[Federal Register Volume 67, Number 243 (Wednesday, December 18, 2002)]
[Proposed Rules]
[Pages 77450-77451]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31858]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-151043-02]
RIN 1545-BB44


Rents and Royalties

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations relating to the 
inclusion in gross income of advance rentals. The proposed regulations 
authorize the Commissioner to provide rules allowing for the inclusion 
of advance rentals in gross income in a year other than the year of 
receipt. The proposed regulations will affect taxpayers that receive 
advance payments for the use of certain items (such as intellectual 
property) to be designated by the Commissioner.

DATES: Written or electronic comments and requests for a public hearing 
must be received by February 18, 2003.

ADDRESSES: Send submissions to: CC:ITA:RU (REG-151043-02), Room 5226, 
Internal Revenue Service, 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:ITA:RU (REG-
151043-02), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC. Alternatively, taxpayers may submit 
electronic comments directly to the IRS Internet site at www.irs.gov/regs.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Edwin B. Cleverdon, at (202) 622-7900; concerning submissions of 
comments, Guy Traynor, at (202) 622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to 26 CFR part 1 
relating to the inclusion in gross income of advance rentals under 
section 61.

Explanation of Provisions

    Currently Sec.  1.61-8(b) provides that, except as provided in 
section 467 and the regulations thereunder, advance rentals must be 
included in gross income in the year of receipt regardless of the 
period covered or the method of accounting employed by the taxpayer. 
The proposed amendments authorize the Commissioner to provide, through 
administrative guidance, rules for deferring income inclusion of 
advance rentals to a taxable year other than the year of receipt. This 
amendment will ensure that the Commissioner, in modifying Rev. Proc. 
71-21 (1971-2 C.B. 549), may provide deferral rules for licenses of 
intellectual property.

Proposed Effective Date

    The regulations, as proposed, are effective on the date of 
publication of a Treasury decision adopting these rules as final 
regulations in the Federal Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It has also 
been determined that section 553(b) of the Administrative Procedure Act 
(5 U.S.C. chapter 5) does not apply to these regulations and, because 
the regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Internal Revenue Code, this 
notice of proposed rulemaking will be submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on its 
impact on small business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written (a signed original and eight 
copies) or electronic comments that are submitted timely to the IRS. 
The IRS and the Treasury Department specifically request comments on 
the clarity of the proposed regulations and how they can be made easier 
to understand. All comments will be available for public inspection and 
copying. A public hearing may 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 hearing will be 
published in the Federal Register.

Drafting Information

    The principal author of these regulations is Edwin B. Cleverdon,

[[Page 77451]]

Office of Associate Chief Counsel (Income Tax and Accounting). However, 
other personnel from the IRS and Treasury Department participated in 
their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendment to the Regulations

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

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 * * *

    Par. 2. In Sec.  1.61-8, the first sentence of paragraph (b) is 
revised to read as follows:


Sec.  1.61-8  Rents and royalties.

* * * * *
    (b) * * * Except as provided in section 467 and the regulations 
thereunder, and except as otherwise provided by the Commissioner in 
published guidance (see Sec.  601.601(d)(2) of this chapter), gross 
income includes advance rentals, which must be included in income for 
the year of receipt regardless of the period covered or the method of 
accounting employed by the taxpayer. * * *
* * * * *

David A. Mader,
Assistant Deputy Commissioner of Internal Revenue.
[FR Doc. 02-31858 Filed 12-17-02; 8:45 am]
BILLING CODE 4830-01-P