Rev. Rul. 88-71

Modified by 90-4

                       Internal Revenue Service

                                 Revenue Ruling

                  FRINGE BENEFITS; AIRCRAFT VALUATION FORMULA

                           Published: August 19, 1988

Section 61. -- Gross Income Defined, 26 CFR 1.61-2T: Taxation of fringe benefits.

  Fringe benefits; aircraft valuation formula. For purposes of section 1.61- 2T(g) of the temporary regulations, relating to the rule for valuing noncommercial flights on employer-provided aircraft, the Standard Industry Fare LEvel (SIFL) cents-per-mile rates and the terminal charges in effect on June 30, 1988, and for prior periods are set forth. Rev. Rul. 88-40 superseded.

  For purposes of the taxation of fringe benefits under section 61 of the Internal Revenue Code, section 1.61-2T(g) of the Temporary Income Tax Regulations provides a rule for valuing noncommercial flights on employer- provided aircraft. Section 1.61-2T(g)(5) of the temporary regulations sets forth an aircraft valuation formula to determine the value of such flights. The value of a flight is determined under the base aircraft valuation formula (also known as the Standard Industry Fare Level formula or SIFL) by multiplying the SIFL cents-per-mile rates applicable for the period during which the flight was taken by the appropriate aircraft multiple provided in section 1.61-2T(g)(7) and then adding the applicable terminal charge. The value of a particular flight during the first 6 months of a calendar year is determined by using the SIFL rates and terminal charge in effect on December 31 of the preceding year. The value of a particular flight during the last 6 months of a calendar year is determined by using the SIFL rates and terminal charge in effect on June 30 of that year.

  Therefore, to determine the value of a noncommercial flight taken on an employer-provided aircraft during the last six months of 1988 for purposes of section 1.61-2T(g), the applicable terminal charge and SIFL rates are those in effect on June 30, 1988.

  The terminal charge in effect on June 30, 1988, is $25.55 and the SIFL rates in effect on June 30, 1988, are $.1397 per mile for the first 500 miles, $.1065 per mile for 501 through 1500 miles, and $.1024 per mile for miles over 1500.

  The following chart sets forth the cumulative terminal charges and SIFL mileage rates:

     Period         Terminal                 SIFL Mileage Rates

     ______         Charge                   ___________________

                    _________

1/1/85-6/30/85       $27.05        Up to 500 miles = $.1480 per mile

                                   501-1500 miles = $.1128 per mile

                                   Over 1500 miles = $.1085 per mile

7/1/85-12/31/85      $25.62        Up to 500 miles = $.1402 per mile

                                   501-1500 miles = $.1069 per mile

                                   Over 1500 miles = $.1028 per mile

1/1/86-6/30/86       $26.19        Up to 500 miles = $.1433 per mile

                                   501-1500 miles = $.1092 per mile

                                   Over 1500 miles = $.1050 per mile

7/1/86-12/31/86      $26.02        Up to 500 miles = $.1423 per mile

                                   501-1500 miles = $.1085 per mile

                                   Over 1500 miles = $.1043 per mile

1/1/87-6/30/87       $23.80        Up to 500 miles = $.1302 per mile

                                   501-1500 miles = $.0993 per mile

                                   Over 1500 miles = $.0954 per mile

7/1/87-12/31/87      $23.95        Up to 500 miles = $.1310 per mile

                                   501-1500 miles = $.0999 per mile

                                   Over 1500 miles = $.0960 per mile

1/1/88-6/30/88       $25.20        Up to 500 miles = $.1378 per mile

                                   501-1500 miles = $.1051 per mile

                                   Over 1500 miles = $.1010 per mile

7/1/88-12/31/88      $25.55        Up to 500 miles = $.1397 per mile

                                   501-1500 miles = $.1065 per mile

                                   Over 1500 miles = $.1024 per mile

                         EFFECT ON OTHER REVENUE RULING

  Rev. Rul. 88-40, 1988-22 I.R.B. 18, is superseded.

                              DRAFTING INFORMATION

  The principal author of this revenue ruling is Richard Pavel of the Employee Benefits and Exempt Organizations Division. For further information regarding this revenue ruling contact Mr. Pavel on (202) 566-3080 (not a toll-free call).

Rev. Rul. 88-71, 1988-2 C.B. 29, 1988-36 I.R.B. 1.