Guidance Under Section 1061; Correction, 50524-50526 [2024-12374]
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Federal Register / Vol. 89, No. 116 / Friday, June 14, 2024 / Rules and Regulations
burdensome, and to modify, streamline,
expand, or repeal them in accordance
with what has been learned.’’ Executive
Order 13563 also directs that, where
relevant, feasible, and consistent with
regulatory objectives, and to the extent
permitted by law, agencies are to
identify and consider regulatory
approaches that reduce burdens and
maintain flexibility and freedom of
choice for the public. Executive Order
14094 (Modernizing Regulatory Review)
amends section 3(f) of Executive Order
12866, among other things. This rule
has been determined not to be a
‘‘significant regulatory action’’ as
defined in section 3(f) of the Executive
order and therefore was not reviewed by
OMB.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 (2 U.S.C. 1531–
1538) establishes requirements for
Federal agencies to assess the effects of
their regulatory actions on state, local,
and tribal governments, and the private
sector. This rule will not impose any
Federal mandates on any state, local, or
tribal government or the private sector
within the meaning of the Unfunded
Mandates Reform Act of 1995.
ddrumheller on DSK120RN23PROD with RULES1
Environmental Review
A Finding of No Significant Impact
with respect to the environment was
made prior to publication of the March
20, 2024, final rule, in accordance with
HUD regulations at 24 CFR part 50,
which implement section 102(2)(C) of
the National Environmental Policy Act
of 1969 (42 U.S.C. 4332(2)(C)). The
Finding of No Significant Impact
remains applicable and is available for
public inspection between the hours of
8 a.m. and 5 p.m. weekdays in the
Regulations Division, Office of General
Counsel, Room 10276, Department of
Housing and Urban Development, 451
Seventh Street SW, Washington, DC
20410–0500. The Finding of No
Significant Impact will also be available
for review in the docket for this rule on
Regulations.gov.
Executive Order 13132, Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits, to the extent
practicable and permitted by law, an
agency from promulgating a regulation
that has federalism implications and
either imposes substantial direct
compliance costs on state and local
governments and is not required by
statute, or preempts state law, unless the
relevant requirements of section 6 of the
Executive order are met. This rule does
not have federalism implications and
does not impose substantial direct
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compliance costs on state and local
governments or preempt state law
within the meaning of the Executive
order.
Damon Smith,
General Counsel.
[FR Doc. 2024–13124 Filed 6–13–24; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9945]
RIN 1545–BO81
Guidance Under Section 1061;
Correction
Internal Revenue Service (IRS),
Treasury.
ACTION: Final rule; correction and
correcting amendments.
AGENCY:
This document contains
corrections to Treasury Decision 9945
published in the Federal Register on
Tuesday, January 19, 2021. Treasury
Decision 9945 issued final regulations
that recharacterize certain net long-term
capital gains of a partner that holds one
or more applicable partnership interests
as short-term capital gains.
DATES: These corrections are effective
on June 14, 2024 and for dates of
applicability, see §§ 1.702–1(g), 1.704–
3(f), 1.1061–1(b), 1.1061–2(c), 1.1061–
3(f), 1.1061–4(d), 1.1061–5(g), 1.1061–
6(e), and 1.1223–3(g).
FOR FURTHER INFORMATION CONTACT:
Concerning the regulations, Alta Li of
the Office of Associate Chief Counsel
(Passthroughs and Special Industries) at
(202) 317–5279 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
The final regulations (TD 9945)
subject to these corrections are issued
under section 1061 of the Internal
Revenue Code.
Corrections to Publication
Accordingly, the final regulations (TD
9945) that are the subject of FR Doc.
2021–00427, published on Tuesday,
January 19, 2021, are corrected as
follows:
1. On page 5455, in the first column,
in the seventh line of the column the
language ‘‘make’’ is corrected to read
‘‘made’’.
2. On page 5455, in the first column,
in the fifteenth line of the column the
language ‘‘are’’ is corrected to read ‘‘at’’.
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3. On page 5456, in the first column,
the fourteenth line of the column is
corrected to read ‘‘terms, priority, type
and level of risk’’.
4. On page 5457, in the first column,
in the last line of the column the
language ‘‘allocation’’ is corrected to
read ‘‘allocations’’.
5. On page 5459, in the first column,
the thirteenth line from the bottom of
the column is corrected to read ‘‘other
partner, other than’’.
6. On page 5459, in the first column,
the fifth line from the bottom of the
column is corrected to read ‘‘advances
made by another partner in the’’.
7. On page 5459, in the first column,
the fourth line from the bottom of the
column is corrected to read
‘‘partnership (or any Related Person
with respect to such’’.
8. On page 5459, in the first column,
the third line from the bottom of the
column is corrected to read ‘‘other
partner, other than the partnership) to
a’’.
9. On page 5459, in the second
column, the ninth line of the column is
corrected to read ‘‘loan or advance made
by another partner (or’’.
10. On page 5459, in the second
column, the tenth line of the column is
corrected to read ‘‘any Related Person
with respect to such other partner, other
than the’’.
11. On page 5463, in the third
column, the second line of the second
full paragraph is corrected to read ‘‘that
once a partnership interest qualifies as’’.
12. On page 5465, in the first column,
the twelfth line of the first full
paragraph is corrected to read ‘‘Assets;
and (vi) options or derivative’’.
13. On page 5465, in the third
column, in the twelfth line of the
second full paragraph the language
‘‘APIs’’ is corrected to read ‘‘API’’.
14. On page 5467, in the first column,
in the ninth line from the bottom of the
column, the language ‘‘API Distributed’’
is corrected to read ‘‘Distributed API’’.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Correction to the Regulations
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:
■
Authority: 26 U.S.C. 7805 * * *
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Federal Register / Vol. 89, No. 116 / Friday, June 14, 2024 / Rules and Regulations
Par. 2. Section 1.1061–1(a) is
amended by revising the definition for
‘‘Passthrough Entity’’ to read as follows:
■
§ 1.1061–1
Section 1061 definitions.
*
*
*
*
*
Passthrough Entity means a
partnership, trust, estate, S corporation
described in § 1.1061–3(b)(2)(i), or a
passive foreign investment company
described in § 1.1061–3(b)(2)(ii).
*
*
*
*
*
■ Par. 3. Section 1.1061–3 is amended
by:
■ 1. Revising the first sentence of
paragraph (c)(3)(v)(A).
■ 2. Revising paragraph (c)(3)(v)(B)
introductory text.
■ 3. Revising the heading of paragraph
(c)(6)(i)(C).
■ 4. Removing the language ‘‘PRS’s’’ in
the fifth sentence of paragraph
(c)(6)(i)(C) and adding the language
‘‘PRS’’ in its place.
■ 5. Revising paragraph (d)(3).
The revisions read as follows:
§ 1.1061–3
an API.
Exceptions to the definition of
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*
*
*
*
*
(c) * * *
(3) * * *
(v) * * *
(A) * * * For purposes of the Section
1061 Regulations, an allocation is not a
Capital Interest Allocation to the extent
the allocation is attributable to the
contribution of an amount of capital to
a partnership that, directly or indirectly,
results from, or is attributable to, any
loan or other advance made or
guaranteed, directly or indirectly, by the
partnership or another partner in the
partnership (or any Related Person with
respect to such persons), except to the
extent a loan or advance is described in
paragraph (c)(3)(v)(B) of this
section.* * *
(B) * * * Paragraph (c)(3)(v)(A) of
this section does not apply with respect
to an allocation attributable to a
contribution made by an individual
service provider that, directly or
indirectly, results from, or is attributable
to, a loan or advance from another
partner in the partnership (or any
Related Person with respect to such
other partner, other than the
partnership) to such individual service
provider if the individual service
provider is personally liable for the
repayment of such loan or advance. A
contribution made by an individual
service provider includes a contribution
made by an entity that is wholly owned
by, and disregarded as separate from,
the individual service provider as
described in § 1.1061–2(a)(1)(v),
including a contribution attributable to
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a loan or advance made to the
disregarded entity by another partner in
the partnership (or any Related Person
with respect to such other partner, other
than the partnership) if the individual
service provider is personally liable for
the repayment of any and all borrowed
amounts that are not repaid by the
disregarded entity. For purposes of this
paragraph (c)(3)(v)(B), an individual
service provider is personally liable for
the repayment of a loan or advance
made by another partner (or any Related
Person with respect to such other
partner, other than the partnership) if—
*
*
*
*
*
(6) * * *
(i) * * *
(C) GP’s Capital Interest Allocation
Analysis.* * *
*
*
*
*
*
(d) * * *
(3) Acquirer not a service provider. At
the time of the purchase, the acquirer
has not provided, does not provide, and
does not anticipate providing services
to, or for the benefit of, the target
partnership, directly or indirectly, or
any lower-tier partnership in which the
target partnership directly or indirectly
holds an interest.
*
*
*
*
*
■ Par. 4. Section 1.1061–4 is amended
by:
■ 1. Removing the language ‘‘Share
amount’’ in the first sentence of
paragraph (b)(5)(ii) and adding the
language ‘‘Share Amount’’ in its place.
■ 2. Revising paragraph (b)(9)(i)(B).
■ 3. Removing the language ‘‘applying’’
in paragraph (b)(9)(ii) introductory text
and adding the language ‘‘computing’’
in its place.
■ 4. Removing the language ‘‘Three Year
API’’ in paragraph (c)(1)(i)(C)(2) and
adding the language ‘‘API Three Year’’
in its place.
■ 5. Removing the language ‘‘Gain
amount’’ in the first sentence of
paragraph (c)(1)(i)(D) and adding the
language ‘‘Gain Amount’’ in its place.
■ 6. Revising the third sentence of
paragraph (c)(1)(ii)(B).
■ 7. Revising paragraph (c)(1)(iii)(B).
■ 8. Removing the language ‘‘Gain of
$300’’ in the first sentence of paragraph
(c)(1)(iii)(C) and adding the language ‘‘of
$300’’ in its place.
■ 9. Removing the language ‘‘year
causing’’ in the third sentence of
paragraph (c)(2)(ii) and adding the
language ‘‘year, causing’’ in its place.
■ 10. Removing the language ‘‘the
$1000’’ in the fifth sentence of
paragraph (c)(2)(iii) and adding the
language ‘‘the $1,000’’ in its place.
The revisions read as follows:
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§ 1.1061–4
50525
Section 1061 Computations.
*
*
*
*
*
(b) * * *
(9) * * *
(i) * * *
(B) Determination that the
Lookthrough Rule applies to the
disposition of a Passthrough Interest.
Paragraph (b)(9)(i)(A) of this section
similarly applies with respect to a
Passthrough Interest issued by an S
corporation or a PFIC to the extent that
the Passthrough Interest is treated as an
API.
*
*
*
*
*
(c) * * *
(1) * * *
(ii) * * *
(B) * * * Under paragraph (a)(4)(ii) of
this section, A’s API Three Year
Disposition Amount is $100, which is
the amount of long-term capital gain
that A recognized upon disposition of
the API held for more than three
years.* * *
*
*
*
*
*
(iii) * * *
(B) Determination of A’s One Year
Gain Amount. Under paragraph (a)(2) of
this section, A’s One Year Gain Amount
is $900, which is an amount equal to A’s
$100 API One Year Distributive Share
Amount from PRS1 and A’s $600 API
One Year Distributive Share Amount
from PRS2 (a combined net API One
Year Distributive Share Amount of
$700) plus A’s $200 API One Year
Disposition Amount.
*
*
*
*
*
■ Par. 5. Section 1.1061–5 is amended
by:
■ 1. Removing the language ‘‘of this
section’’ in the fourth sentence of
paragraph (f)(1) and adding the language
‘‘of this section;’’ in its place.
■ 2. Revising paragraphs (f)(2)(i) and (ii)
and (f)(3).
The revisions read as follows:
§ 1.1061–5 Section 1061(d) transfers to
related persons.
*
*
*
*
*
(f) * * *
(2) * * *
(i) Facts. A, B, and C are equal
partners in GP, a partnership. GP holds
only one asset, an API in PRS1 which
is an Indirect API as to each of A, B, and
C. Each of A, B, and C provides services
in the ATB in connection with which
GP was transferred its API in PRS1. A
and B contribute their interests in GP to
PRS2 in a section 721(a) exchange for
interests in PRS2.
(ii) Application of section 1061(d).
Because the contribution by each of A
and B of its interest in GP to PRS2 is an
exchange in which no gain is recognized
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Federal Register / Vol. 89, No. 116 / Friday, June 14, 2024 / Rules and Regulations
by either A or B, the contribution is not
a transfer as described in paragraph (b)
of this section; thus section 1061(d)
does not apply to A’s and B’s
contribution. However, the API remains
an API in the hands of PRS2 under
§ 1.1061–2(a)(1)(i).
(3) Example 3: Transfer of an API to
a Section 1061(d) Related Person. A has
held an API in GP, a partnership, for
four years. A transfers the API to a
Section 1061(d) Related Person
described in paragraph (e) of this
section in exchange for $100 of cash,
resulting in A recognizing long-term
capital gain of $100. Because this is a
transfer described in paragraph (b) of
this section, section 1061(d) applies to
the transfer of A’s API and A must
determine its Section 1061(d)
Recharacterization Amount under
paragraph (c) of this section. If,
immediately prior to A’s transfer of the
API, the partnership had sold all of its
assets in a fully taxable transaction for
cash equal to the fair market value of the
assets, A’s share of the net long-term
capital gain (excluding amounts not
taken into account for purposes of
section 1061 under § 1.1061–4(b)(7))
from assets held for three years or less
would have been $120. Thus, A’s
Section 1061(d) Recharacterization
Amount is $120. As a result, A’s $100
long-term capital gain is recharacterized
as short-term capital gain under
paragraph (a) of this section. The API
remains an API in the hands of the
Section 1061(d) Related Person under
§ 1.1061–2(a)(1)(i).
*
*
*
*
*
§ 1.1061–6
[Amended]
Par. 6. Section 1.1061–6 is amended
by removing the language ‘‘capital gain
excluding’’ in the first sentence of
paragraph (c)(1)(i) and adding the
language ‘‘capital gain, excluding’’ in its
place.
■
§ 1.1223–3
[Amended]
Par. 7. Section 1.1223–3 is amended
by removing the language ‘‘June 30,
2020’’ in the third sentence of paragraph
(f)(10) and adding the language ‘‘June 1,
2020’’ in its place.
ddrumheller on DSK120RN23PROD with RULES1
■
Oluwafunmilayo A. Taylor,
Section Chief, Publications and Regulations
Section, Associate Chief Counsel, (Procedure
and Administration).
[FR Doc. 2024–12374 Filed 6–13–24; 8:45 am]
BILLING CODE 4830–01–P
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Jkt 262001
PENSION BENEFIT GUARANTY
CORPORATION
29 CFR Part 4044
Allocation of Assets in SingleEmployer Plans; Interest Assumptions
for Valuing Benefits
Pension Benefit Guaranty
Corporation.
ACTION: Final rule.
AGENCY:
This final rule amends the
Pension Benefit Guaranty Corporation’s
regulation on Allocation of Assets in
Single-Employer Plans to prescribe
interest assumptions under the asset
allocation regulation for plans with
valuation dates of July 1–July 30, 2024.
These interest assumptions are used for
valuing benefits under terminating
single-employer plans and for other
purposes.
DATES: Effective July 1, 2024.
FOR FURTHER INFORMATION CONTACT:
Monica O’Donnell (odonnell.monica@
pbgc.gov), Attorney, Office of the
General Counsel, Pension Benefit
Guaranty Corporation, 445 12th Street
SW, Washington, DC 20024–2101, 202–
229–8706. If you are deaf or hard of
hearing or have a speech disability,
please dial 7–1–1 to access
telecommunications relay services.
SUPPLEMENTARY INFORMATION: PBGC’s
regulation on Allocation of Assets in
Single-Employer Plans (29 CFR part
4044) prescribes actuarial
assumptions—including interest
assumptions—for valuing benefits under
terminating single-employer plans
covered by title IV of the Employee
Retirement Income Security Act of 1974
(ERISA). The interest assumptions in
the regulation are also posted on PBGC’s
website (www.pbgc.gov).
PBGC uses the interest assumptions in
appendix B to part 4044 (‘‘Interest Rates
Used to Value Benefits’’) to determine
the present value of annuities in an
involuntary or distress termination of a
single-employer plan under the asset
allocation regulation. The assumptions
are also used to determine the value of
multiemployer plan benefits and certain
assets when a plan terminates by mass
withdrawal in accordance with PBGC’s
regulation on Duties of Plan Sponsor
Following Mass Withdrawal (29 CFR
part 4281).
The July 1–July 30, 2024 interest
assumptions will be 5.11 percent for the
first 20 years following the valuation
date and 4.83 percent thereafter. In
comparison with the interest
assumptions in effect for the second
quarter of 2024, these interest
assumptions represent no change in the
SUMMARY:
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select period (the period during which
the select rate (the initial rate) applies),
a decrease of 0.39 percent in the select
rate, and no change in the ultimate rate
(the final rate).
This final rule is the last rule that
PBGC will publish for the interest
assumption using the select and
ultimate approach. On June 6, 2024,
PBGC issued a final rule at 89 FR 48291
that changes the structure of the interest
assumption for valuation dates on or
after July 31, 2024, from the select and
ultimate approach to a yield curve
approach. As described in the June 6
final rule, under the yield curve
approach, the interest assumption is
based on a blend of two publicly
available yield curves that is adjusted to
the extent necessary so that the resulting
liabilities align with group annuity
prices. PBGC will determine and
publish those adjustments (i.e.,
‘‘spreads’’) quarterly based on survey
data on pricing of private-sector group
annuities.
Need for Immediate Guidance
PBGC has determined that notice of,
and public comment on, this rule are
impracticable, unnecessary, and
contrary to the public interest. PBGC
routinely updates the interest
assumptions in appendix B of the asset
allocation regulation each quarter so
that they are available to value benefits.
Accordingly, PBGC finds that the public
interest is best served by issuing this
rule expeditiously, without an
opportunity for notice and comment,
and that good cause exists for making
the assumptions set forth in this
amendment effective less than 30 days
after publication.
PBGC has determined that this action
is not a ‘‘significant regulatory action’’
under the criteria set forth in Executive
Order 12866.
Because no general notice of proposed
rulemaking is required for this
amendment, the Regulatory Flexibility
Act of 1980 does not apply. See 5 U.S.C.
601(2).
List of Subjects in 29 CFR Part 4044
Employee benefit plans, Pension
insurance, Pensions.
In consideration of the foregoing, 29
CFR part 4044 is amended as follows:
PART 4044—ALLOCATION OF
ASSETS IN SINGLE-EMPLOYER
PLANS
1. The authority citation for part 4044
continues to read as follows:
■
Authority: 29 U.S.C. 1301(a), 1302(b)(3),
1341, 1344, 1362.
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]]>Agencies
[Federal Register Volume 89, Number 116 (Friday, June 14, 2024)]
[Rules and Regulations]
[Pages 50524-50526]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12374]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9945]
RIN 1545-BO81
Guidance Under Section 1061; Correction
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final rule; correction and correcting amendments.
-----------------------------------------------------------------------
SUMMARY: This document contains corrections to Treasury Decision 9945
published in the Federal Register on Tuesday, January 19, 2021.
Treasury Decision 9945 issued final regulations that recharacterize
certain net long-term capital gains of a partner that holds one or more
applicable partnership interests as short-term capital gains.
DATES: These corrections are effective on June 14, 2024 and for dates
of applicability, see Sec. Sec. 1.702-1(g), 1.704-3(f), 1.1061-1(b),
1.1061-2(c), 1.1061-3(f), 1.1061-4(d), 1.1061-5(g), 1.1061-6(e), and
1.1223-3(g).
FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Alta Li of
the Office of Associate Chief Counsel (Passthroughs and Special
Industries) at (202) 317-5279 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations (TD 9945) subject to these corrections are
issued under section 1061 of the Internal Revenue Code.
Corrections to Publication
Accordingly, the final regulations (TD 9945) that are the subject
of FR Doc. 2021-00427, published on Tuesday, January 19, 2021, are
corrected as follows:
1. On page 5455, in the first column, in the seventh line of the
column the language ``make'' is corrected to read ``made''.
2. On page 5455, in the first column, in the fifteenth line of the
column the language ``are'' is corrected to read ``at''.
3. On page 5456, in the first column, the fourteenth line of the
column is corrected to read ``terms, priority, type and level of
risk''.
4. On page 5457, in the first column, in the last line of the
column the language ``allocation'' is corrected to read
``allocations''.
5. On page 5459, in the first column, the thirteenth line from the
bottom of the column is corrected to read ``other partner, other
than''.
6. On page 5459, in the first column, the fifth line from the
bottom of the column is corrected to read ``advances made by another
partner in the''.
7. On page 5459, in the first column, the fourth line from the
bottom of the column is corrected to read ``partnership (or any Related
Person with respect to such''.
8. On page 5459, in the first column, the third line from the
bottom of the column is corrected to read ``other partner, other than
the partnership) to a''.
9. On page 5459, in the second column, the ninth line of the column
is corrected to read ``loan or advance made by another partner (or''.
10. On page 5459, in the second column, the tenth line of the
column is corrected to read ``any Related Person with respect to such
other partner, other than the''.
11. On page 5463, in the third column, the second line of the
second full paragraph is corrected to read ``that once a partnership
interest qualifies as''.
12. On page 5465, in the first column, the twelfth line of the
first full paragraph is corrected to read ``Assets; and (vi) options or
derivative''.
13. On page 5465, in the third column, in the twelfth line of the
second full paragraph the language ``APIs'' is corrected to read
``API''.
14. On page 5467, in the first column, in the ninth line from the
bottom of the column, the language ``API Distributed'' is corrected to
read ``Distributed API''.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Correction to the Regulations
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 * * *
[[Page 50525]]
0
Par. 2. Section 1.1061-1(a) is amended by revising the definition for
``Passthrough Entity'' to read as follows:
Sec. 1.1061-1 Section 1061 definitions.
* * * * *
Passthrough Entity means a partnership, trust, estate, S
corporation described in Sec. 1.1061-3(b)(2)(i), or a passive foreign
investment company described in Sec. 1.1061-3(b)(2)(ii).
* * * * *
0
Par. 3. Section 1.1061-3 is amended by:
0
1. Revising the first sentence of paragraph (c)(3)(v)(A).
0
2. Revising paragraph (c)(3)(v)(B) introductory text.
0
3. Revising the heading of paragraph (c)(6)(i)(C).
0
4. Removing the language ``PRS's'' in the fifth sentence of paragraph
(c)(6)(i)(C) and adding the language ``PRS'' in its place.
0
5. Revising paragraph (d)(3).
The revisions read as follows:
Sec. 1.1061-3 Exceptions to the definition of an API.
* * * * *
(c) * * *
(3) * * *
(v) * * *
(A) * * * For purposes of the Section 1061 Regulations, an
allocation is not a Capital Interest Allocation to the extent the
allocation is attributable to the contribution of an amount of capital
to a partnership that, directly or indirectly, results from, or is
attributable to, any loan or other advance made or guaranteed, directly
or indirectly, by the partnership or another partner in the partnership
(or any Related Person with respect to such persons), except to the
extent a loan or advance is described in paragraph (c)(3)(v)(B) of this
section.* * *
(B) * * * Paragraph (c)(3)(v)(A) of this section does not apply
with respect to an allocation attributable to a contribution made by an
individual service provider that, directly or indirectly, results from,
or is attributable to, a loan or advance from another partner in the
partnership (or any Related Person with respect to such other partner,
other than the partnership) to such individual service provider if the
individual service provider is personally liable for the repayment of
such loan or advance. A contribution made by an individual service
provider includes a contribution made by an entity that is wholly owned
by, and disregarded as separate from, the individual service provider
as described in Sec. 1.1061-2(a)(1)(v), including a contribution
attributable to a loan or advance made to the disregarded entity by
another partner in the partnership (or any Related Person with respect
to such other partner, other than the partnership) if the individual
service provider is personally liable for the repayment of any and all
borrowed amounts that are not repaid by the disregarded entity. For
purposes of this paragraph (c)(3)(v)(B), an individual service provider
is personally liable for the repayment of a loan or advance made by
another partner (or any Related Person with respect to such other
partner, other than the partnership) if--
* * * * *
(6) * * *
(i) * * *
(C) GP's Capital Interest Allocation Analysis.* * *
* * * * *
(d) * * *
(3) Acquirer not a service provider. At the time of the purchase,
the acquirer has not provided, does not provide, and does not
anticipate providing services to, or for the benefit of, the target
partnership, directly or indirectly, or any lower-tier partnership in
which the target partnership directly or indirectly holds an interest.
* * * * *
0
Par. 4. Section 1.1061-4 is amended by:
0
1. Removing the language ``Share amount'' in the first sentence of
paragraph (b)(5)(ii) and adding the language ``Share Amount'' in its
place.
0
2. Revising paragraph (b)(9)(i)(B).
0
3. Removing the language ``applying'' in paragraph (b)(9)(ii)
introductory text and adding the language ``computing'' in its place.
0
4. Removing the language ``Three Year API'' in paragraph
(c)(1)(i)(C)(2) and adding the language ``API Three Year'' in its
place.
0
5. Removing the language ``Gain amount'' in the first sentence of
paragraph (c)(1)(i)(D) and adding the language ``Gain Amount'' in its
place.
0
6. Revising the third sentence of paragraph (c)(1)(ii)(B).
0
7. Revising paragraph (c)(1)(iii)(B).
0
8. Removing the language ``Gain of $300'' in the first sentence of
paragraph (c)(1)(iii)(C) and adding the language ``of $300'' in its
place.
0
9. Removing the language ``year causing'' in the third sentence of
paragraph (c)(2)(ii) and adding the language ``year, causing'' in its
place.
0
10. Removing the language ``the $1000'' in the fifth sentence of
paragraph (c)(2)(iii) and adding the language ``the $1,000'' in its
place.
The revisions read as follows:
Sec. 1.1061-4 Section 1061 Computations.
* * * * *
(b) * * *
(9) * * *
(i) * * *
(B) Determination that the Lookthrough Rule applies to the
disposition of a Passthrough Interest. Paragraph (b)(9)(i)(A) of this
section similarly applies with respect to a Passthrough Interest issued
by an S corporation or a PFIC to the extent that the Passthrough
Interest is treated as an API.
* * * * *
(c) * * *
(1) * * *
(ii) * * *
(B) * * * Under paragraph (a)(4)(ii) of this section, A's API Three
Year Disposition Amount is $100, which is the amount of long-term
capital gain that A recognized upon disposition of the API held for
more than three years.* * *
* * * * *
(iii) * * *
(B) Determination of A's One Year Gain Amount. Under paragraph
(a)(2) of this section, A's One Year Gain Amount is $900, which is an
amount equal to A's $100 API One Year Distributive Share Amount from
PRS1 and A's $600 API One Year Distributive Share Amount from PRS2 (a
combined net API One Year Distributive Share Amount of $700) plus A's
$200 API One Year Disposition Amount.
* * * * *
0
Par. 5. Section 1.1061-5 is amended by:
0
1. Removing the language ``of this section'' in the fourth sentence of
paragraph (f)(1) and adding the language ``of this section;'' in its
place.
0
2. Revising paragraphs (f)(2)(i) and (ii) and (f)(3).
The revisions read as follows:
Sec. 1.1061-5 Section 1061(d) transfers to related persons.
* * * * *
(f) * * *
(2) * * *
(i) Facts. A, B, and C are equal partners in GP, a partnership. GP
holds only one asset, an API in PRS1 which is an Indirect API as to
each of A, B, and C. Each of A, B, and C provides services in the ATB
in connection with which GP was transferred its API in PRS1. A and B
contribute their interests in GP to PRS2 in a section 721(a) exchange
for interests in PRS2.
(ii) Application of section 1061(d). Because the contribution by
each of A and B of its interest in GP to PRS2 is an exchange in which
no gain is recognized
[[Page 50526]]
by either A or B, the contribution is not a transfer as described in
paragraph (b) of this section; thus section 1061(d) does not apply to
A's and B's contribution. However, the API remains an API in the hands
of PRS2 under Sec. 1.1061-2(a)(1)(i).
(3) Example 3: Transfer of an API to a Section 1061(d) Related
Person. A has held an API in GP, a partnership, for four years. A
transfers the API to a Section 1061(d) Related Person described in
paragraph (e) of this section in exchange for $100 of cash, resulting
in A recognizing long-term capital gain of $100. Because this is a
transfer described in paragraph (b) of this section, section 1061(d)
applies to the transfer of A's API and A must determine its Section
1061(d) Recharacterization Amount under paragraph (c) of this section.
If, immediately prior to A's transfer of the API, the partnership had
sold all of its assets in a fully taxable transaction for cash equal to
the fair market value of the assets, A's share of the net long-term
capital gain (excluding amounts not taken into account for purposes of
section 1061 under Sec. 1.1061-4(b)(7)) from assets held for three
years or less would have been $120. Thus, A's Section 1061(d)
Recharacterization Amount is $120. As a result, A's $100 long-term
capital gain is recharacterized as short-term capital gain under
paragraph (a) of this section. The API remains an API in the hands of
the Section 1061(d) Related Person under Sec. 1.1061-2(a)(1)(i).
* * * * *
Sec. 1.1061-6 [Amended]
0
Par. 6. Section 1.1061-6 is amended by removing the language ``capital
gain excluding'' in the first sentence of paragraph (c)(1)(i) and
adding the language ``capital gain, excluding'' in its place.
Sec. 1.1223-3 [Amended]
0
Par. 7. Section 1.1223-3 is amended by removing the language ``June 30,
2020'' in the third sentence of paragraph (f)(10) and adding the
language ``June 1, 2020'' in its place.
Oluwafunmilayo A. Taylor,
Section Chief, Publications and Regulations Section, Associate Chief
Counsel, (Procedure and Administration).
[FR Doc. 2024-12374 Filed 6-13-24; 8:45 am]
BILLING CODE 4830-01-P
