80 FR 66415 - United States Property Held by Controlled Foreign Corporations in Transactions Involving Partnerships; Rents and Royalties Derived in the Active Conduct of a Trade or Business; Correction

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 80, Issue 209 (October 29, 2015)

This document contains corrections to final and temporary regulations (TD 9733) that were published in the Federal Register on September 2, 2015 (80 FR 52976). The temporary regulations are regarding the treatment as United States property of property held by a controlled foreign corporation in connection with certain transactions involving partnerships.

[Federal Register Volume 80, Number 209 (Thursday, October 29, 2015)]
[Rules and Regulations]
[Pages 66415-66416]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-27603]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9733]
RIN 1545-BJ49


United States Property Held by Controlled Foreign Corporations in 
Transactions Involving Partnerships; Rents and Royalties Derived in the 
Active Conduct of a Trade or Business; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations; correcting amendment.

-----------------------------------------------------------------------

SUMMARY: This document contains corrections to final and temporary 
regulations (TD 9733) that were published in the Federal Register on 
September 2, 2015 (80 FR 52976). The temporary regulations are 
regarding the treatment as United States property of

[[Page 66416]]

property held by a controlled foreign corporation in connection with 
certain transactions involving partnerships.

DATES: This correction is effective on October 29, 2015 and applicable 
beginning September 2, 2015.

FOR FURTHER INFORMATION CONTACT: Rose E. Jenkins at (202) 317-6934 (not 
a toll free number).

SUPPLEMENTARY INFORMATION:

Background

    The final and temporary regulations (TD 9733) that are the subject 
of this correction are under sections 954 and 956 of the Internal 
Revenue Code.

Need for Correction

    As published, the final and temporary regulations (TD 9733) 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 1.954-2T is amended by revising paragraph (a)(1) 
through (c)(1) introductory text, paragraph (c)(2)(iii) introductory 
text through (c)(2)(iii)(D), paragraph (c)(3) and (d)(1) introductory 
text, (d)(2)(iii) introductory text through (d)(2)(iii)(D), and the 
last sentence of paragraph (j) to read as follows:


Sec.  1.954-3T  Foreign personal holding company income (temporary).

    (a)(1) through (c)(1) introductory text [Reserved]. For further 
guidance, see Sec.  1.954-2(a)(1) through (c)(1) introductory text.
* * * * *
    (c)(2)(iii) introductory text through (c)(2)(iii)(D) [Reserved]. 
For further guidance, see Sec.  1.954-2(c)(2)(iii) introductory text 
through (c)(2)(iii)(D).
* * * * *
    (c)(3) and (d)(1) introductory text [Reserved]. For further 
guidance, see Sec.  1.954-2(c)(3) and (d)(1) introductory text.
* * * * *
    (d)(2)(iii) introductory text through (d)(2)(iii)(D) [Reserved]. 
For further guidance, see Sec.  1.954-2(d)(2)(iii) introductory text 
through (d)(2)(iii)(D).
* * * * *
    (j) * * * See Sec.  1.954-2(c)(1)(i), (c)(1)(iv), (c)(2)(ii), 
(c)(2)(iii), (d)(1)(i), (d)(1)(ii), (d)(2)(ii), and (d)(2)(iii), as 
contained in 26 CFR part 1 revised as of April 1, 2015, for rules 
applicable to rents or royalties, as applicable, received or accrued 
before September 1, 2015.
* * * * *

0
Par. 3. Section 1.956-1 is amended by revising paragraph (g) 
introductory text through (g)(3) to read as follows:


Sec.  1.956-1  Shareholder's pro rata share of a controlled foreign 
corporation's increase in earnings invested in United States property.

* * * * *
    (g) introductory text through (g)(3) [Reserved]. For further 
guidance, see Sec.  1.956-1T(g) introductory text through (g)(3).
* * * * *

0
Par. 4. Section 1.956-1T is amended by revising paragraph (b)(4)(ii), 
the third sentence of paragraph (b)(4)(iv) Example 1. (i), the first 
sentence of paragraph (b)(4)(iv) Example 3. (i), and paragraph (g)(1) 
to read as follows:


Sec.  1.956-1T  Shareholder's pro rata share of a controlled foreign 
corporation's increase in earnings invested in United States property 
(temporary).

* * * * *
    (b) * * *
    (4) * * *
    (ii) Control. For purposes of paragraphs (b)(4)(i)(B) and (C) of 
this section, a controlled foreign corporation controls a foreign 
corporation or partnership if the controlled foreign corporation and 
the other foreign corporation or partnership are related within the 
meaning of section 267(b) or section 707(b). For this purpose, in 
determining whether two corporations are members of the same controlled 
group under section 267(b)(3), a person is considered to own stock 
owned directly by such person, stock owned for the purposes of section 
1563(e)(1), and stock owned with the application of section 267(c).
* * * * *
    (iv) * * *
    Example 1. (i) * * * FS2 has no earnings and profits, and FS1 
has substantial accumulated earnings and profits. * * *
* * * * *
    Example 3. (i) * * * FS1 has $100x of post-1986 undisturbed 
earnings and profits and $100x post-1986 foreign income taxes, but 
does not have any cash. * * *
* * * * *
    (g) * * * (1) Paragraph (b)(4) of this section applies to taxable 
years of controlled foreign corporations ending on or after September 
1, 2015, and to taxable years of United States shareholders in which or 
with which such taxable years end, with respect to property acquired on 
or after September 1, 2015. See paragraph (b)(4) of Sec.  1.956-1T, as 
contained in 26 CFR part 1 revised as of April 1, 2015, for the rules 
applicable to taxable years of controlled foreign corporations ending 
before September 1, 2015, and property acquired before September 1, 
2015. For purposes of this paragraph (g)(1), a deemed exchange of 
property pursuant to section 1001 on or after September 1, 2015, 
constitutes an acquisition of the property on or after that date.
* * * * *

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2015-27603 Filed 10-28-15; 8:45 am]
BILLING CODE 4830-01-P