Legal Definitions - REV. RUL.

REV. RUL. stands for Revenue Ruling.

A Revenue Ruling is an official public statement issued by the Internal Revenue Service (IRS) that provides an interpretation of how tax law applies to a specific set of facts. It serves as guidance for both taxpayers and IRS personnel, ensuring consistent application of the tax code across similar situations. While not as legally binding as a Treasury Regulation or a statute passed by Congress, taxpayers can generally rely on Revenue Rulings for guidance on their tax obligations.

• Example 1: Business Expense Deductions

  Imagine a small business that develops custom software for clients. They frequently incur expenses for specialized training to keep their developers' skills current with the latest programming languages and tools. The business owner wants to know if these training costs are fully deductible as ordinary and necessary business expenses.

  How it illustrates REV. RUL.: The IRS might have previously issued a Revenue Ruling clarifying the conditions under which employee training expenses, particularly for skill maintenance or enhancement in a rapidly evolving field like software development, qualify for a full deduction. This ruling would provide clear guidance to the business owner on how to treat these expenses on their tax return, rather than leaving them to interpret complex tax code sections on their own.

• Example 2: Taxability of Digital Assets

  Consider an individual who received a significant amount of cryptocurrency as a reward for participating in a new blockchain network's initial launch. They are unsure whether this cryptocurrency, received without direct purchase, should be treated as taxable income, and if so, at what value and when.

  How it illustrates REV. RUL.: The IRS has issued Revenue Rulings in the past to address the tax treatment of various digital assets, including how "airdropped" or "forked" cryptocurrencies are to be valued and reported as gross income. Such a ruling would guide this individual on their reporting obligations, specifying the date of receipt and fair market value to use for tax purposes, thereby clarifying a complex area of emerging finance.

• Example 3: Non-Profit Organization Activities

  A newly formed non-profit organization aims to provide free online educational resources to students in underserved communities. They are applying for 501(c)(3) tax-exempt status and need to ensure their specific activities, such as creating interactive learning modules and hosting virtual tutoring sessions, align with the IRS's definition of educational purposes.

  How it illustrates REV. RUL.: The IRS often issues Revenue Rulings to provide examples of activities that qualify an organization for tax-exempt status under specific sections of the Internal Revenue Code. A relevant Revenue Ruling might detail what constitutes "educational" activities in the context of online learning or community outreach, helping this non-profit structure its mission and operations to successfully obtain and maintain its tax-exempt status.