account any extensions of time to file obtained by the taxpayer) of the tax return for the first taxable year for which the election is effective, or (B) January 22, 1990 (in which case the election generally must be made by amended return). (ii) No extension of time for payment. Payments of tax due must be made in accordance with chapter 62 of the Code. (3) Manner of making elections. Except as otherwise provided in this section, the elections described in paragraph (a)(1) of this section must be made by attaching a statement to the tax return for the first taxable year for which the election is to be effective. If such tax return is filed prior to the making of the election, the statement must be attached to an amended tax return of the first taxable year for which the election is to be effective. Except as otherwise provided in the return or in the instructions accompanying the return for the taxable year, the statement must-- (i) Contain the name, address and taxpayer identification number of the electing taxpayer; (ii) Identify the election; (iii) Indicate the section of the Code (or, if the provision is not codified, the section of the Act) under which the election is made; (iv) Specify, as applicable, the period for which the election is being made and the property or other items to which the election is to apply; and (v) Provide any information required by the relevant statutory provisions and any information requested in applicable forms and instructions, such as the information necessary to show that the taxpayer is entitled to make the election. Notwithstanding the foregoing, an amended return need not be filed for an election made prior to October 23, 1989, if the taxpayer made the election in a reasonable manner. (4) Revocation--(i) Irrevocable elections. The elections described in this section that are made under the following sections of the Act are irrevocable: 1002(a)(11)(A) (Code section 168(b)(2)), 1002(a)(23)(B), 1002(l)(1)(A) (Code section 42(b)(2)(A)(ii)), 1002 (l)(2)(B) (Code section 42(f)(1)), 1005(c)(11), 1008(c)(4)(A) (Code section 460(b)(3)), 1014(c)(1), 1014(c)(2), 1014(d)(3)(B) and 1014(d)(4) (Code section 643(g)(2)), 2004(m)(5), 4004(a) (Code section 42(j)(5)(B)), 5033(a)(2) (Code section 2056A(d)), 6006(a) (Code section 1(i)(7)), 6026(a) (Code section 263A(h)), 6026(b)(1) (Code section 263A(d)(1)), 6152(a) and 6152(c)(3) (Code section 2056(b)(7)(C)(ii)), 6152(b) and 6152(c)(3) (Code section 2523(f)(6)(B)), 6152(c)(2) (Code sections 2056(b)(7)(C)(ii) and 2523(f)(6)(B)), and 6180(b)(1) (Code section 142(i)(2)). (ii) Elections revocable with the consent of the Commissioner. The elections described in this section that are made under the following sections of the Act are revocable only with the consent of the Commissioner: 1006(d)(15), 1006(j)(1)(C), 1006(t)(18)(B), 1009(d) (Code section 165(l)), 1010(f)(1) (Code section 831(b)(2)(A)), 1010(f)(2) (Code section 835(a)), 1012(d)(4) (Code section 865(f)), 1012(d)(6) (Code section 865(g)(3)), 1012(d)(8) (Code section 865(h)(2)), 1012(l)(2) (Code section 245(a)(10)), 1012(n)(3), 1012(bb)(4) (Code section 904(g)(10)), 2004(j)(1), 5031(a) (Code section 7520(a)), 6026(c) (Code section 263A(d)(3)(B)), and 6277. (iii) Freely revocable elections. The election described in this section that is made under section 6011 of the Act is revocable without the consent of the Commissioner. (See section 121(c) of the Code and Sec. 1.121-4 of the regulations.) (b) Elections with respect to the low-income housing credit. The elections under sections 42(d)(3)(B), 42(f)(1), 42(g)(3)(B)(i), 42(i)(2)(B), and 42(j)(5)(B) of the Code generally must be made for the taxable year in which the building is placed in service, or the succeeding taxable year if the section 42(f)(1) election is made to defer the start of the credit period, and must be made in the certification required to be filed pursuant to section 42(l) (1) and (2), as amended by the Act. The election under section 42(j)(5)(B) of the Code must be made by the later of the due date of the certification or January 22, 1990. The election under section 42(b)(2)(A)(ii) must be made in accordance with the requirements of Notice 89-1, 1989-2 I.R.B. 10. (c) Election to treat certain carryovers of disallowed investment interest expense [[Page 726]] as passive activity deductions. The requirements of paragraphs (a) (2) and (3) of this section do not apply to an election under section 1005(c)(11) of the Act. Instead, the election must be made at the time and in the manner prescribed in Notice 89-36, 1989-13 I.R.B. 6. Thus, the election must be made before the filing deadline specified in Notice 89-36 by amending previously filed returns to reflect any change in the computation of tax liability that results from the election. (d) Election with respect to the treatment of reasonably estimated losses in an insolvent or bankrupt financial institution--(1) In general. This paragraph (d) applies to an election under section 905(a) of the 1986 Act, and to an election under section 1009(d) of the Act, both relating to section 165(l) of the Code. If-- (i) As of the close of the taxable year, it can reasonably be estimated that there is a loss on a deposit (within the meaning of section 165(l)(4)) of a qualified individual (as defined in section 165(l)(2)) in a qualified financial institution (as defined in section 165(l)(3)), and (ii) Such loss is on account of the bankruptcy or insolvency of such institution, then the qualified individual may elect under either section 165(l)(1) or (5) (but not both), to treat the amount (subject to the applicable limitations if under section 165(l)(5)) so estimated for that taxable year as a loss described in either section 165(c)(3), relating to casualty losses, or section 165(c)(2), relating to transactions entered into for profit, and incurred during the taxable year. The election will apply to all losses of the qualified individual on deposits in the institution with respect to which an election is made. For additional information and examples of the application of the election rules, see Notice 89-28, 1989-12 I.R.B. 72. This paragraph (d) includes the procedural and the principal substantive rules first issued in Notice 89-28. For specific rules relating to an election under section 165(1)(5), see paragraph (d)(2) of this section. (2) Specific rules relating to the section 165(1)(5) election--(i) Applicability. An election under section 165(1)(5) of the Code may be made only if no part of the taxpayer's deposits in the financial institution is federally insured. Generally, this requirement will be met only in cases in which none of the deposits in the financial institution are federally insured. (ii) Dollar limitations. An election under section 165(1)(5) of the Code is limited to $20,000 ($10,000 in the case of a separate return by a married individual) in aggregate losses on deposits in any one financial institution. The applicable dollar limit must be reduced by the amount of any insurance proceeds that can reasonably be expected to be received under any state law. (3) Time and manner of determining loss and making the election--(i) Year of election and determination of loss. A qualified individual may make an election under section 165(1) of the Code either for the first taxable year in which a reasonable estimate of the loss can be made or for a later taxable year that is prior to the taxable year in which the loss is sustained. The amount of the loss is determined by the difference between a taxpayer's basis in the deposits and the amount that is reasonably estimated to be recovered, taking into account all facts and circumstances reasonably available to the taxpayer as of the date the election is made. A reasonable estimate might be based, for example, on the percentage of total deposits likely to be recovered by the depositors according to a determination made by the regulatory authority or trustee having responsibility over the institution. In addition, the taxpayer's basis in the deposits must be reduced to the extent that a loss is claimed. (ii) Time and manner of making election. A qualified individual may make an election under section 165(1) of the Code on-- (A) The income tax return for the taxable year with respect to which the taxpayer made a reasonable estimate of the loss; (B) An amended income tax return for a taxable year described in paragraph (d)(3)(ii)(A) of this section, if the period prescribed for filing a claim for refund or credit for that taxable year has not yet expired; or, if applicable, [[Page 727]] (C) An amended income tax return for a taxable year (beginning after December 31, 1981) described in paragraph (d)(3)(ii)(A) of this section, whether or not the claim for refund or credit is barred by another provision of law, but only if the amended return is properly filed on or before November 9, 1989. (iii) Information to include with election. The election should include any information requested in the applicable forms and instructions (e.g., Form 4684, Casualties and Thefts). If the applicable form(s) and instructions do not make reference to or request information concerning this election, the taxpayer should, on an appropriate line or space clearly indicate the name of the financial institution, include the following language: ``Insolvent Financial Institution Election,'' and include the calculation of the reasonably estimated loss claimed. (4) Revocability of the election--(i) In general. If a taxpayer desires to revoke an election under section 165(l) of the Code, the taxpayer must request, in writing, the consent of the Secretary setting forth the pertinent facts surrounding the election and the reasons for requesting a revocation. (ii) Exception. With respect to an election made under section 165(l)(1) of the Code prior to November 9, 1989, a qualified individual may revoke such election without securing the prior consent of the Secretary but only if the taxpayer makes an election under section 165(l)(5) by November 9, 1989, in the manner prescribed in paragraph (d)(3) of this section. (5) Effective date. Paragraph (d) of this section is generally effective for elections made under section 165(1) of the Code on or after November 10, 1988. However, an election filed prior to February 24, 1989, that is made in any reasonable manner will be effective. (e) Election to treat a survivor annuity payable to a surviving spouse as a nondeductible terminable interest. Where the time for making the election under section 2056(b)(7)(C)(ii) of the Code to treat the survivor annuity as nondeductible otherwise expires before November 11, 1990, the election may be made before November 11, 1990, by filing with the Service Center where the original return was filed supplemental information under Sec. 20.6081-1(c) of the Estate Tax Regulations containing: (1) A statement that the election under section 2056(b)(7)(C)(ii) of the Code is being made; (2) The applicable revised schedules; (3) A recomputation of the tax due; and (4) Payment of any additional tax due. (f) Election to treat a joint and survivor annuity in which the donee spouse has a survivor interest as a nondeductible terminable interest. Where the time for making the election under section 2523(f)(6)(B) of the Code to treat the interest as nondeductible otherwise expires before November 11, 1990, the election may be made before November 11, 1990, by filing with the appropriate Service Center an original return (or an amended return if an original return was filed) containing: (1) A statement that the election under section 2523(f)(6)(B) is being made; (2) A recomputation of the tax due; and (3) Payment of any additional tax due. (g) Election to treat survivor's annuity payable to the surviving spouse as qualified terminable interest property deductible under sections 2056(b)(7)(C) or 2523(f)(6) of the Code in the case of a return filed prior to November 11, 1988. (1) In the case of an estate tax election under section 2056(b)(7)(C) the election is made by filing with the Service Center where the estate tax return was filed supplemental information under Sec. 20.6081-1(c) of the Estate Tax Regulations (and timely claim for refund under section 6511 of the Code, if applicable) containing: (i) A statement that the election under section 6152(c)(2) of the Technical and Miscellaneous Revenue Act of 1988 is being made; (ii) The applicable revised schedules; and (iii) A recomputation of the estate's tax liability showing the amount of any refund due. (2) In the case of a gift tax election under section 2523(f)(6) of the Code, the election is made by filing with the Service Center where the original return was filed an amended return (and [[Page 728]] timely claim for refund under section 6511, if applicable) containing: (i) A statement that the election under section 6152(c)(2) of the Technical and Miscellaneous Revenue Act of 1988 is being made; (ii) The applicable revised schedules; and (iii) A recomputation of the gift tax liability showing the amount of any refund due. (h) Elections with respect to certain nongovernmentally owned rail facilities--(1) In general. This paragraph applies to the election under section 6180(b)(1) of the Act (Code section 142(i)(2)) not to claim a deduction under section 167 or 168 of the Code or any credit with respect to certain bond-financed property. An electing owner that is not a governmental unit must make the election at the time the loan agreement with the issuer of the bond is executed. The election must be signed by the owner and include-- (i) A description of the property with respect to which the election is being made; (ii) The name, address, and taxpayer identification number of the issuing authority; (iii) The name, address, and taxpayer identification number of the electing owner; and (iv) The date and face amount of the issue used to provide the property. (2) Other requirements. The electing owner must provide a copy of the election to the issuing authority and to any person purchasing the facilities during the period the bonds are outstanding or within 6 years after the last bond that is part of the issue is retired. The electing owner, purchaser, and all successors in interest to the electing owner or purchaser must each retain the original election document or a copy thereof in its records until 6 years after the later of the date the last bond that is part of the issue is retired or the date such owner, purchaser or successor in interest ceases to own the facilities. The issuer must retain a copy of the election until 6 years after the date the last bond that is part of the issue is retired. In addition, while the facilities are nongovernmentally owned, any publicly recorded document with respect to the facilities must state that neither the electing owner, nor any person purchasing the facilities during the period the bonds are outstanding or within 6 years after the date the last bond that is part of the issue is retired, nor any successor in interest to the electing owner or such purchaser, may claim any deduction under section 167 or 168 of the Code or any credit with respect to the facilities. (3) Election is binding on purchasers and successors. The election is binding at all times on any person purchasing the facilities during the period the bonds are outstanding or within 6 years after the date the last bond that is part of the issue is retired and on all successors in interest to the electing owner and such purchaser. (i) Election under section 3127 of the Code to be exempted from the taxes imposed by sections 3111 and 3101--(1) Application for exemption. To be exempt from the taxes imposed under section 3111 and 3101 of the Code with regard to wages paid after December 31, 1988, an individual who is an employer and his or her employee must each file an application on the prescribed form with the Internal Revenue Service office designated in the instructions relating to the application for exemption. (2) Approval of application for exemption. The application for exemption by the individual employer or the employee will be approved only if: (i) The application contains or is accompanied by the evidence described in section 1402(g)(1)(A) of the Code and a waiver described in section 1402(g)(1)(B); (ii) The Secretary of Health and Human Services makes the findings described in section 1402(g)(1) (C), (D), and (E) with respect to the religious sect or division described in section 1402(g)(1) of which the individual employer and employee are members; and (iii) No benefit or other payment referred to in section 1402(g)(1)(B) became payable (or, but for sections 203 or 222(b) of the Social Security Act, would have become payable) to the employee filing the application at or before the time of the filing. (3) Effective period of exemption. The election provided in paragraph (h)(1) of this section will apply with respect to [[Page 729]] wages paid by such individual employer during the period commencing with the first day of the first calendar quarter, after the quarter in which such application is filed, throughout which such individual employer or employee meets the applicable requirements specified in paragraphs (h)(2) and (h)(3). (4) Termination of election. The exemption granted under section 3127 of the Code will end on the last day of the calendar quarter preceding the first calendar quarter thereafter in which: (i) Such individual employer or the employee involved ceases to meet the applicable requirements of paragraphs (h)(2) and (h)(3), or (ii) The sect or division thereof of which such individual employer or employee is a member is found by the Secretary of Health and Human Services to have failed to meet the requirements of section 3127(b)(2). (5) Both the individual employer and employee must qualify and elect. The exemption from the taxes imposed under sections 3101 and 3111 of the Code is applicable only if both the individual employer and the employee qualify and make the election under the provisions of section 3127. (j) Certain elections not addressed in this section. Elections under the Act that are not addressed in this section include: (1) An election relating to the effective date of certain source rules under section 861(a) of the Code (section 1012(g)(1) of the Act); (2) An election relating to transitional rules for interest allocation under 864(e) of the Code (section 1012(h)(7) of the Act); (3) An election relating to the chain deficit rules under section 952(c)(1)(C) of the Code (section 1012(i)(25) of the Act); (4) An election relating to the definition of a passive foreign investment company in section 1296 of the Code (section 1012(p)(27) of the Act); (5) An election by a shareholder of a qualified electing fund under section 1291(d)(2)(B) of the Code (section 1012(p)(28) of the Act); (6) An election to be treated as a qualified electing fund under section 1295 of the Code (section 6127 of the Act); (7) An election relating to treatment of an insurance branch as a separate corporation under section 964(d) of the Code (section 6129 of the Act); (8) An election relating to certain regulated futures contracts and nonequity options under section 988(c)(1)(D) of the Code (section 6130(b) of the Act); (9) An election relating to certain qualified funds under section 988(c)(1)(E) of the Code (section 6130(b) of the Act); (10) An election under section 952(c)(1)(B) of the Code to apply section 953(a) without regard to the same country exception (section 6131(a) of the Act); (11) An election relating to treatment of a foreign insurance company as a domestic corporation under section 953(d) of the Code (section 6135 of the Act). Guidance concerning the elections described in this paragraph (j) will generally be provided in regulations to be issued under the relevant Code sections. With respect to certain elections described in this paragraph (j), preliminary guidance has been published. See Notice 88- 125, 1988-52 I.R.B. 4, for guidance with respect to the election described in paragraph (j)(6) of this section, relating to the qualified electing fund election. See Notice 88-124, 1988-51 I.R.B. 6, for guidance with respect to the elections described in paragraph (j) (8) and (9) of this section, relating to section 988(c)(1) (D) and (E) of the Code. (k) Additional information required. Later regulations or revenue procedures issued under provisions of the Code or Act covered by this section may require the furnishing of information in addition to that which was furnished with the statement of election described in this section. In that event, the later regulations or revenue procedures will provide guidance with respect to the furnishing of additional information. [T.D. 8267, 54 FR 38980, Sept. 22, 1989; 54 FR 41243, 41364, Oct. 6, 1989. Redesignated and amended by T.D. 8435, 57 FR 43895, 43896, Sept. 23, 1992; 57 FR 47373, Oct. 15, 1992] [[Page 730]]