Information Reporting for Discharges of Indebtedness, 47728-47729 [E9-22354]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 74, Number 179 (Thursday, September 17, 2009)]
[Rules and Regulations]
[Pages 47728-47729]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-22354]



[[Page 47728]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9461]
RIN 1545-BH99


Information Reporting for Discharges of Indebtedness

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations relating to 
information returns for cancellation of indebtedness by certain 
entities under section 6050P of the Internal Revenue Code. The final 
regulations will avoid premature information reporting from certain 
businesses and will reduce the number of information returns required 
to be filed. The final regulations will impact certain businesses 
required to file information returns under the existing regulations.

DATES: Effective Date: These regulations are effective on September 17, 
2009.
    Applicability Date: For dates of applicability, see Sec.  1.6050P-
1(h).

FOR FURTHER INFORMATION CONTACT: Barbara Pettoni at (202) 622-4910 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1) under section 6050P relating to information reporting for 
cancellation of indebtedness by certain entities. In general, section 
6050P requires certain entities to file information returns with the 
IRS, and to furnish information statements to debtors, reporting 
discharges of indebtedness of $600 or more. The amendments in this 
document will avoid premature reporting of cancellation of indebtedness 
income by reducing the information reporting burden on certain entities 
that were not originally within the scope of section 6050P. The 
amendments will also protect debtors from receiving information returns 
that prematurely report cancellation of indebtedness income from such 
entities.
    Final and temporary regulations (TD 9430) were published in the 
Federal Register (73 FR 66539) on November 10, 2008. On the same date, 
a notice of proposed rulemaking (REG-118327-08) cross-referencing to 
temporary regulations was published in the Federal Register (73 FR 
66568). A correction to final and temporary regulations (73 FR 75326) 
and a correcting amendment (73 FR 75326) to the regulations were 
published in the Federal Register on December 11, 2008. Only one 
commenter responded to the proposed regulations, presenting oral 
comments at a public hearing on the proposed regulations at the IRS on 
March 13, 2009, as well as written comments. After considering these 
oral and written comments, the IRS and the Treasury Department are 
adopting the proposed regulations without change and removing the 
corresponding temporary regulations.

Explanation of Comments

    The sole commenter agrees with the amendments in the proposed 
regulations to reduce the information reporting burden on certain 
entities that were not originally within the scope of section 6050P and 
thereby avoid premature reporting of cancellation of indebtedness 
income. The commenter, however, requested additional guidance on 
several other areas addressed in the existing regulations under section 
6050P including: (1) The meaning of ``stated principal'' as used in 
Sec.  1.6050P-1(c) and (d)(3) when applied to transactions involving 
entities that acquire a loan from another person; (2) what information, 
if any, must be provided to a debtor prior to filing Form 1099-C, 
``Cancellation of Debt''; (3) what constitutes significant bona fide 
collection activity under Sec.  1.6050P-1(b)(2)(iv)(A); and (4) how to 
report the discharge of a debt that has been reduced to judgment. These 
other areas are beyond the scope of the proposed regulations and are 
therefore not addressed in these final regulations. The Treasury 
Department and the IRS will consider the concerns raised in these 
comments in determining whether to issue additional guidance under 
section 6050P.
    No revisions were made to the proposed and temporary regulations or 
the corrections to those regulations. Accordingly, this Treasury 
decision adopts the proposed regulations without substantive change and 
removes the corresponding temporary regulations.

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 
regulation does 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 
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 Barbara Pettoni, 
Office of Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 1

    Income tax, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by removing 
the entry for Sec.  1.6050P-1T to read in part as follows:

    Authority: 26 U.S.C. 7805 * * *.


0
Par. 2. Section 1.6050P-0 is amended as follows:
0
1. The introductory text is revised.
0
2. The entry for Sec.  1.6050P-1(b)(2)(v) is added.
0
3. The entry for Sec.  1.6050P-1T is removed.
    The revisions and addition read as follows:


Sec.  1.6050P-0  Table of contents.

    This section lists the major captions that appear in Sec. Sec.  
1.6050P-1 and 1.6050P-2.


Sec.  1.6050P-1  Information reporting for discharges of indebtedness 
by certain entities.

* * * * *
    (b) * * *
    (2) * * *
    (v) Special rule for certain entities required to file in a year 
prior to 2008.
* * * * *
    Par. 3. Section 1.6050P-1 is amended by revising paragraphs 
(b)(2)(i)(H), (b)(2)(v) and (h)(1) to read as follows:


Sec.  1.6050P-1  Information reporting for discharges of indebtedness 
by certain entities.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (H) In the case of an entity described in section 6050P(c)(2)(A) 
through (C),

[[Page 47729]]

the expiration of the non-payment testing period, as described in Sec.  
1.6050P-1(b)(2)(iv).
* * * * *
    (v) Special rule for certain entities required to file in a year 
prior to 2008. In the case of an entity described in section 
6050P(c)(1)(A) or (c)(2)(D) required to file an information return in a 
tax year prior to 2008 due to an identifiable event described in 
paragraph (b)(2)(i)(H) of this section, and who failed to so file, the 
date of discharge is the first event, if any, described in paragraphs 
(b)(2)(i)(A) through (G) of this section that occurs after 2007.
* * * * *
    (h) * * *
    (1) In general. The rules in this section apply to discharges of 
indebtedness after December 21, 1996, except paragraphs (e)(1) and 
(e)(3) of this section, which apply to discharges of indebtedness after 
December 31, 1994, except paragraph (e)(5) of this section, which 
applies to discharges of indebtedness occurring after December 31, 
2004, and except paragraphs (b)(2)(i)(H) and (b)(2)(v) of this section, 
which apply to discharges of indebtedness occurring after November 10, 
2008.
* * * * *

0
Par. 4. Section 1.6050P-1T is removed.

    Approved: August 28, 2009.
Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
Michael F. Mundaca,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E9-22354 Filed 9-16-09; 8:45 am]
BILLING CODE 4830-01-P