[Federal Register Volume 68, Number 242 (Wednesday, December 17, 2003)]
[Proposed Rules]
[Pages 70214-70215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31034]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

[REG-146893-02, REG-115037-00]
RIN 1545-BB31, 1545-AY38


Treatment of Services Under Section 482; Allocation of Income and 
Deductions From Intangibles; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correction to notice of proposed rulemaking and notice of 
public hearing.

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SUMMARY: This document contains corrections to a notice of proposed 
rulemaking and notice of public hearing that was published in the 
Federal Register on Wednesday, September 10, 2003 (68 FR 53448). The 
proposed regulations provide guidance regarding the treatment of 
controlled services transactions under section 482 and the allocation 
of income from intangibles in particular when one controlled taxpayer 
performs activities that increase (or are expected to increase) the 
valve of an intangible owned by another controlled taxpayer.

FOR FURTHER INFORMATION CONTACT: J. Peter Luedtke or Helen Hong-George, 
(202) 435-5265 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    The notice of proposed rulemaking and notice of public hearing that 
is the subject of this correction is under section 482 of the Internal 
Revenue Code.

Need for Correction

    As published, the notice of proposed rulemaking and notice of 
public hearing contains errors that may prove to be misleading and are 
in need of clarification.

Correction of Publication

    Accordingly, the publication of the notice of proposed regulations 
and

[[Page 70215]]

notice of public hearing (REG-146893-02, REG-115037-00), that was the 
subject of FR Doc. 03-22550, are corrected as follows:
    1. On page 53448, column 1, in the preamble under the paragraph 
heading ``DATES'', second line of the paragraph, the language ``must be 
received December 9, 2003.'' is corrected to read ``must be received by 
December 9, 2003.''
    2. On page 53449, column 2, in the preamble under the paragraph 
heading ``2. Income Attributable to Intangibles'', fifth line of the 
paragraph, the language, ``property. The Taxpayers and other'' is 
corrected to read ``property. Taxpayers and other''.
    3. On page 53455, column 3, in the preamble under the paragraph 
heading ``10. Total Services Costs--Sec.  1.482-9(j)'', the last line 
of the paragraph, the language, ``analysis of the result expressed as 
ration'' is corrected to read ``analysis of the result expressed as the 
ratio''.
    4. On page 53464, column 3, following Sec.  1.482-6(c)(3)(i)(B)(2), 
paragraph (c)(3)(ii) is added to read as follows:


Sec.  1.482-6  Profit split method.

* * * * *
    (c) * * *
    (3) * * * (i) * * *
    (ii) * * *
* * * * *
    5. On page 53473, columns 2 and 3, Sec.  1.482-9(f)(2)(iv)(A) 
through (C) introductory text are corrected to read as follows:


Sec.  1.482-9  Methods to determine taxable income in connection with a 
controlled services transaction.

* * * * *
    (f) * * *
    (2) * * *
    (iv) Measurement of limitation on allocations: The rules of 
paragraphs (f)(2)(i) and (ii) of this section are expressed in this 
paragraph (f)(2)(iv) in equations and a table.
    (A) The minimum arm's length markup necessary for an allocation by 
the Commissioner (Z) is the sum of the markup charged by the taxpayer 
(X) and the applicable number of percentage points determined under 
paragraph (f)(2)(ii) of this section (Y). Where the markup charged by 
the taxpayer is not less than zero, the minimum arm's length markup 
necessary for allocation by the Commissioner (Z) also equals the lesser 
of--
    (1) The sum of six percentage points and half of the markup charged 
by the taxpayer (X); and
    (2) Ten percentage points.
    (B) The equations in paragraph (f)(2)(iv)(A) of this section may 
also be expressed as follows:
    Z = X + Y = min((6% + 0.5 x X), 10%) where X = 0.
    (C) The following table illustrates the results of these 
calculations in representative cases:
* * * * *
    6. On page 53480, column 1, Sec.  1.482-9(l)(4), Example 12, the 
last line of the paragraph, the language, ``therefore Company Y is 
considered to obtain.'' is corrected to read ``therefore Company Y is 
considered to obtain a benefit from the activities.''

Cynthia E. Grigsby,
Acting Chief, Publications and Regulations Branch, Legal Processing 
Division, Associate Chief Counsel (Procedure and Administration).
[FR Doc. 03-31034 Filed 12-16-03; 8:45 am]
BILLING CODE 4830-01-P