Rev. Proc. 64-24

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to set forth procedures to be followed by taxpayers who opened deposits or accounts in certain financial institutions prior to November 15, 1962, and who desire to enter into closing agreements with the Internal Revenue Service regarding their tax liability with respect to the interest earned on such deposits or accounts.

SEC. 2. BACKGROUND.

.01 Treasury Decision 6723, page 73, this Bulletin, published in the Federal Register for April 21, 1964, amends those provisions of the Income Tax Regulations under sections 61 and 451 of the Internal Revenue Code of 1954, relating to the constructive receipt of interest on life insurance policy dividends, or other earnings payable in respect of any deposit or account in a bank, savings and loan, or similar financial institution.

.02 Certain financial institutions have established deposits or accounts such as serial shares, installment shares, bonus savings plans, negotiable time deposit certificates, and growth savings certificates. The Revenue Service has at times ruled that earnings on such deposits or accounts are not includible in gross income until maturity or termination, whichever occurs earlier. However, the amended regulations provide that with respect to such deposits or accounts, a forfeiture provision, a notice requirement, or the loss of bonus interest, shall not be considered to be a substantial limitation or restriction within the meaning of section 1.451-2 of the regulations. Thus, a taxpayer will be required to include in gross income any amount of earnings on such deposit or account in the taxable year in which such earnings are credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given.

SEC. 3. CONCLUSION.

The amended regulations are applicable to all open taxable years subject to the 1954 Code. However, any taxpayer who opened such a deposit or account prior to November 15, 1962, will be allowed to enter into a closing agreement, as authorized under section 7121 of the Code, if the taxpayer will agree that his tax liability with respect to such deposit or account will be determined on the basis of the prior rulings. The closing agreement should specify the date the taxpayer opened his deposit or account and that the full amount of earnings on the deposit or account shall constitute gross income in the year the plan matures, is assigned, or is terminated, whichever occurs first.

SEC. 4. FORM PRESCRIBED.

Form 906, Closing Agreement as to Final Determination Covering Specific Matters, which is prescribed in section 601.202 of the Statement of Procedural Rules, is to be used for these cases, and should be submitted to the District Director of Internal Revenue with whom the most recent return of the taxpayer was filed.

¹ Based on Technical Information Release 582, dated April 23, 1964.