SECTION 7325.—PERSONAL PROPERTY VALUED AT $2,500 OR LESS

26 CFR 172.26: Forfeiture of seized personal

T. D. 63391

TITLE 26-INTERNAL REVENUE, 1954.-CHAPTER I, SUBCHAPTER E, PART 172.— DISPOSITION OF SEIZED PERSONAL PROPERTY

Miscellaneous Amendments

DEPARTMENT OF THE TREASURY,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington 25, D. C.

To Officers and Employees of the Internal Revenue Service and Others Concerned:

In order to conform to and implement sections 7325 and 7326 of the Internal Revenue Code of 1954 as amended by the Excise Tax Technical Changes Act of 1958 (Public Law 85-859, 72 Stat. 1275), CFR, Part 172 is hereby amended as follows:

26

PARAGRAPH 1. Section 172.26 is amended to read as follows: Personal property seized as subject to forfeiture under the internal revenue laws and appraised at a value of $2,500.00 or less, and any carrier appraised at $2,500.00 or less under the customs laws shall be forfeited to the United States in administrative or summary forfeiture proceedings, unless within 30 days from the date of the first advertisement of seizure as required by I. R. C., section 7325, or within 20 days from the date of first publication of notice of seizure of carriers as required by 19 U. S. C., section 1608, a claimant appears and files proper claims supported by a $250.00 cost bond, thereby removing the forfeiture status of the property or carrier in question to the jurisdiction of the Federal court for adjudication, in which event the seizure in question shall be referred to the United States Attorney for appropriate judicial forfeiture proceedings or other disposition. PAR. 2. The following new subpart, Subpart G, is added immediately following Subpart F:

SUBPART G-DISPOSAL OF FORFEITED OR ABANDONED PROPERTY

§ 172.65 AUTHORITY FOR DESTRUCTION.-The assistant regional commissioner is authorized to order the destruction of any coin-operated gaming device as defined in I. R. C., section 4462 (a)(2) upon which a tax is imposed by I. R. C., section 4461, after the expiration of three months from the date of consummation of administrative forfeiture under any provision of I. R. C.

Because the amended sections 7325 and 7326 of the Internal Revenue Code of 1954 are effective on the day following the date of enactment of the Excise Tax Technical Changes Act of 1958 (Public Law 85-859, 72 Stat. 1275), it is found that it is impracticable and contrary to the public interest to issue this Treasury Decision with notice and public procedure thereon under section 4 (a) of the Administrative Procedure Act (60 Stat. 238; 5 U. S. C. 1003) or subject to

123 F. R. 9693.

the effective date limitation of section 4(c) of such Act. Accordingly, this Treasury Decision shall be effective on September 3, 1958. (This Treasury Decision is issued under the authority contained in section 7805 of the Internal Revenue Code of 1954 (68A Stat. 917; 26 U. S. C. 7805).)

Approved December 11, 1958.

NELSON P. ROSE,

DANA LATHAM,

Commissioner of Internal Revenue.

Acting Secretary of the Treasury.

(Filed by the Division of the Federal Register on December 15, 1958, 8: 50 a. m., and published in the issue of the Federal Register for December 16, 1958, 23 F. R. 9693.)

SECTION 7326.-DISPOSAL OF FORFEITED OR ABANDONED PROPERTY IN SPECIAL CASES

26 CFR 172.65: Authority for destruction.

Authorization for the destruction of coin-operated gaming devices which have been forfeited. See T. D. 6339, page 14.

PART II

RULINGS AND DECISIONS UNDER THE INTERNAL REV. ENUE CODE OF 1939, THE FEDERAL FIREARMS ACT, AND OTHER PUBLIC LAWS

SUBPART A.-RULINGS AND DECISIONS UNDER THE INTERNAL REVENUE CODE OF 1939

Rulings and decisions published in Part II, Subpart A, of the Internal Revenue Bulletin are based on the applications of provisions of the Internal Revenue Code of 1939 and unless otherwise noted therein are published without consideration to any application of the provisions of the Internal Revenue Code of 1954, the Federal Firearms Act, or other public laws.

SECTION 3441.-SALE PRICE

MANUFACTURERS' EXCISE AND IMPORT TAXESGENERAL ADMINISTRATIVE PROVISIONS

26 CFR (1939) 330.1: Determination of price

for purposes of manufacturers' excise taxes.

(Also Sections 3443; 330.1-2.)

(Also Part I, Sections 4216, 6416.)

T. D. 63401

TITLE 26-INTERNAL REVENUE.-CHAPTER I, SUBCHAPTER C, PART.-DETERMINATION OF PRICE AND PRICE READJUSTMENTS

Regulations with respect to certain problems encountered in the determination of price for purposes of the manufacturers excise taxes, and with respect to bona fide discounts, rebates, and allowances for purposes of such taxes.

DEPARTMENT OF THE TREASURY,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,
Washington 25, D. C.

To Officers and Employees of the Internal Revenue Service and Others
Concerned:

On March 22, 1958, notice of proposed rule making with respect to regulations relating to the determination of price and price readjustments for purposes of the manufacturers excise taxes under chapter 29 of the Internal Revenue Code of 1939 and chapter 32 of the Internal Revenue Code of 1954 was published in the Federal Register (23 F. R. 1931). After consideration of all such relevant matter as was presented by interested persons regarding the rules proposed, the following regulations are hereby adopted.

123 F. R. 9692.

Dec.

330.1-1 Determination of price for purposes of manufacturers excise taxes. 330.1-2 Readjustments of price for purposes of manufacturers excise taxes. 330.1-3 Application of regulations.

AUTHORITY: $ 330.1-1 to 330.1-3, incl., issued under sec. 3791, Internal Revenue Code of 1939 (53 Stat. 467; 26 U. S. C. 3791), and made applicable to Internal Revenue Code of 1954 under sec. 7805, Internal Revenue Code of 1954 (68A Stat. 917; 26 U. S. C. 7805).

$330.1-1 DETERMINATION OF PRICE FOR PURPOSES OF MANUFACTURERS EXCISE TAXES.-(a) Section 3441 (a) of the Internal Revenue Code of 1939, providing the following rules for determining the price at which an article is sold for purposes of computing any manufacturers excise tax imposed by chapter 29 of such Code, which is based on the price for which the article is sold, is set forth below:

SEC. 3441. SALE PRICE.

(a) In determining, for the purposes of this chapter, the price for which an article is sold, there shall be included any charge for coverings and containers of whatever nature, and any charge incident to placing the article in condition packed ready for shipment, but there shall be excluded the amount of tax imposed by this chapter, whether or not stated as a separate charge. A transportation, delivery, insurance, installation, or other charge (not required by the foregoing sentence to be included) shall be excluded from the price only if the amount thereof is established to the satisfaction of the Commissioner, in accordance with the regulations.

(b) Any charge which is required by a manufacturer, producer, or importer to be paid as a condition to this sale of a taxable article and which is not attributable to an expense falling within one of the exclusions provided in section 3441 (a) of the Internal Revenue Code of 1939 is includible in the sale price upon which the tax is based. It is immaterial for this purpose that the charge may be paid to someone other than the manufacturer, producer, or importer, or that it may be separately billed to the purchaser as one earmarked for expenses incurred or to be incurred in his behalf, as for example, for advertising at the national or local level, for demonstration or display of the article, for sales promotion programs, or otherwise.

$330.1-2 READJUSTMENT OF PRICE FOR PURPOSES OF MANUFACTURERS EXCISE TAXES.-(a) Readjustments of the price of an article, as determined for purposes of the manufacturers excise taxes imposed by chapter 29 of the Internal Revenue Code of 1939, may not be anticipated. However, under section 3443 (a) (2) of such Code, if the tax is based upon the price for which an article is sold, a proportionate adjustment of the tax may be made when the price is subsequently readjusted by a bona fide discount, rebate, or allowance made to the purchaser of the article. Section 3443 (a) (2) provides as follows:

SEC. 3443. CREDITS AND REFUNDS.

(a) A credit against tax under this chapter, or a refund, may be allowed or made

(2) To any person who has paid tax under this chapter with respect to an article, when the price on which the tax was based is readjusted by reason of return or repossession of the article or a covering or container, or by a bona fide discount, rebate, or allowance; in the amount of that part of the tax proportionate to the part of the price which is refunded or credited.

490545-59-3

(b) In determining whether a manufacturer, producer, or importer has made a bona fide discount, rebate, or allowance to a purchaser, for purposes of section 3443 (a) (2), the basic consideration is whether the price actually paid by, or charged against, the purchaser has in fact been reduced by subsequent transactions between the parties. In general, the price will be considered as having been readjusted by reason of a bona fide discount, rebate, or allowance only if the manufacturer, producer, or importer repays a part of the purchase price in cash to his vendee, or credits the vendee's account, in consideration of factors which, if taken into account at the time of the original transaction, would have resulted at that time in a lower sale price. For example, a price readjustment is considered to have been made when a bona fide discount, rebate, or allowance is given. in consideration of such factors as prompt payment, quantity buying over a specified period, the vendee's inventory of an article when new models are introduced, or a general price reduction affecting articles held in stock by the vendee. On the other hand, repayments made by a manufacturer, producer, or importer to his vendee do not effectuate price readjustments if given in consideration of an expenditure made or to be made by the vendee for national or local advertising, for demonstration or display of the manufacturer's product by the vendee, or other similar circumstances under which the vendee has been or is required to incur an expense which, if treated as a separate item in the original transaction and not included in the price billed for the taxable article, would nevertheless have been includible in the price of the article for purposes of computing the tax.

(c) The principles stated in this section may be illustrated by the following examples:

Example 1. A, a manufacturer of refrigerators, adds a dollars per refrigerator as a separate item on each invoice covering sales to his distributors. This separate charge, which must be paid by the distributor as a condition to the sale, is credited to the distributor's account in a reserve fund set up for local advertising of A's product and is unconditionally refundable to the distributor, by agreement between him and the manufacturer, if unexpended within a specified period or upon termination of the relationship between the parties, whichever is earlier. A also makes a contribution to the distributor's account in the reserve fund in an amount equal to y dollars per refrigerator purchased by the distributor. Thereafter, when a distributor makes an expenditure for local advertising of A's product, the distributor is given a credit memorandum equal to the amount of such expenditure, but not in excess of a plus y dollars per refrigerator purchased by him, which is charged to the distributor's account in the reserve fund. In this stiuation, the segregated charge of a dollars for local advertising is considered to be a part of the sale price of the refrigerator, and the additional contribution of y dollars made by A to the reserve fund does not affect such price. Furthermore, no readjustment of price occurs upon issuance of a credit memorandum in consideration of amounts expended by the distributor for local advertising of A's product. However, any amount remaining