What Is a Revenue Ruling?
Before we discuss the holding of the new ruling, it’s important to understand what an IRS revenue ruling is and how it affects current IRS regulations. The Internal Revenue Service defines a revenue ruling as the Service’s “official interpretation” of the Internal Revenue Code (IRC). It is the IRS’ conclusion as to how the IRC should be applied to a specific set of facts. According to the IRS, “Revenue rulings do not have the force and effect of Treasury Department Regulations, but they may be used as legal precedents.” The IRS cautions against the application of revenue rulings to other situations, unless the facts and circumstances are substantially the same. In practice, when a revenue ruling is made, it is considered prudent to follow it as soon as it is issued. What is the fact situation to which this ruling applies? Holdings of IRS revenue rulings apply only to the specific fact situation addressed in that ruling. Here is the fact situation presented in Revenue Ruling 2004-22: Em
