81_FR_95719 81 FR 95470 - 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

81 FR 95470 - 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 81, Issue 249 (December 28, 2016)

Page Range95470-95471
FR Document2016-31364

This document contains corrections to the final regulations (TD 9792) that were published in the Federal Register on Thursday, November 3, 2016 (81 FR 76497). The final regulations provide rules regarding the treatment as United States property of property held by a controlled foreign corporation (CFC) in connection with certain transactions involving partnerships.

Federal Register, Volume 81 Issue 249 (Wednesday, December 28, 2016) 
[Federal Register Volume 81, Number 249 (Wednesday, December 28, 2016)]
[Rules and Regulations]
[Pages 95470-95471]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-31364]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9792]
RIN 1545-BJ48


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 regulations; correction.

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SUMMARY: This document contains corrections to the final regulations 
(TD 9792) that were published in the Federal Register on Thursday, 
November 3, 2016 (81 FR 76497). The final regulations provide rules 
regarding the treatment as United States property of property held by a 
controlled foreign corporation (CFC) in connection with certain 
transactions involving partnerships.

DATES: This correction is effective December 28, 2016 and is applicable 
on or after November 3, 2016.

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

SUPPLEMENTARY INFORMATION:

Background

    The final regulations (TD 9792) that are the subject of this 
correction are

[[Page 95471]]

under sections 954 and 956 of the Internal Revenue Code.

Need for Correction

    As published, the final regulations (TD 9792) contain errors that 
may prove to be misleading and are in need of clarification.

Correction of Publication

    Accordingly, the final regulations (TD 9792), that are the subject 
of FR Doc. 2016-26425, are corrected as follows:
    1. On page 76499, third column, in the preamble, the eighth line 
from the bottom of the last paragraph, the language ``generally is 
consistent with Sec.  1.956-'' is corrected to read ``generally is 
consistent with existing Sec.  1.956-''.
    2. On page 76500, first column, in the preamble, the fourth line 
from the top of the page, the language ``that is not included in the 
final or'' is corrected to read ``that is not included in the existing 
final or''.
    3. On page 76500, first column, in the preamble, the seventh line 
in the first full paragraph, the language ``Sec.  1.956-2(a)(3) nor 
proposed Sec.  1.956-'' is corrected to read ``existing Sec.  1.956-
2(a)(3) nor proposed Sec.  1.956-''.
    4. On page 76500, first column, in the preamble, the eighth line in 
the first full paragraph, the language ``4(b) include the limitation. A 
comment'' is corrected to read ``4(b) includes the limitation. A 
comment''.
    5. On page 76500, third column, in the preamble, the eleventh line 
from the top of the first full paragraph, the language is corrected to 
read ``book-up''.
    6. On page 76501, first column, in the preamble, the eighth line of 
the first full paragraph, the language is corrected to read ``Sec.  
1.956-4(b)(2)(ii)''.

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel, (Procedure and Administration).
[FR Doc. 2016-31364 Filed 12-27-16; 8:45 am]
 BILLING CODE 4830-01-P

95470 Federal Register / Vol. 81, No. 249 / Wednesday, December 28, 2016 / Rules and Regulations respect to C Corp and D Corp, E does not § 1.1298–1T [Removed] paragraph (e)(5) does not apply to have to file a Form 8621 with respect to C ■ Par. 11. Section 1.1298–1T is persons excepted from filing a return by Corp or D Corp because E qualifies for the removed. reason of the provisions of paragraph $25,000 exception set forth in paragraph ■ Par. 12. Section 1.6038–2 is amended (e)(4) of this section. (c)(2)(i)(A)(1) of this section. Example 4. Indirect shareholder’s by revising paragraphs (j)(3) and (m) to * * * * * requirement to file. (i) Facts. The facts are the read as follows: (l) * * * same as in Example 3 of this paragraph (g), (3) Paragraph (e)(5) of this section § 1.6038–2 Information returns required of except that the value of E’s interest in C Corp United States persons with respect to applies to returns filed on or after is $30,000 and the value of E’s proportionate annual accounting periods of certain December 31, 2013. See paragraph (e)(5) share of C Corp’s interest in D Corp is $3,000. foreign corporations beginning after of § 1.6046–1, as contained in 26 CFR (ii) Results. The results are the same as in December 31, 1962. part 1 revised as of April 1, 2012, for Example 3 of this paragraph (g) with respect returns filed before December 31, 2013. to E having no requirement to file a Form * * * * * 8621 under section 1298(f) and these (j) * * * § 1.6046–1T [Removed] regulations with respect to A Corp and B (3) Statement required. Any United States person required to furnish ■ Par. 15. Section 1.6046–1T is Corp. However, under the facts in this Example 4, E does not qualify for the $25,000 information under this section with his removed. exception under paragraph (c)(2)(i)(A)(1) of return who does not do so by reason of John Dalrymple, this section with respect to C Corp because the provisions of paragraph (j)(1) of this Deputy Commissioner for Services and the value of E’s interest in C Corp is $30,000. section shall file a statement with his Enforcement. Accordingly, E must file a Form 8621 under section 1298(f) and these regulations with income tax return indicating that such Approved: December 13, 2016. respect to C Corp. However, E does qualify requirement has been (or will be) Mark D. Mazur, for the $5,000 exception under paragraph satisfied and identifying the return with Assistant Secretary of the Treasury (Tax (c)(2)(i)(A)(2) of this section with respect to which the information was or will be Policy). D Corp, and thus does not have to file a Form filed and the place of filing. [FR Doc. 2016–30712 Filed 12–27–16; 8:45 am] 8621 with respect to D Corp. * * * * * BILLING CODE 4830–01–P Example 5. Application of the domestic (m) Applicability dates. Except as partnership exception. (i) Facts. Tax Exempt Entity A and Tax Exempt Entity B are both otherwise provided, this section applies organizations exempt under section 501(a) with respect to information for annual DEPARTMENT OF THE TREASURY because they are described in section 501(c). accounting periods beginning on or after Tax Exempt Entity A and Tax Exempt Entity June 21, 2006. Paragraphs (k)(1) and (5) Internal Revenue Service B own all the interests in Partnership X, a Examples 3 and 4 of this section apply domestic partnership, which, in turn, owns, June 21, 2006. Paragraph (d) of this 26 CFR Part 1 an interest in Partnership Y, also a domestic section applies to taxable years ending [TD 9792] partnership. The remaining interests in after April 9, 2008. Paragraph (j)(3) of Partnership Y are owned by F Corp, a foreign RIN 1545–BJ48 this section applies to returns filed on corporation owned solely by individuals that are not residents or citizens of the United or after December 31, 2013. United States Property Held by States. Partnership Y owns an interest in A § 1.6038–2T [Removed] Controlled Foreign Corporations in Corp, which is a PFIC. Any income derived Transactions Involving Partnerships; with respect to A Corp would not be taxable ■ Par. 13. Section 1.6038–2T is removed. Rents and Royalties Derived in the to Tax Exempt Entity A or Tax Exempt Entity ■ Par. 14. Section 1.6046–1 is amended Active Conduct of a Trade or B under subchapter F of Subtitle A of the Code. Tax Exempt Entity A, Tax Exempt by revising paragraph (e)(5) and adding Business; Correction Entity B, Partnership X, and Partnership Y all paragraph (l)(3) to read as follows: AGENCY: Internal Revenue Service (IRS), are calendar year taxpayers. Treasury. (ii) Results. Under paragraph (c)(1) of this § 1.6046–1 Returns as to organizations or section, Tax Exempt Entity A and Tax reorganizations of foreign corporations and ACTION: Final regulations; correction. Exempt Entity B do not have to file Form as to acquisitions of their stock. SUMMARY: This document contains 8621 under section 1298(f) and these * * * * * regulations with respect to A Corp because (e) * * * corrections to the final regulations (TD neither entity would be subject to tax under (5) Persons excepted from furnishing 9792) that were published in the subchapter F of Subtitle A of the Code with items of information. Any person Federal Register on Thursday, respect to income derived from A Corp. In required to furnish any item of November 3, 2016 (81 FR 76497). The addition, under paragraph (c)(6) of this information under paragraph (b) or (c) of final regulations provide rules regarding section, neither Partnership X nor the treatment as United States property Partnership Y is required to file Form 8621 this section with respect to a foreign corporation may, if such item of of property held by a controlled foreign under section 1298(f) and these regulations corporation (CFC) in connection with with respect to A Corp because all of the information is furnished by another person having an equal or greater stock certain transactions involving direct and indirect interests in Partnership X and Partnership Y are owned by persons interest (measured in terms of either the partnerships. described in paragraph (c)(1) of this section total combined voting power of all DATES: This correction is effective or persons that are not a shareholder of A classes of stock of the foreign December 28, 2016 and is applicable on Corp as defined by § 1.1291–1(b)(7). corporation entitled to vote or the total or after November 3, 2016. (h) Applicability dates. (1) Except as value of the stock of the foreign FOR FURTHER INFORMATION CONTACT: Rose sradovich on DSK3GMQ082PROD with RULES provided in paragraph (h)(2) of this corporation) in such foreign E. Jenkins, at (202) 317–6934 (not a toll- section, this section applies to taxable corporation, satisfy such requirement by free number). years of shareholders ending on or after filing a statement with his return on SUPPLEMENTARY INFORMATION: December 31, 2013. Form 5471 indicating that such (2) Paragraph (c)(9) of this section requirement has been satisfied and Background applies to taxable years of shareholders identifying the return in which such The final regulations (TD 9792) that ending before December 31, 2013. item of information was included. This are the subject of this correction are VerDate Sep<11>2014 16:15 Dec 27, 2016 Jkt 241001 PO 00000 Frm 00074 Fmt 4700 Sfmt 4700 E:\FR\FM\28DER1.SGM 28DER1

Federal Register / Vol. 81, No. 249 / Wednesday, December 28, 2016 / Rules and Regulations 95471 under sections 954 and 956 of the DEPARTMENT OF THE TREASURY § 1.954–2 [Amended] Internal Revenue Code. ■ Par. 2. Section 1.954–2 is amended by Internal Revenue Service removing paragraph (j). Need for Correction ■ Par. 3. Section 1.956–1T is amended As published, the final regulations 26 CFR Part 1 by revising the section heading and the (TD 9792) contain errors that may prove [TD 9792] paragraph headings for paragraphs (a)(5) to be misleading and are in need of and (f) to read as follows: clarification. RIN 1545–BJ48 § 1.956–1T Shareholder’s pro rata share of Correction of Publication United States Property Held by the average of the amounts of United States Controlled Foreign Corporations in property held by a controlled foreign Accordingly, the final regulations (TD Transactions Involving Partnerships; corporation (temporary). 9792), that are the subject of FR Doc. Rents and Royalties Derived in the (a) * * * 2016–26425, are corrected as follows: Active Conduct of a Trade or (5) Exclusion for certain recourse 1. On page 76499, third column, in Business; Correction obligations. * * * the preamble, the eighth line from the * * * * * AGENCY: Internal Revenue Service (IRS), (f) Effective/applicability date. * * * bottom of the last paragraph, the Treasury. language ‘‘generally is consistent with * * * * * § 1.956–’’ is corrected to read ‘‘generally ACTION: Correcting amendment. ■ Par. 4. Section 1.956–4 is amended by is consistent with existing § 1.956–’’. SUMMARY: This document contains revising paragraphs (b)(2)(ii), (b)(3) 2. On page 76500, first column, in the corrections to the final regulations (TD introductory text, and (c)(3)(i) preamble, the fourth line from the top 9792) that were published in the introductory text, and in paragraph of the page, the language ‘‘that is not Federal Register on Thursday, (c)(4), Example 3, by removing ‘‘U.S.C.’’ included in the final or’’ is corrected to November 3, 2016 (81 FR 76497). The each place that it appears and adding in read ‘‘that is not included in the existing final regulations provide rules regarding its place, ‘‘USP2’’. final or’’. the treatment as United States property The revisions read as follows: of property held by a controlled foreign § 1.956–4 Certain rules applicable to 3. On page 76500, first column, in the corporation (CFC) in connection with partnerships. preamble, the seventh line in the first certain transactions involving * * * * * full paragraph, the language ‘‘§ 1.956– partnerships. 2(a)(3) nor proposed § 1.956–’’ is (b) * * * corrected to read ‘‘existing § 1.956– DATES: This correction is effective (2) * * * 2(a)(3) nor proposed § 1.956–’’. December 28, 2016 and is applicable on (ii) Special allocations. For purposes or after November 3, 2016. of paragraph (b)(1) of this section, if a 4. On page 76500, first column, in the partnership agreement provides for the FOR FURTHER INFORMATION CONTACT: Rose preamble, the eighth line in the first full allocation of book income (or, where E. Jenkins, at (202) 317–6934 (not a toll- paragraph, the language ‘‘4(b) include appropriate, book gain) from a subset of free number). the limitation. A comment’’ is corrected the property of the partnership to a SUPPLEMENTARY INFORMATION: to read ‘‘4(b) includes the limitation. A partner other than in accordance with comment’’. Background the partner’s liquidation value 5. On page 76500, third column, in The final regulations (TD 9792) that percentage in a particular taxable year (a the preamble, the eleventh line from the are the subject of these corrections are special allocation), then the partner’s top of the first full paragraph, the under sections 954 and 956 of the attributable share of that property is language is corrected to read ‘‘book-up’’. Internal Revenue Code. determined solely by reference to the partner’s special allocation with respect 6. On page 76501, first column, in the Need for Correction to the property, provided the special preamble, the eighth line of the first full allocation will be respected for federal As published, the final regulations paragraph, the language is corrected to income tax purposes under section (TD 9792) contain errors that may prove read ‘‘§ 1.956–4(b)(2)(ii)’’. 704(b) and the regulations thereunder to be misleading and are in need of Martin V. Franks, clarification. and does not have a principal purpose of avoiding the purposes of section 956. Chief, Publications and Regulations Branch, List of Subjects in 26 CFR Part 1 Legal Processing Division, Associate Chief (3) Examples. The following examples Counsel, (Procedure and Administration). Income taxes, Reporting and illustrate the rules of this paragraph (b): recordkeeping requirements. *** [FR Doc. 2016–31364 Filed 12–27–16; 8:45 am] Amendments to the Regulations * * * * * BILLING CODE 4830–01–P (c) * * * Accordingly, 26 CFR part 1 is (3) * * * corrected by making the following (i) General rule. For purposes of correcting amendments: determining a partner’s share of a foreign partnership’s obligation under PART 1—INCOME TAXES section 956, if the foreign partnership sradovich on DSK3GMQ082PROD with RULES distributes an amount of money or ■ Paragraph 1. The authority citation property to a partner that is related to for part 1 is amended by deleting the a controlled foreign corporation within entry for § 1.956–3T to read in part as the meaning of section 954(d)(3) and follows: whose obligation would be United Authority: 26 U.S.C. 7805 * * * States property if held (or if treated as * * * * * held) by the controlled foreign VerDate Sep<11>2014 16:15 Dec 27, 2016 Jkt 241001 PO 00000 Frm 00075 Fmt 4700 Sfmt 4700 E:\FR\FM\28DER1.SGM 28DER1


Document Created: 2016-12-28 02:16:51
Document Modified: 2016-12-28 02:16:51
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionFinal regulations; correction.
DatesThis correction is effective December 28, 2016 and is applicable on or after November 3, 2016.
ContactRose E. Jenkins, at (202) 317-6934 (not a toll-free number).
FR Citation81 FR 95470 
RIN Number1545-BJ48
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