Interest rates; underpayments and overpayments. The rate of interest determined under section 6621 of the Code for the calendar quarter beginning July 1, 2004, will be 4 percent for overpayments (3 percent in the case of a corporation), 4 percent for underpayments, and 6 percent for large corporate underpayments. The rate of interest paid on the portion of a corporate overpayment exceeding $10,000 will be 1.5 percent.

Preproduction costs of creative property. This ruling provides that a taxpayer may not deduct as a loss under section 165 of the Code the costs of acquiring and developing creative property if the taxpayer does not establish an intention to abandon the property and an affirmative act of abandonment, or an identifiable event evidencing a closed and completed transaction establishing the worthlessness of the property.

State law conversion from partnership to corporation. This ruling explains the federal tax consequences when an entity classified as a partnership for federal tax purposes converts into a state law corporation under a state statute that does not require an actual transfer of the unincorporated entity’s assets or interests.

Final and temporary regulations under section 108 of the Code clarify that if a taxpayer realizes excluded COD income either during or after the taxable year in which the taxpayer is the distributor or transferor of assets for a transaction described in section 381(a), those attributes to which the acquiring corporation succeeds, including the basis of property, must reflect the reductions required by section 108(b).

Final, temporary, and proposed regulations under section 263A of the Code except interest expense incurred by a lessor in certain safe harbor leasing transactions from the requirement to capitalize interest under section 263A.

Final, temporary, and proposed regulations under section 263A of the Code except interest expense incurred by a lessor in certain safe harbor leasing transactions from the requirement to capitalize interest under section 263A.

Governmental plan; union; section 457(b). This ruling holds that a deferred compensation plan does not fail to be an eligible governmental plan under section 457(b) of the Code merely because the plan is created, offered, and administered by a union, provided adoption of the plan meets certain criteria set forth in the ruling.

Correction; section 457; Rev. Rul. 2004-57. A transition rule is set forth for a plan established before June 14, 2004, that does not satisfy the requirements of Rev. Rul. 2004-57 solely as a result of being established and maintained by a labor organization instead of being established and maintained by an eligible governmental employer.

Federal Insurance Contributions Act (FICA); options and deferred compensation transfer on divorce. This ruling concludes that nonqualified stock options and nonqualified deferred compensation transferred by an employee to a former spouse incident to a divorce are subject to the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax Act (FUTA), and income tax withholding to the same extent as if retained by the employee. The ruling also provides reporting requirements applicable to the wage payments. Notice 2002-31 modified.

This announcement provides the rates for various types of income under a new income tax treaty with Japan. For purposes of withholding, the treaty is generally effective July 1, 2004. The tables in this announcement can be used, depending on the effective dates, to replace the entries for Japan in Tables 1 and 2 in Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities (For Withholding in 2004).

This procedure provides a safe harbor method of accounting that allows film producers to amortize certain creative property costs ratably over a period of 15 years beginning in the year the creative property costs are written off for book purposes under AICPA Statement of Position (SOP) 00-2, “Accounting for Producers or Distributors of Film.” Rev. Proc. 2002-9 modified and amplified.