2006 base period T-bill rate. The “base
period T-bill rate” for the period ending September 30, 2006, is published
as required by section 995(f) of the Code.
Section 995(f)(1) of the Internal Revenue Code provides that a shareholder
of a DISC shall pay interest each taxable year in an amount equal to the product
of the shareholder’s DISC-related deferred tax liability for the year
and the “base period T-bill rate.” Under section 995(f)(4), the
base period T-bill rate is the annual rate of interest determined by the Secretary
to be equivalent to the average of the 1-year constant maturity Treasury yields,
as published by the Board of Governors of the Federal Reserve System, for
the 1-year period ending on September 30 of the calendar year ending with
(or of the most recent calendar year ending before) the close of the taxable
year of the shareholder. The base period T-bill rate for the period ending
September 30, 2006 is 4.76 percent.
Pursuant to section 6222 of the Code, interest must be compounded daily.
The table below provides factors for compounding the base period T-bill rate
daily for any number of days in the shareholder’s taxable year (including
a 52-53 week accounting period) for the 2006 base period T-bill rate. To
compute the amount of the interest charge for the shareholder’s taxable
year, multiply the amount of the shareholder’s DISC-related deferred
tax liability (as defined in section 995(f)(2)) for that year by the base
period T-bill rate factor corresponding to the number of days in the shareholder’s
taxable year for which the interest charge is being computed. Generally,
one would use the factor for 365 days. One would use a different factor only
if the shareholder’s taxable year for which the interest charge being
determined is a short taxable year, if the shareholder uses the 52-53 week
taxable year, or if the shareholder’s taxable year is a leap year.
For the base period T-bill rates for the periods ending in prior years,
see Rev. Rul. 2005-70, 2005-45 I.R.B. 919, Rev. Rul. 2004-99, 2004-2 C.B.
720, Rev. Rul. 2003-111, 2003-2 C.B. 1009, Rev. Rul. 2002-68, 2002-2 C.B.
808, Rev. Rul. 2001-56, 2001-2 C.B. 500, and Rev. Rul. 2000-52, 2000-2 C.B.
516.
The principal author of this revenue ruling is David Bergkuist of the
Office of the Associate Chief Counsel (International). For further information
about this revenue ruling, contact Mr. Bergkuist at (202) 622-3850 (not a
toll-free call).
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