REMIC Residual Interests-Accounting for REMIC Net Income (Including Any Excess Inclusions) (Foreign Holders), 40171-40173 [E8-15940]
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Federal Register / Vol. 73, No. 135 / Monday, July 14, 2008 / Rules and Regulations
Brownsville, TX, Brownsville South
Padre Island Intl, ILS OR LOC RWY
13R, Amdt 1
Dallas, TX, Dallas Love Field, ILS OR
LOC RWY 31L, Amdt 21
Dallas, TX, Dallas Love Field, RNAV
(GPS) RWY 31L, Amdt 1
Port Isabel, TX, Port Isabel-Cameron
County, RNAV (GPS) RWY 13, Amdt
1
Port Isabel, TX, Port Isabel-Cameron
County, Takeoff Minimums and
Obstacle DP, Amdt 2
Moses Lake, WA, Grant County Intl,
MLS RWY 32R, Orig-B, CANCELLED
Juneau, WI, Dodge County, RNAV (GPS)
RWY 2, Amdt 1
Juneau, WI, Dodge County, RNAV (GPS)
RWY 20, Amdt 1
Beckley, WV, Raleigh County Memorial,
RNAV (GPS) RWY 1, Orig
Beckley, WV, Raleigh County Memorial,
VOR/DME OR GPS RWY 1, Amdt 3A,
CANCELLED
Effective 28 AUG 2008
Grand Forks, ND, Grand Forks Intl,
RNAV (GPS) RWY 26, Amdt 1A
Ithaca, NY, Ithaca Tompkins Regional,
Takeoff Minimums and Obstacle DP,
Amdt 4
Waynesburg, PA, Greene County,
Takeoff Minimums and Obstacle DP,
Orig
rfrederick on PROD1PC67 with RULES
Effective 25 SEP 2008
Fort Pierce, FL, St. Lucie County Intl,
GPS RWY 9, Orig-B, CANCELLED
Fort Pierce, FL, St. Lucie County Intl,
ILS OR LOC RWY 9, Amdt 2
Fort Pierce, FL, St. Lucie County Intl,
NDB RWY 27, Amdt 1
Fort Pierce, FL, St. Lucie County Intl,
RNAV (GPS) RWY 9, Orig
Fort Pierce, FL, St. Lucie County Intl,
RNAV (GPS) RWY 14, Orig
Fort Pierce, FL, St. Lucie County Intl,
RNAV (GPS) RWY 27, Orig
Fort Pierce, FL, St. Lucie County Intl,
VOR/DME RWY 14, Amdt 8
Pahokee, FL, Palm Beach County
Glades, RNAV (GPS) RWY 17, Orig
Pahokee, FL, Palm Beach County
Glades, RNAV (GPS) RWY 35, Orig
St Petersburg, FL, Albert Whitted,
RNAV (GPS) RWY 7, Amdt 1
St Petersburg, FL, Albert Whitted,
RNAV (GPS) RWY 18, Orig-A
St Petersburg, FL, Albert Whitted,
RNAV (GPS) RWY 36, Amdt 1
Thomasville, GA, Thomasville Regional,
RNAV (GPS) RWY 22, Orig
Bloomington/Normal, IL, Central IL
Rgnl Arpt at Bloomington-Normal,
VOR RWY 11, Amdt 13, CANCELLED
[FR Doc. E8–15603 Filed 7–11–08; 8:45 am]
BILLING CODE 4910–13–P
VerDate Aug<31>2005
14:19 Jul 11, 2008
Jkt 214001
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9415]
RIN 1545–BB84
REMIC Residual Interests—Accounting
for REMIC Net Income (Including Any
Excess Inclusions) (Foreign Holders)
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations and removal of
temporary regulations.
AGENCY:
SUMMARY: This document contains final
regulations relating to income that is
associated with a residual interest in a
Real Estate Mortgage Investment
Conduit (REMIC) and that is allocated
through certain entities to foreign
persons who have invested in those
entities. The foreign persons covered by
these regulations include partners in
domestic partnerships, shareholders of
real estate investment trusts,
shareholders of regulated investment
companies, participants in common
trust funds, and patrons of subchapter T
cooperatives. These regulations are
necessary to prevent inappropriate
avoidance of current income tax liability
by foreign persons to whom income
from REMIC residual interests is
allocated.
DATES: Effective Date: These regulations
are effective on July 14, 2008.
Dates of Applicability: For dates of
applicability, see §§ 1.860A–1(b)(5),
1.863–1(f) and 1.1441–2(f).
FOR FURTHER INFORMATION CONTACT:
Arturo Estrada, (202) 622–3900 (not a
toll-free number).
Background
This document contains amendments
to 26 CFR part 1 under sections 860A,
860G(b), 863, 1441, and 1442 of the
Internal Revenue Code (Code). On
August 1, 2006, temporary regulations
(TD 9272) were published in the
Federal Register (71 FR 43363). A
notice of proposed rulemaking (REG–
159929–02) cross-referencing the
temporary regulations was published in
the Federal Register for the same day
(71 FR 43398). The preamble to the
temporary regulations contains an
explanation of these provisions. No
comments were received from the
public in response to the notice of
proposed rule making. Accordingly, this
Treasury Decision adopts the proposed
regulations without any substantive
changes. No public hearing was
requested or held.
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40171
Dates of Applicability
The regulations regarding the timing
of REMIC income inclusions apply to
REMIC net income of a foreign person
with respect to REMIC residual interests
with respect to which the first REMIC
net income allocation to the foreign
person under section 860C occurs on or
after August 1, 2006. The regulations
regarding the source of excess
inclusions are applicable for taxable
years ending after August 1, 2006.
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
has also been determined that section
553(b) and (d) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to this regulation.
Pursuant to section 605(b) of the
Regulatory Flexibility Act, 5 U.S.C.
605(b), it has also been determined that
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply to these
regulations because these regulations do
not have a significant economic impact
on a substantial number of small
entities. According to the Small
Business Administration definition of a
‘‘small business,’’ 13 CFR 121.201, a
REMIC is classified as an ‘‘Other
Financial Vehicle,’’ NAICS code
525990, and is considered a small entity
if it accumulates less than 6.5 million
dollars in annual receipts. It has been
determined that REMICs affected by
these regulations generally will have
greater than 6.5 million dollars in
annual receipts and therefore will not
generally be classified as small business
entities. Pursuant to section 7805(f) of
the Internal Revenue Code, the notice of
proposed rulemaking preceding this
regulation was 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 Dale Collinson, formerly
with the Office of the Associate Chief
Counsel (Financial Institutions and
Products). 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 the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
I
E:\FR\FM\14JYR1.SGM
14JYR1
40172
Federal Register / Vol. 73, No. 135 / Monday, July 14, 2008 / Rules and Regulations
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by removing the
entries for §§ 860A–1T and 860G–3T to
read as follows:
I
Authority: 26 U.S.C. 7805 * * *
I Par. 2. Section 1.860A–0 is amended
by adding entries for §§ 1.860A–1(b)(5)
and 1.860G–3(b) and removing the
entries for §§ 1.860A–1T and 1.860G–3T
to read as follows:
§ 1.860A–0
Outline of REMIC provisions.
*
*
*
*
*
§ 1.860A–1
rules.
Effective dates and transition
*
*
*
*
*
(b) * * *
(5) Accounting for REMIC net income of
foreign persons.
*
*
*
§ 1.860G–3
*
*
*
*
Treatment of foreign persons.
*
*
*
(b) Accounting for REMIC net income
(1) Allocation of partnership income to a
foreign partner.
(2) Excess inclusion income allocated by
certain pass-through entities to a foreign
person.
I Par. 3. Section 1.860A–1(b)(5) is
revised to read as follows:
§ 1.860A–1
rules.
Effective dates and transition
*
*
*
*
*
(b) * * *
(5) Accounting for REMIC net income
of foreign persons. Section 1.860G–3(b)
is applicable to REMIC net income
(including excess inclusions) of a
foreign person with respect to a REMIC
residual interest if the first net income
allocation under section 860C(a)(1) to
the foreign person with respect to that
interest occurs on or after August 1,
2006.
§ 1.860A–1T
[Removed]
Par. 4. Section 1.860A–1T is removed.
I Par. 5. Section 1.860G–3 (b) is revised
to read as follows:
I
§ 1.860G–3
Treatment of foreign persons.
rfrederick on PROD1PC67 with RULES
*
*
*
*
*
(b) Accounting for REMIC net
income—(1) Allocation of partnership
income to a foreign partner. A domestic
partnership shall separately state its
allocable share of REMIC taxable
income or net loss in accordance with
§ 1.702–1(a)(8). If a domestic
partnership allocates all or some portion
of its allocable share of REMIC taxable
income to a partner that is a foreign
person, the amount allocated to the
foreign partner shall be taken into
account by the foreign partner for
purposes of sections 871(a), 881, 1441,
VerDate Aug<31>2005
and 1442 as if that amount was received
on the last day of the partnership’s
taxable year, except to the extent that
some or all of the amount is required to
be taken into account by the foreign
partner at an earlier time under section
860G(b) as a result of a distribution by
the partnership to the foreign partner or
a disposition of the foreign partner’s
indirect interest in the REMIC residual
interest. A disposition in whole or in
part of the foreign partner’s indirect
interest in the REMIC residual interest
may occur as a result of a termination
of the REMIC, a disposition of the
partnership’s residual interest in the
REMIC, a disposition of the foreign
partner’s interest in the partnership, or
any other reduction in the foreign
partner’s allocable share of the portion
of the REMIC net income or deduction
allocated to the partnership. See
§ 1.871–14(d)(2) for the treatment of
interest received on a regular or residual
interest in a REMIC. For a partnership’s
withholding obligations with respect to
excess inclusion amounts described in
this paragraph (b)(1), see §§ 1.1441–
2(b)(5), 1.1441–2(d)(4), 1.1441–
5(b)(2)(i)(A), and §§ 1.1446–1 through
1.1446–7.
(2) Excess inclusion income allocated
by certain pass-through entities to a
foreign person. If an amount is allocated
under section 860E(d)(1) to a foreign
person that is a shareholder of a real
estate investment trust or a regulated
investment company, a participant in a
common trust fund, or a patron of an
organization to which part I of
subchapter T applies and if the amount
so allocated is governed by section
860E(d)(2) (treating it ‘‘as an excess
inclusion with respect to a residual
interest held by’’ the taxpayer), the
amount shall be taken into account for
purposes of sections 871(a), 881, 1441,
and 1442 at the same time as the time
prescribed for other income of the
shareholder, participant, or patron from
the trust, company, fund, or
organization.
14:19 Jul 11, 2008
Jkt 214001
§ 1.860G–3T
I
[Removed]
Par. 6. Section 1.860G–3T is removed.
I Par. 7. Section 1.863–0 is amended by
adding an entry for 1.863–1(f) and
removing the entries for § 1.863–1T to
read as follows:
§ 1.863–1 Allocation of gross income
under section 863(a).
*
*
*
*
*
(f) Effective/applicability date.
I Par. 8. Section 1.863–1 paragraphs
(e)(2) and (f) are revised to read as
follows:
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Fmt 4700
Sfmt 4700
§ 1.863–1 Allocation of gross income
under section 863(a).
*
*
*
*
*
(e) * * *
(1) * * *
(2) Excess inclusion income and net
losses. An excess inclusion (as defined
in section 860E(c)) shall be treated as
income from sources within the United
States. To the extent of excess inclusion
income previously taken into account
with respect to a residual interest
(reduced by net losses previously taken
into account under this paragraph), a
net loss (described in section
860C(b)(2)) with respect to the residual
interest shall be allocated to the class of
gross income and apportioned to the
statutory grouping(s) or residual
grouping of gross income to which the
excess inclusion income was assigned.
(f) Effective/applicability date.
Paragraph (e)(2) of this section applies
for taxable years ending after August 1,
2006.
§ 1.863–1T
[Removed]
Par. 9. Section 1.863–1T is removed.
I Par. 10. Section 1.1441–0 is amended
by revising the entry for § 1.1441–2(f)
and removing the entries for § 1.1441–
2T to read as follows:
I
§ 1.1441–0 Outline of regulation provisions
for section 1441.
*
*
*
*
*
§ 1.1441–2 Amounts subject to
withholding.
*
*
*
*
*
(f) Effective/applicability date.
Par. 11. Section 1.1441–2(b)(5), (d)(4)
and (f) are revised to read as follows:
I
§ 1.1441–2 Amounts subject to
withholding.
*
*
*
*
*
(b) * * *
(5) REMIC residual interests. Amounts
subject to withholding include an
excess inclusion described in § 1.860G–
3(b)(2) and the portion of an amount
described in § 1.860G–3(b)(1) that is an
excess inclusion.
*
*
*
*
*
(d) * * *
(4) Withholding exemption
inapplicable. The exemption in
§ 1.1441–2(d) from the obligation to
withhold shall not apply to amounts
described in § 1.860G–3(b)(1) (regarding
certain partnership allocations of
REMIC net income with respect to a
REMIC residual interest).
*
*
*
*
*
E:\FR\FM\14JYR1.SGM
14JYR1
Federal Register / Vol. 73, No. 135 / Monday, July 14, 2008 / Rules and Regulations
§ 1.1441–2T
[Removed]
Par. 12. Section 1.1441–2T is
removed.
I
Linda E. Stiff,
Deputy Commissioner for Services and
Enforcement.
Approved: June 30, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. E8–15940 Filed 7–11–08; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 20
[TD 9414]
RIN 1545–BE52
Grantor Retained Interest Trusts—
Application of Sections 2036 and 2039
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
rfrederick on PROD1PC67 with RULES
SUMMARY: This document contains final
regulations providing guidance on the
portion of property transferred to a trust
or otherwise, that is properly includible
in a grantor’s gross estate under Internal
Revenue Code (Code) sections 2036 and
2039 if the grantor has retained the use
of the property or the right to an
annuity, unitrust, or other payment from
such property for life, for any period not
ascertainable without reference to the
grantor’s death, or for a period that does
not in fact end before the grantor’s
death. The final regulations affect
estates that are required to file Form
706, United States Estate (and
Generation-Skipping Transfer) Tax
Return.
DATES: Effective Date: These regulations
are effective on July 14, 2008.
Applicability Date: For dates of
applicability, see § 20.2036–1(c)(3) and
§ 20.2039–1(f).
FOR FURTHER INFORMATION CONTACT:
Theresa M. Melchiorre at (202) 622–
3090 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
On June 7, 2007, proposed regulations
(REG–119097–05) were published in the
Federal Register [72 FR 31487]. The
proposed regulations contain proposed
amendments to the Estate Tax
Regulations [26 CFR part 20] providing
guidance on the portion of a trust
properly includible in a grantor’s gross
VerDate Aug<31>2005
14:19 Jul 11, 2008
Jkt 214001
estate under sections 2036 and 2039 if
the grantor retained the use of property
in the trust or the right to an annuity,
unitrust, or other payment from the trust
for life, for any period not ascertainable
without reference to the grantor’s death,
or for a period that does not in fact end
before the grantor’s death. The trusts
that were the subject of the proposed
regulations include without limitation
certain charitable remainder trusts
(collectively CRTs) such as charitable
remainder annuity trusts (CRATs)
within the meaning of section 664(d)(1),
charitable remainder unitrusts (CRUTs)
within the meaning of section 664(d)(2)
or (d)(3), and charitable remainder trusts
that do not qualify under section 664, as
well as other trusts established by a
grantor (collectively GRTs) such as
grantor retained annuity trusts (GRATs),
grantor retained unitrusts (GRUTs), and
various forms of grantor retained
income trusts (GRITs), such as qualified
personal residence trusts (QPRTs) and
personal residence trusts (PRTs). A CRT
was within the scope of the proposed
regulations whether or not the CRT met
the qualifications of section 664(d)(1),
(d)(2), or (d)(3) because either the CRT
was created prior to 1969, there was a
defect in the drafting of the CRT, there
was no intention to qualify the CRT for
the charitable deduction, or for any
other reason. A GRT was within the
scope of the proposed regulations
whether or not the grantor’s retained
interest was a ‘‘qualified interest’’ as
defined in section 2702(b).
The proposed regulations incorporate
the guidance provided in Rev. Rul. 76–
273, 1976–2 CB 268, and Rev. Rul. 82–
105, 1982–1 CB 133, by proposing to
amend § 20.2036–1 to provide that the
portion of the corpus of a CRT and GRT
includible in the decedent’s gross estate
under section 2036 is that portion of the
trust corpus necessary to generate a
return sufficient to provide the
decedent’s retained annuity, unitrust, or
other payment. See
§ 601.601(d)(2)(ii)(b). The proposed
regulations provide that, in cases where
both section 2036 and section 2039
could apply to a retained annuity,
unitrust, or other payment in a CRT or
a GRT, section 2036 (and therefore,
when applicable, section 2035), rather
than section 2039, will be applied.
Accordingly, the proposed regulations
also amend § 20.2039–1 by providing
that section 2039 generally shall not be
applied to an annuity, unitrust, or other
payment retained by a deceased grantor
in a CRT or GRT.
Written comments were received on
the proposed regulations, and a public
hearing was held on September 26,
2007. The proposed regulations, with
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40173
certain changes made in response to the
written and oral comments received, are
adopted as final regulations. Although
the final regulations provide guidance
as to the Code section (specifically,
section 2036 or 2039) to be applied in
certain circumstances when each of
those sections applies to the same trust,
the final regulations are not to be
construed to foreclose the possibility
that any applicable section of the Code
(sections 2035 through 2039, or any
other section) properly may be applied
in the future by the IRS in appropriate
circumstances beyond those described
in the final regulations.
Summary of Comments and
Explanation of Provisions
References to the Terms GRAT and
GRUT
A commentator recommended that
the terms ‘‘GRAT’’ (grantor retained
annuity trust) and ‘‘GRUT’’ (grantor
retained unitrust) in the proposed
regulations be replaced with references
to § 25.2702–3(b) and (c) because the
terms GRAT and GRUT are not statutory
or regulatory terms in the Code. In
response, the final regulations include
both the Treasury Regulation citations
and the terms GRAT and GRUT.
Application of Section 2036 to a
Retained Interest in a GRAT or a GRUT
A commentator suggested that section
2036 is not applicable to a retained
annuity interest in a GRAT to the extent
the retained annuity interest is not
payable from trust income. The
commentator takes the position that the
retained annuity interest is payable from
principal and/or income, in kind or in
cash, and the size of the annuity
payment is not defined in relation to
trust income. Instead, the commentator
suggests that the annuity is defined as
a fraction or percentage of the value of
the GRAT’s original principal, and
accordingly, pursuant to section 2033,
only the present value of any unpaid
annuity payments as of a particular date
or event, valued using section 7520,
should be includible in the deceased
grantor’s gross estate. The commentator
opined that section 2036 includes a
portion of the trust in the gross estate
only to the extent that the trust’s income
must be used to pay the retained
annuity.
Another commentator suggested that
the method in the proposed regulations
for calculating the portion of GRAT or
GRUT corpus includible in the deceased
grantor’s gross estate under section 2036
results in an overstatement of the
property required to produce the
retained annuity because the method
E:\FR\FM\14JYR1.SGM
14JYR1
]]>Agencies
[Federal Register Volume 73, Number 135 (Monday, July 14, 2008)]
[Rules and Regulations]
[Pages 40171-40173]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-15940]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9415]
RIN 1545-BB84
REMIC Residual Interests--Accounting for REMIC Net Income
(Including Any Excess Inclusions) (Foreign Holders)
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to income
that is associated with a residual interest in a Real Estate Mortgage
Investment Conduit (REMIC) and that is allocated through certain
entities to foreign persons who have invested in those entities. The
foreign persons covered by these regulations include partners in
domestic partnerships, shareholders of real estate investment trusts,
shareholders of regulated investment companies, participants in common
trust funds, and patrons of subchapter T cooperatives. These
regulations are necessary to prevent inappropriate avoidance of current
income tax liability by foreign persons to whom income from REMIC
residual interests is allocated.
DATES: Effective Date: These regulations are effective on July 14,
2008.
Dates of Applicability: For dates of applicability, see Sec. Sec.
1.860A-1(b)(5), 1.863-1(f) and 1.1441-2(f).
FOR FURTHER INFORMATION CONTACT: Arturo Estrada, (202) 622-3900 (not a
toll-free number).
Background
This document contains amendments to 26 CFR part 1 under sections
860A, 860G(b), 863, 1441, and 1442 of the Internal Revenue Code (Code).
On August 1, 2006, temporary regulations (TD 9272) were published in
the Federal Register (71 FR 43363). A notice of proposed rulemaking
(REG-159929-02) cross-referencing the temporary regulations was
published in the Federal Register for the same day (71 FR 43398). The
preamble to the temporary regulations contains an explanation of these
provisions. No comments were received from the public in response to
the notice of proposed rule making. Accordingly, this Treasury Decision
adopts the proposed regulations without any substantive changes. No
public hearing was requested or held.
Dates of Applicability
The regulations regarding the timing of REMIC income inclusions
apply to REMIC net income of a foreign person with respect to REMIC
residual interests with respect to which the first REMIC net income
allocation to the foreign person under section 860C occurs on or after
August 1, 2006. The regulations regarding the source of excess
inclusions are applicable for taxable years ending after August 1,
2006.
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 has also been
determined that section 553(b) and (d) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply to this regulation.
Pursuant to section 605(b) of the Regulatory Flexibility Act, 5
U.S.C. 605(b), it has also been determined that the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply to these
regulations because these regulations do not have a significant
economic impact on a substantial number of small entities. According to
the Small Business Administration definition of a ``small business,''
13 CFR 121.201, a REMIC is classified as an ``Other Financial
Vehicle,'' NAICS code 525990, and is considered a small entity if it
accumulates less than 6.5 million dollars in annual receipts. It has
been determined that REMICs affected by these regulations generally
will have greater than 6.5 million dollars in annual receipts and
therefore will not generally be classified as small business entities.
Pursuant to section 7805(f) of the Internal Revenue Code, the notice of
proposed rulemaking preceding this regulation was 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 Dale Collinson,
formerly with the Office of the Associate Chief Counsel (Financial
Institutions and Products). 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 the Regulations
0
Accordingly, 26 CFR part 1 is amended as follows:
[[Page 40172]]
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by removing
the entries for Sec. Sec. 860A-1T and 860G-3T to read as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.860A-0 is amended by adding entries for Sec. Sec.
1.860A-1(b)(5) and 1.860G-3(b) and removing the entries for Sec. Sec.
1.860A-1T and 1.860G-3T to read as follows:
Sec. 1.860A-0 Outline of REMIC provisions.
* * * * *
Sec. 1.860A-1 Effective dates and transition rules.
* * * * *
(b) * * *
(5) Accounting for REMIC net income of foreign persons.
* * * * *
Sec. 1.860G-3 Treatment of foreign persons.
* * * * *
(b) Accounting for REMIC net income
(1) Allocation of partnership income to a foreign partner.
(2) Excess inclusion income allocated by certain pass-through
entities to a foreign person.
0
Par. 3. Section 1.860A-1(b)(5) is revised to read as follows:
Sec. 1.860A-1 Effective dates and transition rules.
* * * * *
(b) * * *
(5) Accounting for REMIC net income of foreign persons. Section
1.860G-3(b) is applicable to REMIC net income (including excess
inclusions) of a foreign person with respect to a REMIC residual
interest if the first net income allocation under section 860C(a)(1) to
the foreign person with respect to that interest occurs on or after
August 1, 2006.
Sec. 1.860A-1T [Removed]
0
Par. 4. Section 1.860A-1T is removed.
0
Par. 5. Section 1.860G-3 (b) is revised to read as follows:
Sec. 1.860G-3 Treatment of foreign persons.
* * * * *
(b) Accounting for REMIC net income--(1) Allocation of partnership
income to a foreign partner. A domestic partnership shall separately
state its allocable share of REMIC taxable income or net loss in
accordance with Sec. 1.702-1(a)(8). If a domestic partnership
allocates all or some portion of its allocable share of REMIC taxable
income to a partner that is a foreign person, the amount allocated to
the foreign partner shall be taken into account by the foreign partner
for purposes of sections 871(a), 881, 1441, and 1442 as if that amount
was received on the last day of the partnership's taxable year, except
to the extent that some or all of the amount is required to be taken
into account by the foreign partner at an earlier time under section
860G(b) as a result of a distribution by the partnership to the foreign
partner or a disposition of the foreign partner's indirect interest in
the REMIC residual interest. A disposition in whole or in part of the
foreign partner's indirect interest in the REMIC residual interest may
occur as a result of a termination of the REMIC, a disposition of the
partnership's residual interest in the REMIC, a disposition of the
foreign partner's interest in the partnership, or any other reduction
in the foreign partner's allocable share of the portion of the REMIC
net income or deduction allocated to the partnership. See Sec. 1.871-
14(d)(2) for the treatment of interest received on a regular or
residual interest in a REMIC. For a partnership's withholding
obligations with respect to excess inclusion amounts described in this
paragraph (b)(1), see Sec. Sec. 1.1441-2(b)(5), 1.1441-2(d)(4),
1.1441-5(b)(2)(i)(A), and Sec. Sec. 1.1446-1 through 1.1446-7.
(2) Excess inclusion income allocated by certain pass-through
entities to a foreign person. If an amount is allocated under section
860E(d)(1) to a foreign person that is a shareholder of a real estate
investment trust or a regulated investment company, a participant in a
common trust fund, or a patron of an organization to which part I of
subchapter T applies and if the amount so allocated is governed by
section 860E(d)(2) (treating it ``as an excess inclusion with respect
to a residual interest held by'' the taxpayer), the amount shall be
taken into account for purposes of sections 871(a), 881, 1441, and 1442
at the same time as the time prescribed for other income of the
shareholder, participant, or patron from the trust, company, fund, or
organization.
Sec. 1.860G-3T [Removed]
0
Par. 6. Section 1.860G-3T is removed.
0
Par. 7. Section 1.863-0 is amended by adding an entry for 1.863-1(f)
and removing the entries for Sec. 1.863-1T to read as follows:
Sec. 1.863-1 Allocation of gross income under section 863(a).
* * * * *
(f) Effective/applicability date.
0
Par. 8. Section 1.863-1 paragraphs (e)(2) and (f) are revised to read
as follows:
Sec. 1.863-1 Allocation of gross income under section 863(a).
* * * * *
(e) * * *
(1) * * *
(2) Excess inclusion income and net losses. An excess inclusion (as
defined in section 860E(c)) shall be treated as income from sources
within the United States. To the extent of excess inclusion income
previously taken into account with respect to a residual interest
(reduced by net losses previously taken into account under this
paragraph), a net loss (described in section 860C(b)(2)) with respect
to the residual interest shall be allocated to the class of gross
income and apportioned to the statutory grouping(s) or residual
grouping of gross income to which the excess inclusion income was
assigned.
(f) Effective/applicability date. Paragraph (e)(2) of this section
applies for taxable years ending after August 1, 2006.
Sec. 1.863-1T [Removed]
0
Par. 9. Section 1.863-1T is removed.
0
Par. 10. Section 1.1441-0 is amended by revising the entry for Sec.
1.1441-2(f) and removing the entries for Sec. 1.1441-2T to read as
follows:
Sec. 1.1441-0 Outline of regulation provisions for section 1441.
* * * * *
Sec. 1.1441-2 Amounts subject to withholding.
* * * * *
(f) Effective/applicability date.
0
Par. 11. Section 1.1441-2(b)(5), (d)(4) and (f) are revised to read as
follows:
Sec. 1.1441-2 Amounts subject to withholding.
* * * * *
(b) * * *
(5) REMIC residual interests. Amounts subject to withholding
include an excess inclusion described in Sec. 1.860G-3(b)(2) and the
portion of an amount described in Sec. 1.860G-3(b)(1) that is an
excess inclusion.
* * * * *
(d) * * *
(4) Withholding exemption inapplicable. The exemption in Sec.
1.1441-2(d) from the obligation to withhold shall not apply to amounts
described in Sec. 1.860G-3(b)(1) (regarding certain partnership
allocations of REMIC net income with respect to a REMIC residual
interest).
* * * * *
[[Page 40173]]
Sec. 1.1441-2T [Removed]
0
Par. 12. Section 1.1441-2T is removed.
Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
Approved: June 30, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E8-15940 Filed 7-11-08; 8:45 am]
BILLING CODE 4830-01-P
