Section 704(c), Installment Obligations and Contributed Contracts, 14394-14395 [05-5527]
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Federal Register / Vol. 70, No. 54 / Tuesday, March 22, 2005 / Rules and Regulations
List of Subjects in 18 CFR Part 381
DEPARTMENT OF THE TREASURY
Electric power plants, Electric
utilities, Natural gas, Reporting and
recordkeeping requirements.
Internal Revenue Service
Thomas R. Herlihy,
Executive Director.
[TD 9193]
In consideration of the foregoing, the
Commission amends part 381, Chapter I,
Title 18, Code of Federal Regulations, as
set forth below.
Section 704(c), Installment Obligations
and Contributed Contracts
26 CFR Part 1
RIN 1545–BB65
I
PART 381—FEES
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
3. In 381.303, paragraph (a) is amended
by removing ‘‘$27,860’’ and inserting
‘‘$28,330’’ in its place.
SUMMARY: This document contains final
regulations under sections 704(c) and
737 relating to the tax treatment of
installment obligations and property
acquired pursuant to a contract. The
regulations affect partners and
partnerships and provide guidance
necessary to comply with the law.
DATES: Effective Date: These regulations
are effective November 23, 2003.
Applicability Date: For dates of
applicability, see §§ 1.704–3(f), 1.704–
4(g) and 1.737–5.
FOR FURTHER INFORMATION CONTACT:
Christopher L. Trump, (202) 622–3070
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
§ 381.304
Background
1. The authority citation for part 381
continues to read as follows:
I
Authority: 15 U.S.C. 717–717w; 16 U.S.C.
791–828c, 2601–2645; 31 U.S.C. 9701; 42
U.S.C. 7101–7352; 49 U.S.C. 60502; 49 App.
U.S.C. 1–85.
§ 381.302
[Amended]
2. In 381.302, paragraph (a) is amended
by removing ‘‘$19,090’’ and inserting
‘‘$19,410’’ in its place.
I
§ 381.303
[Amended]
I
[Amended]
4. In 381.304, paragraph (a) is amended
by removing ‘‘$14,610’’ and inserting
‘‘$14,850’’ in its place.
I
§ 381.305
[Amended]
5. In 381.305, paragraph (a) is amended
by removing ‘‘$5,470’’ and inserting
‘‘$5,560’’ in its place.
I
§ 381.403
[Amended]
6. Section 381.403 is amended by
removing ‘‘$9,500’’ and inserting
‘‘$9,660’’ in its place.
I
§ 381.505
[Amended]
7. In 381.505, paragraph (a) is amended
by removing ‘‘$16,410’’ and inserting
‘‘$16,690’’ in its place and by removing
‘‘$18,580’’ and inserting ‘‘$18,890’’ in its
place.
I
§ 381.801
[Amended]
8. Section 381.801 is amended by
removing ‘‘$840’’ and inserting ‘‘$890’’
in its place.
I
[FR Doc. 05–5576 Filed 3–21–05; 8:45 am]
BILLING CODE 6717–01–P
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This document contains amendments
to 26 CFR part 1 under sections 704 and
737. On November 24, 2003, a notice of
proposed rulemaking (REG–160330–02)
relating to the tax treatment of
installment obligations and property
acquired pursuant to a contract under
sections 704(c) and 737 was published
in the Federal Register (68 FR 65864).
A notice of correction was published in
the Federal Register (69 FR 5797) on
February 6, 2004. No comments were
received from the public in response to
the notice of proposed rulemaking. No
public hearing was requested, and
accordingly, no hearing was held. This
Treasury decision adopts the language
of the proposed regulations without
change.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866. Therefore, a
regulatory assessment is not required. It
also has been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations and, because the
regulations do not impose a collection
of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
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section 7805(f) of the Internal Revenue
Code, the proposed regulations
preceding these regulations were
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.
Drafting Information
The principal author of these
regulations is Christopher L. Trump of
the Office of the Associate Chief
Counsel (Passthroughs & Special
Industries). However, other personnel
from the IRS and Treasury Department
participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
I
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read, in part, as
follows:
I
Authority: 26 U.S.C. 7805 * * *
I Par. 2. Section 1.704–3 is amended as
follows:
I 1. The paragraph heading for (a)(8) is
revised.
I 2. The text of paragraph (a)(8) is
redesignated as paragraph (a)(8)(i).
I 3. A paragraph heading for newly
designated paragraph (a)(8)(i) is added.
I 4. The first sentence of newly
designated paragraph (a)(8)(i) is
amended by removing the language ‘‘in
which no gain or loss is recognized’’.
I 5. Paragraphs (a)(8)(ii) and (a)(8)(iii)
are added.
I 6. Paragraph (f) is amended by:
I a. Revising the paragraph heading.
I b. Amending the first sentence of
paragraph (f) by removing the language
‘‘of paragraph (a)(11)’’ and adding ‘‘of
paragraphs (a)(8)(ii), (a)(8)(iii) and
(a)(11)’’ in its place.
I c. Adding two sentences at the end of
paragraph (f).
I The revisions and additions read as
follows:
§ 1.704–3
Contributed property.
(a) * * *
(8) Special rules—(i) Disposition in a
nonrecognition transaction. * * *
(ii) Disposition in an installment sale.
If a partnership disposes of section
704(c) property in an installment sale as
defined in section 453(b), the
installment obligation received by the
partnership is treated as the section
704(c) property with the same amount
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Federal Register / Vol. 70, No. 54 / Tuesday, March 22, 2005 / Rules and Regulations
of built-in gain as the section 704(c)
property disposed of by the partnership
(with appropriate adjustments for any
gain recognized on the installment sale).
The allocation method for the
installment obligation must be
consistent with the allocation method
chosen for the original property.
(iii) Contributed contracts. If a partner
contributes to a partnership a contract
that is section 704(c) property, and the
partnership subsequently acquires
property pursuant to that contract in a
transaction in which less than all of the
gain or loss is recognized, then the
acquired property is treated as the
section 704(c) property with the same
amount of built-in gain or loss as the
contract (with appropriate adjustments
for any gain or loss recognized on the
acquisition). For this purpose, the term
contract includes, but is not limited to,
options, forward contracts, and futures
contracts. The allocation method for the
acquired property must be consistent
with the allocation method chosen for
the contributed contract.
*
*
*
*
*
(f) Effective dates. * * * Paragraph
(a)(8)(ii) applies to installment
obligations received by a partnership in
exchange for section 704(c) property on
or after November 24, 2003. Paragraph
(a)(8)(iii) applies to property acquired
on or after November 24, 2003, by a
partnership pursuant to a contract that
is section 704(c) property.
I Par. 3. Section 1.704–4 is amended as
follows:
I 1. The paragraph heading for (d)(1) is
revised.
I 2. The text of paragraph (d)(1) is
redesignated as paragraph (d)(1)(i).
I 3. A paragraph heading for newly
designated paragraph (d)(1)(i) is added.
I 4. Paragraphs (d)(1)(ii) and (d)(1)(iii)
are added.
I 5. Revising paragraph (g).
The revisions and additions read as
follows:
§ 1.704–4
property.
Distribution of contributed
*
*
*
*
*
(d) Special rules—(1) Nonrecognition
transactions, installment obligations
and contributed contracts—(i)
Nonrecognition transactions. * * *
(ii) Installment obligations. An
installment obligation received by the
partnership in an installment sale (as
defined in section 453(b)) of section
704(c) property is treated as the section
704(c) property for purposes of section
704(c)(1)(B) and this section to the
extent that the installment obligation
received is treated as section 704(c)
property under § 1.704–3(a)(8). See
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§ 1.737–2(d)(3) for a similar rule in the
context of section 737.
(iii) Contributed contracts. Property
acquired by the partnership pursuant to
a contract that is section 704(c) property
is treated as the section 704(c) property
for purposes of section 704(c)(1)(B) and
this section, to the extent that the
acquired property is treated as section
704(c) property under § 1.704–3(a)(8).
See § 1.737–2(d)(3) for a similar rule in
the context of section 737.
*
*
*
*
*
(g) Effective dates. This section
applies to distributions by a partnership
to a partner on or after January 9, 1995,
except that paragraphs (d)(1)(ii) and (iii)
apply to distributions by a partnership
to a partner on or after November 24,
2003.
I Par. 4. Section 1.737–2 is amended as
follows:
I 1. The paragraph heading for (d)(3) is
revised.
I 2. The text of paragraph (d)(3) is
redesignated (d)(3)(i).
I 3. A paragraph heading for newly
designated (d)(3)(i) is added.
I 4. Paragraphs (d)(3)(ii) and (d)(3)(iii)
are added.
§ 1.737–2
Exceptions and special rules.
*
*
*
*
*
(d) * * *
(3) Nonrecognition transactions,
installment sales and contributed
contracts—(i) Nonrecognition
transactions. * * *
(ii) Installment sales. An installment
obligation received by the partnership
in an installment sale (as defined in
section 453(b)) of section 704(c)
property is treated as the contributed
property with regard to the contributing
partner for purposes of section 737 to
the extent that the installment
obligation received is treated as section
704(c) property under § 1.704–3(a)(8).
See § 1.704–4(d)(1) for a similar rule in
the context of section 704(c)(1)(B).
(iii) Contributed contracts. Property
acquired by a partnership pursuant to a
contract that is section 704(c) property
is treated as the contributed property
with regard to the contributing partner
for purposes of section 737 to the extent
that the acquired property is treated as
section 704(c) property under § 1.704–
3(a)(8). See § 1.704–4(d)(1) for a similar
rule in the context of section
704(c)(1)(B).
*
*
*
*
*
I Par. 5. Section 1.737–5 is revised to
read as follows:
§ 1.737–5
Effective dates.
Sections 1.737–1, 1.737–2, 1.737–3,
and 1.737–4 apply to distributions by a
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14395
partnership to a partner on or after
January 9, 1995, except that § 1.737–
2(d)(3)(ii) and (iii) apply to distributions
by a partnership to a partner on or after
November 24, 2003.
Mark E. Matthews,
Deputy Commissioner for Services and
Enforcement.
Approved: March 15, 2005.
Eric Solomon,
Acting Deputy Assistant Secretary of the
Treasury (Tax Policy).
[FR Doc. 05–5527 Filed 3–21–05; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9192]
RIN 1545–BC38; RIN 1545–BC74; RIN 1545–
BC95
Guidance Under Section 1502;
Application of Section 108 to Members
of a Consolidated Group
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations, temporary
regulations, and removal of temporary
regulations.
AGENCY:
SUMMARY: This document contains final
regulations under section 1502 of the
Internal Revenue Code that govern the
application of section 108 when a
member of a consolidated group realizes
discharge of indebtedness income.
These final regulations affect
corporations filing consolidated returns.
DATES: Effective Date: These regulations
are effective March 21, 2005.
Applicability Dates: For dates of
applicability, see § 1.1502–11(c)(7),
§ 1.1502–13(g)(3)(i)(A) and (ii)(C),
§ 1.1502–19(h)(2)(ii), § 1.1502–21(h)(6),
§ 1.1502–28(d), and § 1.1502–32(h)(7).
FOR FURTHER INFORMATION CONTACT:
Concerning § 1.1502–11 of the final
regulations, Candace B. Ewell at (202)
622–7530 (not a toll-free number),
concerning all other sections of the final
regulations, Amber R. Cook at (202)
622–7530 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
This document contains amendments
to 26 CFR part 1 under section 1502 of
the Internal Revenue Code (Code). On
September 4, 2003, temporary
regulations (TD 9089) (the first
temporary regulations) relating to the
E:\FR\FM\22MRR1.SGM
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]]>Agencies
[Federal Register Volume 70, Number 54 (Tuesday, March 22, 2005)]
[Rules and Regulations]
[Pages 14394-14395]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-5527]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9193]
RIN 1545-BB65
Section 704(c), Installment Obligations and Contributed Contracts
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations under sections 704(c)
and 737 relating to the tax treatment of installment obligations and
property acquired pursuant to a contract. The regulations affect
partners and partnerships and provide guidance necessary to comply with
the law.
DATES: Effective Date: These regulations are effective November 23,
2003.
Applicability Date: For dates of applicability, see Sec. Sec.
1.704-3(f), 1.704-4(g) and 1.737-5.
FOR FURTHER INFORMATION CONTACT: Christopher L. Trump, (202) 622-3070
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to 26 CFR part 1 under sections
704 and 737. On November 24, 2003, a notice of proposed rulemaking
(REG-160330-02) relating to the tax treatment of installment
obligations and property acquired pursuant to a contract under sections
704(c) and 737 was published in the Federal Register (68 FR 65864). A
notice of correction was published in the Federal Register (69 FR 5797)
on February 6, 2004. No comments were received from the public in
response to the notice of proposed rulemaking. No public hearing was
requested, and accordingly, no hearing was held. This Treasury decision
adopts the language of the proposed regulations without change.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations and, because the
regulations do not impose a collection of information on small
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the Internal Revenue Code, the
proposed regulations preceding these regulations were submitted to the
Chief Counsel for Advocacy of the Small Business Administration for
comment on its impact on small business.
Drafting Information
The principal author of these regulations is Christopher L. Trump
of the Office of the Associate Chief Counsel (Passthroughs & Special
Industries). However, other personnel from the IRS and Treasury
Department participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to Regulations
0
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.704-3 is amended as follows:
0
1. The paragraph heading for (a)(8) is revised.
0
2. The text of paragraph (a)(8) is redesignated as paragraph (a)(8)(i).
0
3. A paragraph heading for newly designated paragraph (a)(8)(i) is
added.
0
4. The first sentence of newly designated paragraph (a)(8)(i) is
amended by removing the language ``in which no gain or loss is
recognized''.
0
5. Paragraphs (a)(8)(ii) and (a)(8)(iii) are added.
0
6. Paragraph (f) is amended by:
0
a. Revising the paragraph heading.
0
b. Amending the first sentence of paragraph (f) by removing the
language ``of paragraph (a)(11)'' and adding ``of paragraphs
(a)(8)(ii), (a)(8)(iii) and (a)(11)'' in its place.
0
c. Adding two sentences at the end of paragraph (f).
0
The revisions and additions read as follows:
Sec. 1.704-3 Contributed property.
(a) * * *
(8) Special rules--(i) Disposition in a nonrecognition transaction.
* * *
(ii) Disposition in an installment sale. If a partnership disposes
of section 704(c) property in an installment sale as defined in section
453(b), the installment obligation received by the partnership is
treated as the section 704(c) property with the same amount
[[Page 14395]]
of built-in gain as the section 704(c) property disposed of by the
partnership (with appropriate adjustments for any gain recognized on
the installment sale). The allocation method for the installment
obligation must be consistent with the allocation method chosen for the
original property.
(iii) Contributed contracts. If a partner contributes to a
partnership a contract that is section 704(c) property, and the
partnership subsequently acquires property pursuant to that contract in
a transaction in which less than all of the gain or loss is recognized,
then the acquired property is treated as the section 704(c) property
with the same amount of built-in gain or loss as the contract (with
appropriate adjustments for any gain or loss recognized on the
acquisition). For this purpose, the term contract includes, but is not
limited to, options, forward contracts, and futures contracts. The
allocation method for the acquired property must be consistent with the
allocation method chosen for the contributed contract.
* * * * *
(f) Effective dates. * * * Paragraph (a)(8)(ii) applies to
installment obligations received by a partnership in exchange for
section 704(c) property on or after November 24, 2003. Paragraph
(a)(8)(iii) applies to property acquired on or after November 24, 2003,
by a partnership pursuant to a contract that is section 704(c)
property.
0
Par. 3. Section 1.704-4 is amended as follows:
0
1. The paragraph heading for (d)(1) is revised.
0
2. The text of paragraph (d)(1) is redesignated as paragraph (d)(1)(i).
0
3. A paragraph heading for newly designated paragraph (d)(1)(i) is
added.
0
4. Paragraphs (d)(1)(ii) and (d)(1)(iii) are added.
0
5. Revising paragraph (g).
The revisions and additions read as follows:
Sec. 1.704-4 Distribution of contributed property.
* * * * *
(d) Special rules--(1) Nonrecognition transactions, installment
obligations and contributed contracts--(i) Nonrecognition transactions.
* * *
(ii) Installment obligations. An installment obligation received by
the partnership in an installment sale (as defined in section 453(b))
of section 704(c) property is treated as the section 704(c) property
for purposes of section 704(c)(1)(B) and this section to the extent
that the installment obligation received is treated as section 704(c)
property under Sec. 1.704-3(a)(8). See Sec. 1.737-2(d)(3) for a
similar rule in the context of section 737.
(iii) Contributed contracts. Property acquired by the partnership
pursuant to a contract that is section 704(c) property is treated as
the section 704(c) property for purposes of section 704(c)(1)(B) and
this section, to the extent that the acquired property is treated as
section 704(c) property under Sec. 1.704-3(a)(8). See Sec. 1.737-
2(d)(3) for a similar rule in the context of section 737.
* * * * *
(g) Effective dates. This section applies to distributions by a
partnership to a partner on or after January 9, 1995, except that
paragraphs (d)(1)(ii) and (iii) apply to distributions by a partnership
to a partner on or after November 24, 2003.
0
Par. 4. Section 1.737-2 is amended as follows:
0
1. The paragraph heading for (d)(3) is revised.
0
2. The text of paragraph (d)(3) is redesignated (d)(3)(i).
0
3. A paragraph heading for newly designated (d)(3)(i) is added.
0
4. Paragraphs (d)(3)(ii) and (d)(3)(iii) are added.
Sec. 1.737-2 Exceptions and special rules.
* * * * *
(d) * * *
(3) Nonrecognition transactions, installment sales and contributed
contracts--(i) Nonrecognition transactions. * * *
(ii) Installment sales. An installment obligation received by the
partnership in an installment sale (as defined in section 453(b)) of
section 704(c) property is treated as the contributed property with
regard to the contributing partner for purposes of section 737 to the
extent that the installment obligation received is treated as section
704(c) property under Sec. 1.704-3(a)(8). See Sec. 1.704-4(d)(1) for
a similar rule in the context of section 704(c)(1)(B).
(iii) Contributed contracts. Property acquired by a partnership
pursuant to a contract that is section 704(c) property is treated as
the contributed property with regard to the contributing partner for
purposes of section 737 to the extent that the acquired property is
treated as section 704(c) property under Sec. 1.704-3(a)(8). See Sec.
1.704-4(d)(1) for a similar rule in the context of section
704(c)(1)(B).
* * * * *
0
Par. 5. Section 1.737-5 is revised to read as follows:
Sec. 1.737-5 Effective dates.
Sections 1.737-1, 1.737-2, 1.737-3, and 1.737-4 apply to
distributions by a partnership to a partner on or after January 9,
1995, except that Sec. 1.737-2(d)(3)(ii) and (iii) apply to
distributions by a partnership to a partner on or after November 24,
2003.
Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
Approved: March 15, 2005.
Eric Solomon,
Acting Deputy Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 05-5527 Filed 3-21-05; 8:45 am]
BILLING CODE 4830-01-P
