Reporting of Gross Proceeds Payments to Attorneys; Correction, 47080 [E6-13423]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 71, Number 158 (Wednesday, August 16, 2006)]
[Rules and Regulations]
[Page 47080]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-13423]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9270]
RIN 1545-AW72


Reporting of Gross Proceeds Payments to Attorneys; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

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SUMMARY: This document contains a correction to final regulations (TD 
9270) that were published in the Federal Register on Thursday, July 13, 
2006 (71 FR 39548) relating to the reporting of payments of gross 
proceeds to attorneys.

DATES: These corrections are effective July 13, 2006.

FOR FURTHER INFORMATION CONTACT: Nancy Rose, (202) 622-4940 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    The correction notice that is the subject of this document is under 
sections 6041 and 6045 of the Internal Revenue Code.

Need for Correction

    As published, the correction notice (TD 9270) contains errors that 
may prove to be misleading and are in need of clarification.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

0
Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

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 * * *


Sec.  1.6041-1  [Corrected]

0
Par. 2. Section 1.6041-1 is amended by revising paragraphs (a)(1)(ii) 
and (iii) to read as follows:


Sec.  1.6041-1  Return of information as to payments of $600 or more.

    (a) * * *
    (1) * * *
    (ii) Information returns required under other provisions of the 
Internal Revenue Code. The payments described in paragraphs 
(a)(1)(i)(A) and (B) of this section shall not include any payments of 
amounts with respect to which an information return is required by, or 
may be required under authority of, section 6042(a) (relating to 
dividends), section 6043(a)(2) (relating to distributions in 
liquidation), section 6044(a) (relating to patronage dividends), 
section 6045 (relating to brokers' transactions with customers and 
certain other transactions), sections 6049(a)(1) and (2) (relating to 
interest), section 6050N(a) (relating to royalties), or section 
6050P(a) or (b) (relating to cancellation of indebtedness). For 
information returns required under section 6045(f) (relating to 
payments to attorneys), see special rules in Sec. Sec.  1.6041-
1(a)(1)(iii) and 1.6045-5(c)(4).
* * * * *
    (iii) Information returns required under section 6045(f) on or 
after January 1, 2007. For payments made on or after January 1, 2007 to 
which section 6045(f) (relating to payments to attorneys) applies, the 
following rules apply. Not withstanding the provisions of paragraph 
(a)(1)(ii) of this section, payments to an attorney that are described 
in paragraph (a)(1)(i) of this section but which otherwise would be 
reportable under section 6045(f) are reported under section 6041 and 
this section and not section 6045(f). This exception applies only if 
the payments are reportable with respect to the same payee under both 
sections. Thus, a person who, in the course of a trade or business, 
pays $600 of taxable damages to a claimant by paying that amount to the 
claimant's attorney is required to file an information return under 
section 6041 with respect to the claimant, as well as another 
information return under section 6045(f) with respect to the claimant's 
attorney. For provisions relating to information reporting for payments 
to attorneys, see Sec.  1.6045-5.
* * * * *


Sec.  1.6045-5  [Corrected]

0
Par. 4. Section 1.6045-5 is amended by revising Example 4 and Example 5 
of paragraph (f) to read as follows:


Sec.  1.6045-5  Information reporting on payments to attorneys.

* * * * *
    (f) * * *
    Example 4. Check made payable to claimant, but delivered to 
nonpayee attorney. Corporation P is a defendant in a suit for 
damages in which C, the plaintiff, has been represented by attorney 
A throughout the proceeding. P settles the suit for $300,000. 
Pursuant to a request by A, P writes the $300,000 settlement check 
payable solely to C and delivers it to A at A's office. P is not 
required to file an information return under paragraph (a)(1) of 
this section with respect to A, because there is no payment to an 
attorney within the meaning of paragraph (d)(4) of this section.
    Example 5. Multiple attorneys listed as payees. Corporation P, a 
defendant, settles a lost profits suit brought by C for $300,000 by 
issuing a check naming C's attorneys, Y, A, and Z, as payees in that 
order. Y, A, and Z do not belong to the same law firm. P delivers 
the payment to A's office. A deposits the check proceeds into a 
trust account and makes payments by separate checks to Y of $30,000 
and to Z of $15,000, as compensation for legal services, pursuant to 
authorization from C to pay these amounts. A also makes a payment by 
check of $155,000 to C. A retains $100,000 as compensation for legal 
services. P must file an information return for $300,000 with 
respect to A under paragraphs (a)(1) and (b)(1)(i) of this section. 
A, in turn, must file information returns with respect to Y of 
$30,000 and to Z of $15,000 under paragraphs (a)(1) and (b)(2) of 
this section because A is not required to file information returns 
under section 6041 with respect to A's payments to Y and Z because 
A's role in making the payments to Y and Z is merely ministerial. 
See Sec.  1.6041-1(e)(1), (e)(2) and (e)(5) Example 7 for 
information reporting requirements with respect to A's payments to Y 
and Z. As described in Example 3, P must also file an information 
return with respect to C, pursuant to Sec.  1.6041-1(a) and (f).
* * * * *

Guy R. Traynor,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
 [FR Doc. E6-13423 Filed 8-15-06; 8:45 am]
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