Rev. Rul. 99-12, 1999-11 I.R.B. 6.

                       Internal Revenue Service
                                 Revenue Ruling

                   FRINGE BENEFITS AIRCRAFT VALUATION FORMULA

                           Published: March 15, 1999

Section 61. - Gross Income Defined, 26 CFR 1.61-21: Taxation of fringe benefits.

Section 1001. - Determination of Amount of and Recognition of Gain or Loss, 26 CFR 1.1001-3: Modification of debt instruments.

Section 1275. - Other Definitions and Special Rules, 26 CFR 1.1275-2: Special rules relating to debt instruments.

  Fringe benefits aircraft valuation formula. For purposes of section 1.61- 21(g) of the Income Tax Regulations, relating to the rule for valuing noncommercial flights on employer-provided aircraft, the Standard Industry Fare Level (SIFL) cents-per-mile rates and terminal charges in effect for the first half of 1999 are set forth.

  The revenue procedure provides for an election that will allow taxpayers to treat a debt substitution, in certain circumstances, as a realization event even though it does not result in a significant modification under section 1.1001-3 of the Income Tax Regulations.

  For purposes of the taxation of fringe benefits under section 61 of the Internal Revenue Code, section 1.61-21(g) of the Income Tax Regulations provides a rule for valuing noncommercial flights on employer-provided aircraft. Section 1.61-21(g)(5) provides 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 1.61-21(g)(7) and then adding the applicable terminal charge. The SIFL cents-per-mile rates in the formula and the terminal charge are calculated by the Department of Transportation and are reviewed semiannually.

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

Period During Which the        Terminal       SIFL Mileage Rates
 Flight Was Taken               Charge
1/1/99 - 6/30/99               $32.69         Up to 500 miles = $.1788 per mile
                                              501-1500 miles = $.1364 per mile
                                              Over 1500 miles = $.1311 per mile

DRAFTING INFORMATION

  The principle author of this revenue ruling is Kathleen Edmondson of the Office of the Associate Chief Counsel (Employee Benefits and Exempt Organizations). For further information regarding this revenue ruling, contact Ms. Edmondson on (202) 622-6080 (not a toll-free call).

Rev. Rul. 99-12, 1999-11 I.R.B. 6.