Rev. Rul. 88-17

1988-1 C.B. 400, 1988-10 I.R.B. 6.

                       Internal Revenue Service

                                 Revenue Ruling

                 INTEREST RATES; UNDERPAYMENTS AND OVERPAYMENTS

                            Published: March 7, 1988

SECTION 6621 -- DETERMINATION OF RATE OF INTEREST, 26 CFR 301.6621-1: Interest rate

  Interest rates; underpayments and overpayments. The rate of interest determined under section 6621 of the Code for the calendar quarter beginning April 1, 1988, will decrease to 9 percent for overpayments and 10 percent for underpayments.

  Section 6621 of the Internal Revenue Code establishes differential rates for allowance of interest on tax overpayments and assessment of interest on tax underpayments. Under section 6621(a)(1), the overpayment rate is the sum of the short-term federal rate plus 2 percentage points. Under section 6621(a)(2), the underpayment rate is the sum of the short-term federal rate plus 3 percentage points.

  Section 6621(b)(1) of the Code provides that the Secretary shall determine the short-term federal rate for the first month in each calendar quarter.

  Section 6621(b)(2)(A) of the Code provides that the federal short-term rate determined under section 6621(b)(1) for any month shall apply during the first calendar quarter beginning after such month.

  Section 6621(b)(2)(B) of the Code provides that in determining the addition to tax under section 6654 for failure to pay estimated tax for any taxable year the federal short-term rate that applies during the 3rd month following such taxable year shall also apply during the first 15 days of the fourth month following such taxable year.

  Section 6621(b)(3) of the Code provides that the federal short- term rate for any month shall be the federal short-term rate determined during such month by the Secretary in accordance with section 1274(d), rounded to the nearest full percent (or, if a multiple of 1/2 of 1 percent, such rate shall be increased to the next highest full percent).

  Rounded to the nearest full percent, the federal short-term rate determined during the month of January 1988 is 7 percent. Accordingly, an overpayment rate of 9 percent and an underpayment rate of 10 percent is established for the calendar quarter beginning April 1, 1988. The rates apply to amounts bearing interest during that calendar quarter. Pursuant to section 6621(b)(2)(B) of the Code, the 10 percent rate applicable to individual estimated tax underpayments also applies from April 15, 1988, through June 30, 1988.

  Interest factors for daily compound interest for annual rates of 9 percent and 10 percent were published in Tables 39 and 40 of Rev. Proc. 83-7, 1983-1 C.B. 583, 623, 624.

  Annual interest rates to be compounded daily pursuant to section 6622 of the Code that apply for prior periods are set forth in the following table:

                                                   DAILY RATE TABLE
PERIOD                             RATE           IN 1983-1 C.B.
                    OVERPAYMENTS AND UNDERPAYMENTS
January 1, 1983 - June 30, 1983     16%           Table 22, pg. 605
July 1, 1983 - December 31, 1983    11%           Table 17, pg. 600
January 1, 1984 - June 30, 1984     11%           Table 41, pg. 625
July 1, 1984 - December 31, 1984    11%           Table 41, pg. 625
January 1, 1985 - June 30, 1985     13%           Table 19, pg. 602
July 1, 1985 - December 31, 1985    11%           Table 17, pg. 600
January 1, 1986 - June 30, 1986     10%           Table 16, pg. 599
July 1, 1986 - December 31, 1986     9%           Table 15, pg. 598
                             OVERPAYMENTS
January 1, 1987 - March 31, 1987     8%           Table 14, pg. 597
April 1, 1987 - June 30, 1987        8%           Table 14, pg. 597
July 1, 1987 - September 30, 1987    8%           Table 14, pg. 597
October 1, 1987 - December 31, 1987  9%           Table 15, pg. 598
January 1, 1988 - March 31, 1988    10%           Table 40, pg. 624
                             UNDERPAYMENTS
January 1, 1987 - March 31, 1987     9%           Table 15, pg. 598
April 1, 1987 - June 30, 1987        9%           Table 15, pg. 598
July 1, 1987 - September 30, 1987    9%           Table 15, pg. 598
October 1, 1987 - December 31, 1987 10%           Table 16, pg. 599
January 1, 1988 - March 31, 1988    11%           Table 41, pg. 625

DRAFTING INFORMATION

  The principal author of this revenue ruling is Mary Jane Kossar of the Individual Tax Division. For further information regarding this revenue ruling contact Ms. Kossar on (202) 566-3626 (not a toll- free call).

Rev. Rul. 88-17, 1988-1 C.B. 400, 1988-10 I.R.B. 6.