[Federal Register Volume 79, Number 72 (Tuesday, April 15, 2014)]
[Proposed Rules]
[Pages 21163-21164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08360]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-144468-05]
RIN 1545-BE98


Disallowance of Partnership Loss Transfers, Mandatory Basis 
Adjustments, Basis Reduction in Stock of a Corporate Partner, 
Modification of Basis Allocation Rules for Substituted Basis 
Transactions, Miscellaneous Provisions; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correction to a 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 (REG-144468-05) that was 
published in the Federal Register on Thursday, January 16, 2014. The 
proposed rules provide guidance on certain provisions of the American 
Jobs Creation Act of 2004 and conform the regulations to statutory 
changes in the Taxpayer Relief Act of 1997.

DATES: Written or electronic comments and requests for a public hearing 
for the notice of proposed rulemaking published at 79 FR 3042, January 
16, 2014, are still being accepted and must be received by April 16, 
2014.

FOR FURTHER INFORMATION CONTACT: Benjamin Weaver or Wendy Kribell at 
(202) 317-6850 (not a toll free number).

SUPPLEMENTARY INFORMATION:

Background

    The notice of proposed rulemaking and notice of public hearing 
(REG-144468-05) that is the subject of these corrections is under 
sections 704, 732, 734, 743, 755, and 1502 of the Internal Revenue 
Code.

Need for Correction

    As published, the notice of proposed rulemaking and notice of 
public hearing (REG-144468-05) contains errors that may prove to be 
misleading and are in need of clarification.

Correction of Publication

    Accordingly, the notice of proposed rulemaking and notice of public 
hearing (REG-144468-05), that was the subject of FR Doc. 2014-00649, is 
corrected as follows:
    1. On page 3042, in the preamble, third column, thirty-third line 
from the top of the page, the language ``3,600.'' is corrected to read 
``3,600 hours.''.
    2. On page 3042, in the preamble, third column, fortieth line from 
the top of the page, the language ``burden: 2,700.'' is corrected to 
read ``burden: 2,700 hours.''.
    3. On page 3046, in the preamble, second column, twenty-fifth line 
of the first full paragraph, the language ``1(b)(2)(iv)(f) (``reverse 
section 704(c)'' is corrected to read ``1(b)(2)(iv)(f) or Sec.  1.704-
1(b)(2)(iv)(s) (``reverse section 704(c)''.
    4. On page 3052, in the preamble, second column, tenth line from 
the bottom of the page, the language ``Questions have been raised 
whether the'' is corrected to read ``Questions have been raised 
regarding whether the''.
    5. On page 3054, in the preamble, second column, seventh line from 
the top of the page, the language ``by differences in the property's 
adjusted'' is corrected to read ``by decreases in the

[[Page 21164]]

difference between the property's adjusted''.
    6. On page 3054, in the preamble, second column, sixteenth line 
from the top of the page, the language ``1(b)(2)(iv)(f). Thus, for 
example, under'' is corrected to read ``1(b)(2)(iv)(f) or Sec.  1.704-
1(b)(2)(iv)(s). Thus, for example, under''.


Sec.  1.704-3  [Corrected]

    7. On page 3055, third column, the second sentence of paragraph 
(a)(3)(ii) should read ``The built-in gain is thereafter reduced by 
decreases in the difference between the property's book value and 
adjusted tax basis (other than decreases to the property's book value 
pursuant to Sec.  1.704-1(b)(2)(iv)(f) or Sec.  1.704-
1(b)(2)(iv)(s)).''.
    8. On page 3056, first column, the fourth sentence of paragraph 
(a)(3)(ii) should read ``The built-in loss is thereafter reduced by 
decreases in the difference between the property's adjusted tax basis 
and book value (other than increases to the property's book value 
pursuant to Sec.  1.704-1(b)(2)(iv)(f) or Sec.  1.704-
1(b)(2)(iv)(s)).''.
    9. On page 3056, first column, the first sentence of paragraph 
(a)(6)(i) should read ``The principles of this section apply with 
respect to property for which differences between book value and 
adjusted tax basis are created when a partnership revalues partnership 
property pursuant to Sec.  1.704-1(b)(2)(iv)(f) or Sec.  1.704-
1(b)(2)(iv)(s) (reverse section 704(c) allocations).''.
    10. On page 3056, second column, the second sentence of paragraph 
(f)(2)(i) should read ``Section 704(c)(1)(C) property does not include 
a Sec.  1.752-7 liability (within the meaning of Sec.  1.752-7(b)(3)) 
or property for which differences between book value and adjusted tax 
basis are created when a partnership revalues property pursuant to 
Sec.  1.704-1(b)(2)(iv)(f) or Sec.  1.704-1(b)(2)(iv)(s).''.
    11. On page 3057, second column, the third sentence of paragraph 
(f)(3)(iii)(B)(1) should read ``Regardless of whether a section 754 
election is in effect or a substantial built in loss exists with 
respect to the transfer, the amount of any section 704(c)(1)(C) basis 
adjustment with respect to section 704(c)(1)(C) property to which the 
transferee succeeds shall be decreased by the amount of any negative 
section 743(b) adjustment that would be allocated to the section 
704(c)(1)(C) property pursuant to the provisions of Sec.  1.755-1 if 
the partnership had a section 754 election in effect upon the 
transfer.''.


Sec.  1.734-2  [Corrected]

    12. On page 3062, third column, the first sentence of paragraph 
(c)(3) Example 2. (ii) should read ``A is unable to take into account 
A's section 704(c)(1)(C) basis adjustment in Property 1 upon the 
distribution of the cash as described in paragraph (c)(2) of this 
section because A cannot increase the basis of cash under Sec.  1.704-
3(f)(3)(v)(C).''.


Sec.  1.755-1  [Corrected]

    13. On page 3068, third column, paragraph (b)(5)(iv) Example 4. (i) 
should read ``A is a one-third partner in LTP. The three partners in 
LTP have equal interests in the capital and profits of LTP. LTP has two 
assets: accounts receivable with an adjusted basis of $300 and a fair 
market value of $240 and a nondepreciable capital asset with an 
adjusted basis of $60 and a fair market value of $240. A contributes 
its interest in LTP to UTP in a transaction described in section 721. 
At the time of the transfer, A's basis in its LTP interest is $90. 
Under section 723, UTP's basis in its interest in LTP is $90. LTP makes 
an election under section 754 in connection with the transfer.''.
    14. On page 3068, third column, the first sentence of paragraph 
(b)(5)(iv) Example 4. (ii) should read ``The amount of the basis 
adjustment under section 743(b) is the difference between UTP's $90 
basis in its LTP interest and UTP's share of the adjusted basis to LTP 
of LTP's property.''
    15. On page 3068, third column, paragraph (e)(1)(A) is redesignated 
as paragraph (e)(1)(i).
    16. On page 3069, first column, paragraph (e)(1)(B) is redesignated 
as paragraph (e)(1)(ii).
    17. On page 3069, first column, paragraph (e)(2), the language 
``(e)(1)(B) ''should read ``(e)(1)(ii)'' wherever it appears.
    18. On page 3069, first column, paragraph ``(3) Example.'' Is 
corrected to read ``(3) Example.''.
    19. On page 3069, first and second column, paragraph (e)(3) should 
read ``Example. A, B, and C are equal partners in PRS, a partnership. C 
is a corporation. The adjusted basis and fair market value for A's 
interests in PRS is $100. PRS owns Capital Asset 1 with an adjusted 
basis of $0 and a fair market value of $100, Capital Asset 2 with an 
adjusted basis of $150 and a fair market value of $50, and stock in 
Corp, a corporation that is related to C under section 267(b), with an 
adjusted basis of $250 and fair market value of $150. PRS has a section 
754 election in effect. PRS distributes Capital Asset 1 to A in 
liquidation of A's interest in PRS. PRS will reduce the basis of its 
remaining assets under section 734(b) by $100, to be allocated under 
section 755. Pursuant to the general rule of paragraph (c) of this 
section, PRS would reduce the basis of Capital Asset 2 by $50 and the 
stock of Corp by $50. However, pursuant to paragraph (e)(1)(i) of this 
section, the basis of the Corp stock is not adjusted. Thus, the basis 
of Capital Asset 2 is reduced by $100 from $150 to $50.''.

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2014-08360 Filed 4-14-14; 8:45 am]
BILLING CODE 4830-01-P