82 FR 6368 - Transfers of Certain Property by U.S. Persons to Partnerships With Related Foreign Partners

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 82, Issue 12 (January 19, 2017)

In the Rules and Regulations section of this issue of the Federal Register, temporary regulations are being issued under sections 197, 704, 721(c), and 6038B of the Internal Revenue Code (Code) that address transfers of appreciated property by U.S. persons to partnerships with foreign partners related to the transferor. The temporary regulations affect U.S. partners in domestic or foreign partnerships. The text of the temporary regulations also serves as the text of these proposed regulations.

[Federal Register Volume 82, Number 12 (Thursday, January 19, 2017)]
[Proposed Rules]
[Pages 6368-6370]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-01048]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-127203-15]
RIN 1545-BN81


Transfers of Certain Property by U.S. Persons to Partnerships 
With Related Foreign Partners

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulation.

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, temporary regulations are being issued under sections 
197, 704, 721(c), and 6038B of the Internal Revenue Code (Code) that 
address transfers of appreciated property by U.S. persons to 
partnerships with foreign partners related to the transferor. The 
temporary regulations affect U.S. partners in domestic or foreign 
partnerships. The text of the temporary regulations also serves as the 
text of these proposed regulations.

[[Page 6369]]


DATES: Written or electronic comments and requests for a public hearing 
must be received by April 19, 2017.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-127203-15), Internal 
Revenue Service, Room 5203, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
127203-15), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC 20224, or sent electronically via the 
Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-
127203-15).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Ryan A. Bowen, (202) 317-6937; concerning submissions of comments or 
requests for a public hearing, Regina Johnson, (202) 317-6901 (not 
toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background

    The temporary regulations in the Rules and Regulations section of 
this issue of the Federal Register contain regulations under sections 
197, 704, 721(c), and 6038B of the Code. The temporary regulations 
contain rules described in Notice 2015-54, 2015-34 I.R.B. 210, and 
override nonrecognition of gain under section 721(a) for transfers of 
property to a partnership with related foreign partners and with 
substantial related-party ownership unless certain requirements are 
satisfied. The text of the temporary regulations also serves as the 
text of these proposed regulations. The preamble to the temporary 
regulations explains the temporary regulations and the corresponding 
proposed regulations.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. It is hereby certified that the collection of information 
contained in this regulation will not have a significant economic 
impact on a substantial number of small entities. Accordingly, a 
regulatory flexibility analysis is not required. This conclusion is 
based on the fact that the proposed regulations include a $1,000,000 de 
minimis exception for certain transfers, and tangible property with 
built-in gain that does not exceed $20,000 is excluded from the 
application of the regulations. In addition, the regulations only apply 
when a U.S. transferor contributes property to a partnership with a 
related foreign partner, and persons related to the U.S. transferor own 
80 percent or more of the interests in the partnership. Accordingly, 
the Treasury Department and the IRS expect that these regulations 
primarily will affect large domestic corporations. Pursuant to section 
7805(f), this notice of proposed rulemaking has been submitted to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the Addresses heading. 
The Treasury Department and the IRS request comments on all aspects of 
the proposed rules. All comments will be available at 
www.regulations.gov or upon request. A public hearing will be scheduled 
if requested in writing by any person that timely submits written 
comments. If a public hearing is scheduled, notice of the date, time, 
and place for the public hearing will be published in the Federal 
Register.

Drafting Information

    The principal author of these proposed regulations is Ryan A. 
Bowen, Office of Associate Chief Counsel (International). However, 
other personnel from the Treasury Department and the IRS participated 
in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding 
entries to read in part as follows:

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

    Section 1.721(c)-1 also issued under 26 U.S.C. 721(c).
    Section 1.721(c)-2 also issued under 26 U.S.C. 721(c).
    Section 1.721(c)-3 also issued under 26 U.S.C. 721(c).
    Section 1.721(c)-4 also issued under 26 U.S.C. 721(c).
    Section 1.721(c)-5 also issued under 26 U.S.C. 721(c).
    Section 1.721(c)-6 also issued under 26 U.S.C. 721(c).
    Section 1.721(c)-7 also issued under 26 U.S.C. 721(c).
* * * * *
0
Par. 2. Section 1.197-2 is amended by adding paragraphs (h)(12)(vii)(C) 
and (l)(5) to read as follows:


Sec.  1.197-2  Amortization of goodwill and certain other intangibles.

* * * * *
    (h) * * *
    (12) * * *
    (vii) * * *
    (C) [The text of proposed Sec.  1.197-2(h)(12)(vii)(C) is the same 
as the text of Sec.  1.197-2T(h)(12)(vii)(C) published elsewhere in 
this issue of the Federal Register].
* * * * *
    (l) * * *
    (5) [The text of proposed Sec.  1.197-2(l)(5) is the same as the 
text of Sec.  1.197-2T(l)(5) published elsewhere in this issue of the 
Federal Register].
* * * * *
0
Par. 3. Section 1.704-1 is amended by adding paragraph (b)(2)(iv)(f)(6) 
following the undesignated paragraph at the end of paragraph 
(b)(2)(iv)(f)(5) and adding paragraph (f) to read as follows:


Sec.  1.704-1  Partner's distributive share.

* * * * *
    (b) * * *
    (2) * * *
    (iv) * * *
    (f) * * *
    (6) [The text of proposed Sec.  1.704-1(b)(2)(iv)(f)(6) is the same 
as the text of Sec.  1.704-1T(b)(2)(iv)(f)(6) published elsewhere in 
this issue of the Federal Register].
* * * * *
    (f) [The text of proposed Sec.  1.704-1(f) is the same as the text 
of Sec.  1.704-1T(f) published elsewhere in this issue of the Federal 
Register].
* * * * *
0
Par. 4. Section 1.704-3 is amended by adding paragraphs (a)(13), 
(d)(5)(iii), and (g) to read as follows:


Sec.  1.704-3  Contributed property.

    (a) * * *
    (13) [The text of proposed Sec.  1.704-3(a)(13) is the same as the 
text of Sec.  1.704-3T(a)(13) published elsewhere in this issue of the 
Federal Register].
* * * * *
    (d) * * *
    (5) * * *
    (iii) [The text of proposed Sec.  1.704-3(d)(5)(iii) is the same as 
the text of Sec.  1.704-3T(d)(5)(iii) published

[[Page 6370]]

elsewhere in this issue of the Federal Register].
* * * * *
    (g) [The text of proposed Sec.  1.704-3(g) is the same as the text 
of Sec.  1.704-3T(g) published elsewhere in this issue of the Federal 
Register].
0
Par. 5. Section 1.721(c)-1 is added to read as follows:


Sec.  1.721(c)-1  Overview, definitions, and rules of general 
application.

    [The text of proposed Sec.  1.721(c)-1 is the same as the text of 
Sec.  1.721(c)-1T published elsewhere in this issue of the Federal 
Register].
0
Par. 6. Section 1.721(c)-2 is added to read as follows:


Sec.  1.721(c)-2  Recognition of gain on certain contributions of 
property to partnerships with related foreign partners.

    [The text of proposed Sec.  1.721(c)-2 is the same as the text of 
Sec.  1.721(c)-2T published elsewhere in this issue of the Federal 
Register].
0
Par. 7. Section 1.721(c)-3 is added to read as follows:


Sec.  1.721(c)-3  Gain deferral method.

    [The text of proposed Sec.  1.721(c)-3 is the same as the text of 
Sec.  1.721(c)-3T published elsewhere in this issue of the Federal 
Register].
0
Par. 8. Section 1.721(c)-4 is added to read as follows:


Sec.  1.721(c)-4  Acceleration events.

    [The text of proposed Sec.  1.721(c)-4 is the same as the text of 
Sec.  1.721(c)-4T published elsewhere in this issue of the Federal 
Register].
0
Par. 9. Section 1.721(c)-5 is added to read as follows:


Sec.  1.721(c)-5  Acceleration event exceptions.

    [The text of proposed Sec.  1.721(c)-5 is the same as the text of 
Sec.  1.721(c)-5T published elsewhere in this issue of the Federal 
Register].
0
Par. 10. Section 1.721(c)-6 is added to read as follows:


Sec.  1.721(c)-6  Procedural and reporting requirements.

    [The text of proposed Sec.  1.721(c)-6 is the same as the text of 
Sec.  1.721(c)-6T published elsewhere in this issue of the Federal 
Register].
0
Par. 11. Section 1.721(c)-7 is added to read as follows:


Sec.  1.721(c)-7  Examples.

    [The text of proposed Sec.  1.721(c)-7 is the same as the text of 
Sec.  1.721(c)-7T published elsewhere in this issue of the Federal 
Register].
0
Par. 12. Section 1.6038B-2 is amended by:
0
1. Revising paragraph (a)(3).
0
2. Adding paragraphs (a)(1)(iii), (c)(8), and (c)(9).
0
3. Revising paragraph (h)(3).
0
4. Adding paragraphs (j)(4) and (j)(5).


Sec.  1.6038B-2  Reporting of certain transfers to foreign 
partnerships.

    (a) * * *
    (1) * * *
    (iii) [The text of proposed Sec.  1.6038B-2(a)(1)(iii) is the same 
as the text of Sec.  1.6038B-2T(a)(1)(iii) published elsewhere in this 
issue of the Federal Register].
* * * * *
    (3) [The text of proposed Sec.  1.6038B-2(a)(3) is the same as the 
text of Sec.  1.6038B-2T(a)(3) published elsewhere in this issue of the 
Federal Register].
* * * * *
    (c) * * *
    (8) [The text of proposed Sec.  1.6038B-2(c)(8) is the same as the 
text of Sec.  1.6038B-2T(c)(8) published elsewhere in this issue of the 
Federal Register].
    (9) [The text of proposed Sec.  1.6038B-2(c)(9) is the same as the 
text of Sec.  1.6038B-2T(c)(9) published elsewhere in this issue of the 
Federal Register].
* * * * *
    (h) * * *
    (3) [The text of proposed Sec.  1.6038B-2(h)(3) is the same as the 
text of Sec.  1.6038B-2T(h)(3) published elsewhere in this issue of the 
Federal Register].
* * * * *
    (j) * * *
    (4) [The text of proposed Sec.  1.6038B-2(j)(4) is the same as the 
text of Sec.  1.6038B-2T(j)(4) published elsewhere in this issue of the 
Federal Register].
    (5) [The text of proposed Sec.  1.6038B-2(j)(5) is the same as the 
text of Sec.  1.6038B-2T(j)(5) published elsewhere in this issue of the 
Federal Register].

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2017-01048 Filed 1-18-17; 8:45 am]
 BILLING CODE 4830-01-P