Determination of Distributive Share When Partner's Interest Changes; Correction, 68243-68244 [2015-28015]
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68243
Rules and Regulations
Federal Register
Vol. 80, No. 213
Wednesday, November 4, 2015
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
List of Subjects in 26 CFR Part 1
Income taxes, reporting and
recordkeeping requirements.
Correction of Publication
Accordingly, 26 CFR part 1 is
corrected by making the following
correcting amendments:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
■
DEPARTMENT OF THE TREASURY
Internal Revenue Service
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.706–0 is amended by
revising the entries of the table of
contents for § 1.706–1(b)(3)(iii), § 1.706–
2, § 1.706–3, § 1.706–4(a)(2), and
§ 1.706–4(d)(1), and adding entries to
§ 1.706–1(c)(6), and § 1.706–4(c)(3)(i)
and (ii). The revisions and additions
read as follows:
■
26 CFR Part 1
[TD 9728]
RIN 1545–BD71
Determination of Distributive Share
When Partner’s Interest Changes;
Correction
§ 1.706–0
Internal Revenue Service (IRS),
Treasury.
ACTION: Correcting amendment.
AGENCY:
This document contains
corrections to final regulations (TD
9728) that were published in the
Federal Register on Monday, August 3,
2015 (80 FR 45865). The final
regulations are regarding the
determination of a partner’s distributive
share of partnership items of income,
gain, loss, deduction, and credit when a
partner’s interest varies during a
partnership taxable year.
DATES: This correction is effective
November 4, 2015 and is applicable on
or after August 3, 2015.
FOR FURTHER INFORMATION CONTACT:
Benjamin H. Weaver of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries at (202) 317–
6850 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
rmajette on DSK7SPTVN1PROD with RULES
Background
The final regulations (TD 9728) that
are the subject of this correction are
under section 706 of the Internal
Revenue Code.
Jkt 238001
*
*
§ 1.706–1 Taxable years of partner and
partnership.
(b) * * *
(3) * * *
(iii) Special de minimis rule.
*
*
*
*
*
(c) * * *
(6) Foreign taxes.
*
*
*
*
*
§ 1.706–2 Certain allocable cash basis
items. [Reserved]
*
*
*
*
*
§ 1.706–3 Items attributable to interest in
lower tier partnership. [Reserved]
§ 1.706–4 Determination of distributive
share when a partner’s interest varies.
(a) * * *
(2) Coordination with section 706(d)(2) and
(3) and other Code sections.
*
*
*
*
*
(c) * * *
(3) * * *
(i) Rules applicable to all partnerships.
(ii) Publicly treated partnerships.
(4) * * *
(d)(1) Optional regular monthly or
semimonthly interim closings.
*
*
*
*
Par. 3. Section 1.706–1 is amended by
revising paragraph (c)(2)(ii) to read as
follows:
§ 1.706–1 Taxable years of partner and
partnership.
*
*
*
(c) * * *
(2) * * *
PO 00000
Frm 00001
*
Fmt 4700
*
*
*
*
*
Par. 4. Section 1.706–2 is amended by
revising the section heading to read as
follows:
■
§ 1.706–2 Certain allocable cash to as is
items. [Reserved]
Par. 5. Section 1.706–3 is amended by
revising the section heading to read as
follows:
■
§ 1.706–3 Items attributable to interest in
lower tier partnership. [Reserved]
■
As published, the final regulations
(TD 9728) contain errors that may prove
to be misleading and are in need of
clarification.
13:40 Nov 03, 2015
*
*
*
Need for Correction
VerDate Sep<11>2014
Table of contents.
*
(ii)
Example. H is a partner of a partnership
having a taxable year ending December 31.
Both H and his wife W are on a calendar year
and file joint returns. H dies on March 31,
2016. Administration of the estate is
completed and the estate, including the
partnership interest, is distributed to W as
legatee on November 30, 2016. Such
distribution by the estate is not a sale or
exchange of H’s partnership interest. The
taxable year of the partnership will close
with respect to H on March 31, 2016, and H
will include in his final return for his final
taxable year (January 1, 2016, through March
31, 2016) his distributive share of partnership
items for that period under the rules of
sections 706(d)(2), 706(d)(3), and § 1.706–4.
W will include in her return for the taxable
year ending December 31, 2016, her
distributive share of partnership items for the
period of April 1, 2016, through December
31, 2016, under the rules of sections
706(d)(2), 706(d)(3), and § 1.706–4.
*
Sfmt 4700
Par. 6. Section 1.706–4 is amended by
revising paragraphs (a)(2) and
(a)(3)(viii), the introductory text of
paragraph (a)(4), and the third sentence
of paragraph (g) to read as follows:
■
§ 1.706–4 Determination of distributive
share when a partner’s interest varies.
(a) * * *
(2) Coordination with sections
706(d)(2) and 706(d)(3) and other Code
sections. Items subject to allocation
under other rules, including sections
108(e)(8) and 108(i) (which provide
special allocation rules for certain items
from the discharge or retirement of
indebtedness section), section 704(c)
(relating to allocations with respect to
certain contributed property), § 1.704–
3(a)(6) (relating to allocations with
respect to revalued property), section
706(d)(2) (relating to the determination
of partners’ distributive shares of
allocable cash basis items), and section
706(d)(3) (relating the determination of
partners’ distributive share of any item
of an upper tier partnership attributable
to a lower tier partnership), are not
E:\FR\FM\04NOR1.SGM
04NOR1
68244
Federal Register / Vol. 80, No. 213 / Wednesday, November 4, 2015 / Rules and Regulations
subject to the rules of this section. In
addition, the rules of this section do not
apply in making allocation of book
items pursuant to § 1.704–1(b)(2)(iv)(e),
(f), or (s). In all cases, all partnership
items for each taxable year must be
allocated among the partners, and no
partnership items may be duplicated,
regardless of the particular provision of
section 706 (or other Code section)
which applies, and regardless of the
method or convention adopted by the
partnership.
(3) * * *
(viii) Eighth, determine the
partnership’s proration periods, which
are specific portions of a segment
created by a variation for which the
partnership chooses to apply the
proration method. The first proration
period in each segment begins at the
beginning of the segment, and ends at
the first time of the first variation within
the segment for which the partnership
selects the proration method. The next
proration period begins immediately
after the close of the prior proration
period and ends at the time of the next
variation for which the partnership
selects the proration method. However,
each proration period shall end no later
than the close of the segment.
*
*
*
*
*
(4)
Example. At the beginning of 2017, PRS, a
calendar year partnership, has three equal
partners, A, B, and C. On April 16, 2017, A
sells 50% of its interest in PRS to new
partner D. On August 6, 2017, B sells 50%
of its interest in PRS to new partner E. During
2015, PRS earned $75,000 of ordinary
income, incurred $33,000 of ordinary
deductions, earned $12,000 of capital gain in
the ordinary course of its business, and
sustained $9,000 of capital loss in the
ordinary course of its business. Within that
year, PRS earned $60,000 of ordinary income,
incurred $24,000 of ordinary deductions,
earned $12,000 of capital gain, and sustained
$6,000 of capital loss between January 1,
2017, and July 31, 2017, and PRS earned
Section
Paragraph
Paragraph
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Paragraph
Paragraph
Paragraph
Paragraph
Paragraph
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Paragraph
Paragraph
Paragraph
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DEPARTMENT OF THE TREASURY
[FR Doc. 2015–28015 Filed 11–3–15; 8:45 am]
26 CFR Parts 1 and 602
BILLING CODE 4830–01–P
[TD 9728]
Internal Revenue Service
RIN 1545–BD71
Determination of Distributive Share
When Partner’s Interest Changes;
Correction
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations; correction.
rmajette on DSK7SPTVN1PROD with RULES
AGENCY:
This document contains
corrections to final regulations (TD
9728) that were published in the
Federal Register on Monday, August 3,
2015 (80 FR 45865). The final
SUMMARY:
Jkt 238001
*
*
*
*
(g) * * * For purposes of the
immediately preceding sentence, an
existing publicly traded partnership is a
partnership described in section 7704(b)
that was formed prior to April 14, 2009.
* * *
§ 1.706–4
[Amended]
Par. 7. For each entry in § 1.706–4 in
the ‘‘Section’’ column, remove the
language in ‘‘Remove’’ column from
wherever it appears in the Example and
add in its place the language in the
‘‘Add’’ column as set forth below:
■
2015.
2015.
2015.
2015.
2015.
2015.
2015.
February 28, 2015.
2015.
2015.
2015.
2015.
2015.
2015.
2015.
2015.
2015.
2015.
item.
Martin V. Franks,
Chief, Publications and Regulations Branch,
Legal Processing Division, Associate Chief
Counsel (Procedure and Administration).
13:40 Nov 03, 2015
*
Remove
(a)(4) Example. (iii) ...........................................................................................
(a)(4) Example. (iv) ...........................................................................................
(a)(4) Example. (v) ............................................................................................
(a)(4) Example. (vi) ...........................................................................................
(a)(4) Example. (vii) ..........................................................................................
(a)(4) Example. (viii) .........................................................................................
(c)(4) Example. 1 ..............................................................................................
(c)(4) Example. 1 ..............................................................................................
(c)(4) Example. 2 ..............................................................................................
(d)(2) Example. (i) .............................................................................................
(d)(2) Example. (ii) ............................................................................................
(d)(2) Example. (iii) ...........................................................................................
(d)(2) Example. (iv) ...........................................................................................
(e)(4) Example. 1 ..............................................................................................
(e)(4) Example. 2 ..............................................................................................
(e)(4) Example. 3 ..............................................................................................
(e)(4) Example. 4 ..............................................................................................
(e)(4) Example. 5 ..............................................................................................
(e)(4) Example. 6 ..............................................................................................
VerDate Sep<11>2014
$15,000 of gross ordinary income, incurred
$9,000 of gross ordinary deductions, and
sustained $3,000 of capital loss between
August 1, 2017, and December 31, 2017.
None of PRS’s items are extraordinary items
within the meaning of paragraph (e)(2) of this
section. Capital is a material incomeproducing factor for PRS. For 2017, PRS
determines the distributive shares of A, B, C,
D, and E as follows:
PO 00000
Frm 00002
Fmt 4700
Sfmt 4700
Add
2017.
2017.
2017.
2017.
2017.
2017.
2016.
February 29, 2016.
2016.
2016.
2016.
2016.
2016.
2016.
2016.
2016.
2016.
2016.
items.
regulations regarding the determination
of a partner’s distributive share of
partnership items of income, gain, loss,
deduction, and credit when a partner’s
interest varies during a partnership
taxable year.
DATES: This correction is effective
November 4, 2015 and applicable
August 3, 2015.
FOR FURTHER INFORMATION CONTACT:
Benjamin H. Weaver of the Office of
Associate Chief Counsel (Passthroughs
and Special Industries at (202) 317–
6850 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations (TD 9728) that
are the subject of this correction are
under section 706 of the Internal
Revenue Code.
E:\FR\FM\04NOR1.SGM
04NOR1
]]>Agencies
[Federal Register Volume 80, Number 213 (Wednesday, November 4, 2015)]
[Rules and Regulations]
[Pages 68243-68244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28015]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 80, No. 213 / Wednesday, November 4, 2015 /
Rules and Regulations
[[Page 68243]]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9728]
RIN 1545-BD71
Determination of Distributive Share When Partner's Interest
Changes; Correction
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Correcting amendment.
-----------------------------------------------------------------------
SUMMARY: This document contains corrections to final regulations (TD
9728) that were published in the Federal Register on Monday, August 3,
2015 (80 FR 45865). The final regulations are regarding the
determination of a partner's distributive share of partnership items of
income, gain, loss, deduction, and credit when a partner's interest
varies during a partnership taxable year.
DATES: This correction is effective November 4, 2015 and is applicable
on or after August 3, 2015.
FOR FURTHER INFORMATION CONTACT: Benjamin H. Weaver of the Office of
Associate Chief Counsel (Passthroughs and Special Industries at (202)
317-6850 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations (TD 9728) that are the subject of this
correction are under section 706 of the Internal Revenue Code.
Need for Correction
As published, the final regulations (TD 9728) contain 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
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 * * *
0
Par. 2. Section 1.706-0 is amended by revising the entries of the table
of contents for Sec. 1.706-1(b)(3)(iii), Sec. 1.706-2, Sec. 1.706-3,
Sec. 1.706-4(a)(2), and Sec. 1.706-4(d)(1), and adding entries to
Sec. 1.706-1(c)(6), and Sec. 1.706-4(c)(3)(i) and (ii). The revisions
and additions read as follows:
Sec. 1.706-0 Table of contents.
* * * * *
Sec. 1.706-1 Taxable years of partner and partnership.
(b) * * *
(3) * * *
(iii) Special de minimis rule.
* * * * *
(c) * * *
(6) Foreign taxes.
* * * * *
Sec. 1.706-2 Certain allocable cash basis items. [Reserved]
* * * * *
Sec. 1.706-3 Items attributable to interest in lower tier
partnership. [Reserved]
Sec. 1.706-4 Determination of distributive share when a partner's
interest varies.
(a) * * *
(2) Coordination with section 706(d)(2) and (3) and other Code
sections.
* * * * *
(c) * * *
(3) * * *
(i) Rules applicable to all partnerships.
(ii) Publicly treated partnerships.
(4) * * *
(d)(1) Optional regular monthly or semimonthly interim closings.
* * * * *
0
Par. 3. Section 1.706-1 is amended by revising paragraph (c)(2)(ii) to
read as follows:
Sec. 1.706-1 Taxable years of partner and partnership.
* * * * *
(c) * * *
(2) * * *
(ii)
Example. H is a partner of a partnership having a taxable year
ending December 31. Both H and his wife W are on a calendar year and
file joint returns. H dies on March 31, 2016. Administration of the
estate is completed and the estate, including the partnership
interest, is distributed to W as legatee on November 30, 2016. Such
distribution by the estate is not a sale or exchange of H's
partnership interest. The taxable year of the partnership will close
with respect to H on March 31, 2016, and H will include in his final
return for his final taxable year (January 1, 2016, through March
31, 2016) his distributive share of partnership items for that
period under the rules of sections 706(d)(2), 706(d)(3), and Sec.
1.706-4. W will include in her return for the taxable year ending
December 31, 2016, her distributive share of partnership items for
the period of April 1, 2016, through December 31, 2016, under the
rules of sections 706(d)(2), 706(d)(3), and Sec. 1.706-4.
* * * * *
0
Par. 4. Section 1.706-2 is amended by revising the section heading to
read as follows:
Sec. 1.706-2 Certain allocable cash to as is items. [Reserved]
0
Par. 5. Section 1.706-3 is amended by revising the section heading to
read as follows:
Sec. 1.706-3 Items attributable to interest in lower tier
partnership. [Reserved]
0
Par. 6. Section 1.706-4 is amended by revising paragraphs (a)(2) and
(a)(3)(viii), the introductory text of paragraph (a)(4), and the third
sentence of paragraph (g) to read as follows:
Sec. 1.706-4 Determination of distributive share when a partner's
interest varies.
(a) * * *
(2) Coordination with sections 706(d)(2) and 706(d)(3) and other
Code sections. Items subject to allocation under other rules, including
sections 108(e)(8) and 108(i) (which provide special allocation rules
for certain items from the discharge or retirement of indebtedness
section), section 704(c) (relating to allocations with respect to
certain contributed property), Sec. 1.704-3(a)(6) (relating to
allocations with respect to revalued property), section 706(d)(2)
(relating to the determination of partners' distributive shares of
allocable cash basis items), and section 706(d)(3) (relating the
determination of partners' distributive share of any item of an upper
tier partnership attributable to a lower tier partnership), are not
[[Page 68244]]
subject to the rules of this section. In addition, the rules of this
section do not apply in making allocation of book items pursuant to
Sec. 1.704-1(b)(2)(iv)(e), (f), or (s). In all cases, all partnership
items for each taxable year must be allocated among the partners, and
no partnership items may be duplicated, regardless of the particular
provision of section 706 (or other Code section) which applies, and
regardless of the method or convention adopted by the partnership.
(3) * * *
(viii) Eighth, determine the partnership's proration periods, which
are specific portions of a segment created by a variation for which the
partnership chooses to apply the proration method. The first proration
period in each segment begins at the beginning of the segment, and ends
at the first time of the first variation within the segment for which
the partnership selects the proration method. The next proration period
begins immediately after the close of the prior proration period and
ends at the time of the next variation for which the partnership
selects the proration method. However, each proration period shall end
no later than the close of the segment.
* * * * *
(4)
Example. At the beginning of 2017, PRS, a calendar year
partnership, has three equal partners, A, B, and C. On April 16,
2017, A sells 50% of its interest in PRS to new partner D. On August
6, 2017, B sells 50% of its interest in PRS to new partner E. During
2015, PRS earned $75,000 of ordinary income, incurred $33,000 of
ordinary deductions, earned $12,000 of capital gain in the ordinary
course of its business, and sustained $9,000 of capital loss in the
ordinary course of its business. Within that year, PRS earned
$60,000 of ordinary income, incurred $24,000 of ordinary deductions,
earned $12,000 of capital gain, and sustained $6,000 of capital loss
between January 1, 2017, and July 31, 2017, and PRS earned $15,000
of gross ordinary income, incurred $9,000 of gross ordinary
deductions, and sustained $3,000 of capital loss between August 1,
2017, and December 31, 2017. None of PRS's items are extraordinary
items within the meaning of paragraph (e)(2) of this section.
Capital is a material income-producing factor for PRS. For 2017, PRS
determines the distributive shares of A, B, C, D, and E as follows:
* * * * *
(g) * * * For purposes of the immediately preceding sentence, an
existing publicly traded partnership is a partnership described in
section 7704(b) that was formed prior to April 14, 2009. * * *
Sec. 1.706-4 [Amended]
0
Par. 7. For each entry in Sec. 1.706-4 in the ``Section'' column,
remove the language in ``Remove'' column from wherever it appears in
the Example and add in its place the language in the ``Add'' column as
set forth below:
------------------------------------------------------------------------
Section Remove Add
------------------------------------------------------------------------
Paragraph (a)(4) Example. (iii).... 2015. 2017.
Paragraph (a)(4) Example. (iv)..... 2015. 2017.
Paragraph (a)(4) Example. (v)...... 2015. 2017.
Paragraph (a)(4) Example. (vi)..... 2015. 2017.
Paragraph (a)(4) Example. (vii).... 2015. 2017.
Paragraph (a)(4) Example. (viii)... 2015. 2017.
Paragraph (c)(4) Example. 1........ 2015. 2016.
Paragraph (c)(4) Example. 1........ February 28, February 29,
2015. 2016.
Paragraph (c)(4) Example. 2........ 2015. 2016.
Paragraph (d)(2) Example. (i)...... 2015. 2016.
Paragraph (d)(2) Example. (ii)..... 2015. 2016.
Paragraph (d)(2) Example. (iii).... 2015. 2016.
Paragraph (d)(2) Example. (iv)..... 2015. 2016.
Paragraph (e)(4) Example. 1........ 2015. 2016.
Paragraph (e)(4) Example. 2........ 2015. 2016.
Paragraph (e)(4) Example. 3........ 2015. 2016.
Paragraph (e)(4) Example. 4........ 2015. 2016.
Paragraph (e)(4) Example. 5........ 2015. 2016.
Paragraph (e)(4) Example. 6........ item. items.
------------------------------------------------------------------------
Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division,
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2015-28015 Filed 11-3-15; 8:45 am]
BILLING CODE 4830-01-P
