[Federal Register Volume 69, Number 40 (Monday, March 1, 2004)]
[Proposed Rules]
[Pages 9560-9562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-3993]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-106590-00, REG-138499-02]
RIN 1545-AX95; RIN 1545-BB05


Depreciation of MACRS Property That Is Acquired in a Like-Kind 
Exchange or as a Result of an Involuntary Conversion

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking; notice of proposed rule making 
by cross-reference to temporary regulations; notice of public hearing; 
and partial withdrawal of proposed regulations.

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SUMMARY: In the rules and regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations relating to 
the depreciation of property subject to section 168 of the Internal 
Revenue Code (MACRS property). Specifically, the temporary regulations 
provide guidance on how to depreciate MACRS property acquired in a 
like-kind exchange under section 1031 or as a result of an involuntary 
conversion under section 1033 when both the acquired and relinquished 
property are subject to MACRS in the hands of the acquiring taxpayer. 
The text of those temporary regulations also serves as the text of 
these proposed regulations. This document also provides notice of a 
public hearing on these proposed regulations and a partial withdrawal 
of proposed regulations (REG-139499-02) published July 21, 2003.

DATES: Written or electronic comments must be received by June 1, 2004. 
Outlines of topics to be discussed at the public hearing scheduled for 
June 3, 2004, at 10 a.m. must be received by May 13, 2004.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-106590-00), room 5203, 
Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Alternatively, 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-106590-00), Courier's Desk, Internal Revenue Service, 
1111 Constitution Ave., NW., Washington, DC, or sent electronically, 
via the IRS Internet site at http://www.irs.gov/regs. The public 
hearing will be held in the Auditorium, Internal Revenue Building, 1111 
Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Charles J. Magee, (202) 622-3110; concerning submissions of comments, 
the hearing, and/or to be placed on the building access list to attend 
the hearing, Robin Jones, (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    Temporary regulations in the rules and regulations section of this 
issue of the Federal Register amend 26 CFR part 1 relating to section 
168 of the Internal Revenue Code (Code). The temporary regulations 
provide guidance under section 168 on how to depreciate MACRS property 
acquired in a like-kind exchange under section 1031 or as a result of 
an involuntary conversion under section 1033 when both the acquired and 
relinquished property are subject to MACRS in the hands of the 
acquiring taxpayer.
    The text of those regulations also serves as the text of these 
proposed regulations. The preamble to the temporary regulations 
explains the temporary regulations and these proposed regulations.

[[Page 9561]]

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 also has 
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 
these regulations do not impose on small entities a collection of 
information requirement, the Regulatory Flexibility Act (5 U.S.C. 
chapter 6) does not apply. Therefore, a Regulatory Flexibility Analysis 
is not required. 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 Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The IRS and Treasury Department specifically request 
comments on the clarity of the proposed rules and how they may be made 
easier to understand. All comments will be available for public 
inspection and copying.
    A public hearing has been scheduled for June 3, 2004, beginning at 
10 a.m. in the Auditorium of the Internal Revenue Building, 1111 
Constitution Avenue, NW., Washington, DC. Due to building security 
procedures, visitors must enter at the Constitution Avenue entrance. In 
addition, all visitors must present photo identification to enter the 
building. Because of access restrictions, visitors will not be admitted 
beyond the immediate entrance area more than 30 minutes before the 
hearing starts. For information about having your name placed on the 
building access list to attend the hearing, see the FOR FURTHER 
INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit an outline of 
the topics to be discussed and the time to be devoted to each topic 
(signed original and eight (8) copies) by May 13, 2004. A period of 10 
minutes will be allotted to each person for making comments. An agenda 
showing the scheduling of the speakers will be prepared after the 
deadline for receiving outlines has passed. Copies of the agenda will 
be available free of charge at the hearing.

Drafting Information

    The principal authors of these regulations are Alan H. Cooper, 
Office of the Chief Counsel (Small Business/Self Employed), and Charles 
J. Magee, Office of the Associate Chief Counsel (Passthroughs and 
Special Industries). 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.

Partial Withdrawal of Proposed Regulations

    Under the authority of 26 U.S.C. 7805, Sec. Sec.  1.168(a)-1 and 
1.168(b)-1 of the notice of proposed rulemaking (REG-138499-02) 
published in the Federal Register on July 21, 2003 (68 FR 43047) are 
withdrawn.

Proposed Amendments 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 reads as follows:


    Authority: 26 U.S.C. 7805 * * *
    Sec.  1.168(i)-1 also issued under 26 U.S.C. 168(i)(4).
    Par. 2. Sections 1.168(a)-1 and 1.168(b)-1 are added to read as 
follows:


Sec.  1.168(a)-1  Modified accelerated cost recovery system.

    (The text of this proposed section is the same as the text of Sec.  
1.168(a)-1T(a) and (b) published elsewhere in this issue of the Federal 
Register.)


Sec.  1.168(b)-1  Definitions.

    (The text of this proposed section is the same as the text of Sec.  
1.168(b)-1T(a) and (b)(1) published elsewhere in this issue of the 
Federal Register.)
    Par. 3. Section 1.168(d)-1 is amended to read as follows:
    1. Revising paragraph (b)(3)(i) and (ii).
    2. Adding paragraph (d)(3).
    The revision and addition read as follows:


Sec.  1.168(d)-1  Applicable conventions--half-year and mid-quarter 
conventions.

* * * * *
    (b) * * *
    (3) * * *
    (i) and (ii) (The text of the proposed amendment to Sec.  1.168(d)-
1(b)(3)(i) and (ii) is the same as the text of Sec.  1.168(d)-
1T(b)(3)(i) and (ii) published elsewhere in this issue of the Federal 
Register.)
* * * * *
    (d) * * *
    (3) (The text of the proposed amendment to Sec.  1.168(d)-1(d)(3) 
is the same as the text of Sec.  1.168(d)-1T(d)(3) published elsewhere 
in this issue of the Federal Register.)
    Par. 4. Section 1.168(i)-0 is amended by revising the entries for 
Sec.  1.168(i)-1(d)(2), (e)(3)(i), (e)(3)(v) and (vi), (f)(1), (f)(2), 
(f)(2)(i), (i), (j), and (l) to read as follows:


Sec.  1.168(i)-0  Table of contents for the general asset account 
rules.

* * * * *


Sec.  1.168(i)-1  General asset accounts.

* * * * *
    (d) * * *
    (2) (The text of the proposed entry for Sec.  1.168(i)-1(d)(2) is 
the same as the entry for Sec.  1.168(i)-1T(d)(2) published elsewhere 
in this issue of the Federal Register.)
* * * * *
    (e) * * *
    (3) * * *
    (i) (The text of the proposed entry for Sec.  1.168(i)-1(e)(3)(i) 
is the same as the entry for Sec.  1.168(i)-1T(e)(3)(i) published 
elsewhere in this issue of the Federal Register.)
* * * * *
    (vi) (The text of the proposed entries for Sec.  1.168(i)-
1(e)(3)(vi) is the same as the entries for Sec.  1.168(i)-1T(e)(3)(vi) 
published elsewhere in this issue of the Federal Register.)
* * * * *
    (f) * * *
    (f)(1) through (f)(2)(i) (The text of the proposed entries for 
Sec.  1.168(i)-1(f)(1) through (f)(2)(i) is the same as the text of the 
entries for Sec.  1.168(i)-1T(f)(1) through (f)(2)(i) published 
elsewhere in this issue of the Federal Register.)
* * * * *
    (i) and (j) (The text of the proposed entries for Sec.  1.168(i)-
1(i) and (j) is the same as the entries for Sec.  1.168(i)-1T(i) and 
(j) published elsewhere in this issue of the Federal Register.)
* * * * *
    (l) (The text of the proposed entry for Sec.  1.168(i)-1(l) is the 
same as the entry for Sec.  1.168(i)-1T(l) published elsewhere in this 
issue of the Federal Register.)
    Par. 5. Section 1.168(i)-1 is amended by revising paragraphs 
(c)(2)(ii)(E), (d)(2), (e)(3)(i), (e)(3)(iii)(B)(4), (e)(3)(vi), 
(f)(1), (f)(2)(i), (i), (j), and (l) to read as follows:


Sec.  1.168(i)-1  General asset accounts.

* * * * *
    (c) * * *
    (2) * * *
    (ii) * * *

[[Page 9562]]

    (E) (The text of the proposed amendment to Sec.  1.168(i)-
1(c)(2)(ii)(E) is the same as the text of Sec.  1.168(i)-
1T(c)(2)(ii)(E) published elsewhere in this issue of the Federal 
Register.)
* * * * *
    (d) * * *
    (2) (The text of the proposed amendment to Sec.  1.168(i)-1(d)(2) 
is the same as the text of Sec.  1.168(i)-1T(d)(2) published elsewhere 
in this issue of the Federal Register.)
* * * * *
    (e) * * *
    (3) * * *
    (i) (The text of the proposed amendment to Sec.  1.168(i)-
1(e)(3)(i) is the same as the text of Sec.  1.168(i)-1T(e)(3)(i) 
published elsewhere in this issue of the Federal Register.)
* * * * *
    (iii) * * *
    (B) * * *
    (4) (The text of the proposed amendment to Sec.  1.168(i)-
1(e)(3)(iii)(B)(4) is the same as the text of Sec.  1.168(i)-
1T(e)(3)(iii)(B)(4) published elsewhere in this issue of the Federal 
Register.)
* * * * *
    (e)(3)(vi) (The text of the proposed amendment to Sec.  1.168(i)-
1(e)(3)(vi) is the same as the text of Sec.  1.168(i)-1T(e)(3)(vi) 
published elsewhere in this issue of the Federal Register.)
* * * * *
    (f)(1) and (2) (The text of the proposed amendment to Sec.  
1.168(i)-1(f)(1) and (2) is the same as the text of Sec.  1.168(i)-
1T(f)(1) and (2) published elsewhere in this issue of the Federal 
Register.)
* * * * *
    (i) and (j) (The text of the proposed amendment to Sec.  1.168(i)-
1(i) and (j) is the same as the text of Sec.  1.168(i)-1T(i) and (j) 
published elsewhere in this issue of the Federal Register.)
* * * * *
    (l) (The text of the proposed amendment to Sec.  1.168(i)-1(l) is 
the same as the text of Sec.  1.168(i)-1T(l)(1) through (l)(3)(i) 
published elsewhere in this issue of the Federal Register.)
    Par. 6. Section 1.168(i)-5 is added to read as follows:


Sec.  1.168(i)-5  Table of contents.

    (The text of this proposed section is the same as the text of Sec.  
1.168(i)-5T published elsewhere in this issue of the Federal Register.)
    Par. 7. Section 1.168(i)-6 is added to read as follows:


Sec.  1.168(i)-6  Like-kind exchanges and involuntary conversions.

    (The text of this proposed section is the same as the text of Sec.  
1.168(i)-6T published elsewhere in this issue of the Federal Register.)
    Par. 8. Section 1.168(k)-1 is added to read as follows:


Sec.  1.168(k)-1  Additional first year depreciation deduction.

    (a) through (f)(5)(ii)(F)(1) [Reserved]. For further guidance, see 
Sec.  1.168(k)-1T(a) through (f)(5)(ii)(F)(1).
    (2) (The text of the proposed amendment to Sec.  1.168(k)-
1(f)(5)(ii)(F)(2) is the same as the text of Sec.  1.168(k)-
1T(f)(5)(ii)(F)(2) published elsewhere in this issue of the Federal 
Register.)
    (f)(5)(ii)(G) through (f)(5)(iv) [Reserved]. For further guidance, 
see Sec.  1.168(k)-1T(f)(5)(ii)(G) through (f)(5)(iv).
    (v) (The text of the proposed amendment to Sec.  1.168(k)-
1(f)(5)(v) is the same as the text of Sec.  1.168(k)-1T(f)(5)(v) 
published elsewhere in this issue of the Federal Register.)
    (f)(6) through (f)(9) [Reserved]. For further guidance, see Sec.  
1.168(k)-1T (f)(6) through (f)(9).
    (g) Effective date. (1) (The text of the proposed amendment to 
Sec.  1.168(k)-1(g)(1) is the same as Sec.  1.168(g)-1T(g)(1)(i) 
published elsewhere in this issue of the Federal Register.)
    (2) [Reserved]. For further guidance, see Sec.  1.168(k)-1T(g)(2).
    (3)(i) and (ii) (The text of the proposed amendment to Sec.  
1.168(k)-1(g)(3)(i) and (ii) is the same as the text of Sec.  1.168(k)-
1T(g)(3)(i) and (ii) published elsewhere in this issue of the Federal 
Register.)
    (g)(4) [Reserved]. For further guidance, see Sec.  1.168(k)-
1T(g)(4).

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 04-3993 Filed 2-27-04; 8:45 am]
BILLING CODE 4830-01-P