[Federal Register Volume 82, Number 12 (Thursday, January 19, 2017)]
[Rules and Regulations]
[Pages 6235-6243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-01365]



[[Page 6235]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9811]
RIN 1545-BK09


Application of Modified Carryover Basis to General Basis Rules

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations regarding the 
application of the modified carryover basis rules of section 1022 of 
the Internal Revenue Code (Code). Specifically, the final regulations 
modify provisions of the Treasury Regulations involving basis rules by 
including a reference to section 1022 where appropriate. The 
regulations will affect property transferred from certain decedents who 
died in 2010. The regulations reflect changes to the law made by the 
Economic Growth and Tax Relief Reconciliation Act of 2001 and the Tax 
Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 
2010.

DATES: Effective Date: The regulations are effective on January 19, 
2017.
    Applicability Date: The regulations are applicable on January 19, 
2017.

FOR FURTHER INFORMATION CONTACT: Mayer R. Samuels at (202) 317-6859 
(not a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    This document contains amendments to 26 CFR part 1 under various 
provisions of the Code in response to statutory changes made by the 
Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 
107-16 (EGTRRA) and the Tax Relief, Unemployment Insurance 
Reauthorization, and Job Creation Act of 2010, Public Law 111-312 
(TRUIRJCA).
    Section 501(a) of EGTRRA enacted section 2210 of the Code, which 
made chapter 11 (the estate tax) inapplicable to the estate of any 
decedent who died after 2009. Section 542 of EGTRRA also enacted 
section 1022. While section 1014 generally provides that the 
recipient's basis in property passing from a decedent is the fair 
market value of the property on the decedent's date of death, section 
1022 sets forth a modified carryover basis system applicable after 2009 
generally providing that the recipient's basis in property acquired 
from a decedent is the lesser of the decedent's adjusted basis in the 
property or the fair market value of the property on the decedent's 
date of death. Section 901(a) of EGTRRA, known as the ``sunset 
clause'', provided that all provisions of and amendments made by EGTRRA 
do not apply to estates of decedents dying, gifts made, or generation-
skipping transfers after December 31, 2010. The sunset clause 
effectively limited the application of sections 501(a) and 542 of 
EGTRRA to 2010.
    Section 301(a) of TRUIRJCA, which became law on December 17, 2010, 
retroactively reinstated the estate tax and repealed section 1022 with 
respect to the estates of decedents who died in 2010. However, section 
301(c) of TRUIRJCA allowed the executor of the estate of a decedent who 
died in 2010 to elect to apply the Code and regulations thereunder as 
though section 301(a) of TRUIRJCA did not apply with respect to chapter 
11 and with respect to property acquired or passing from the decedent 
(within the meaning of section 1014(b) of the Code). Thus, section 
301(c) of TRUIRJCA allowed the executor of the estate of a decedent who 
died in 2010 to elect not to have the provisions of chapter 11 apply to 
the decedent's estate, but rather to have the provisions of section 
1022 apply (a Section 1022 Election).
    To provide executors with guidance regarding the making of a 
Section 1022 Election and certain other collateral issues arising from 
the determination of basis under section 1022, on August 29, 2011, the 
Treasury Department and the IRS issued Notice 2011-66 (2011-35 IRB 184) 
and Revenue Procedure 2011-41 (2011-35 IRB 188). Although section 1022 
was applicable only to decedents dying in calendar year 2010, basis 
determined pursuant to that section will continue to be relevant until 
all of the property whose basis is determined under that section has 
been sold or otherwise disposed of in a transaction in which gain or 
loss is recognized. Accordingly, on May 11, 2015, the Treasury 
Department and the IRS published in the Federal Register (80 FR 26873) 
a notice of proposed rulemaking (REG-107595-11, 2015-21 IRB 986) 
proposing amendments to existing regulations under various sections of 
the Code to take into account the application of the modified carryover 
basis rules of section 1022. The IRS received written comments 
responding to the notice of proposed rulemaking. No public hearing was 
requested or held.
    After consideration of the comments received on the proposed 
regulations, this Treasury decision adopts the proposed regulations 
without modification as final regulations. However, the final 
regulations adopt certain nonsubstantive, clarifying changes. The 
comments received on the proposed regulations are discussed in the 
remainder of this preamble.

Summary of Comments

    One commenter noted that the proposed regulations proposed to amend 
Sec.  1.742-1 to provide that the basis of a partnership interest 
acquired from a decedent is determined under section 1022 if the 
decedent died in 2010 and the decedent's executor made a Section 1022 
Election with respect to the decedent's estate. The commenter noted 
that there was no similar amendment proposed to be made to Sec.  
1.1367-1(j), relating to the basis of stock of an S corporation where a 
portion of the value of the stock is attributable to items constituting 
income in respect of a decedent (IRD). The commenter recommended that 
the final regulations amend Sec.  1.1367-1(j) with language referencing 
section 1022.
    After considering this comment, the Treasury Department and the IRS 
have determined that no change is necessary. Section 1.1367-1(j) 
states, ``[t]he basis determined under section 1014 of any stock in an 
S corporation is reduced by the portion of the value of the stock that 
is attributable to items constituting income in respect of a 
decedent.'' This regulation section, with its required basis adjustment 
for IRD, is limited to situations in which section 1014 applies. 
Section 1.1367-1(j) does not apply when a Section 1022 Election is made 
because there is no basis adjustment under section 1022 to the date of 
death value of S corporation stock. Without an adjustment to date of 
death value, no further adjustment to the basis of S corporation stock 
is required to account for IRD. Therefore, the final regulations do not 
adopt this comment.
    A commenter noted that the proposed regulations only propose 
amendments to finalized regulations, and not to proposed regulations or 
temporary regulations. That commenter specifically requested guidance 
with respect to proposed regulation Sec.  1.465-69(a) (which provides 
that a successor to a decedent's amount at risk in an activity is 
increased by the amount by which the successor's basis in the activity 
is increased under section 1014) and temporary regulation Sec.  
16A.1255-2(b)(2) (which provides that if, as of the date a person 
acquires section 126 property from a decedent, the basis of the 
property is determined under section 1014, then on that date the 
aggregate of excludable portions under

[[Page 6236]]

section 126 in the hands of such transferee is zero). This Treasury 
decision cannot modify provisions of the proposed or temporary 
regulations referenced by the commenter without adopting those 
provisions as final or temporary regulations. The Treasury Department 
and the IRS continue to study these areas, and therefore are not 
prepared to adopt modifications to the proposed or temporary 
regulations referenced by the commenter at this time. Accordingly, the 
final regulations do not adopt this comment. However, the Treasury 
Department and the IRS expect that, if those proposed or temporary 
regulations are adopted as final or temporary regulations in the 
future, such regulations will be updated as appropriate to account for 
the existence of section 1022.
    Another commenter asked why the preamble to the proposed 
regulations omitted any discussion of the revisions made to regulations 
under six particular sections of the Code, and requested an explanation 
as to why changes to those regulatory provisions were considered less 
significant than the changes for which an explanation was given. 
Generally, the Treasury Department and the IRS included descriptions of 
the proposed changes in that preamble that involved more than a mere 
insertion of a reference to section 1022 in addition to an existing 
reference to section 1014. In such cases, it was determined that an 
explanation or clarification of the substance or effect of the proposed 
revision would be helpful. In the case of the proposed amendments to 
regulations under the six Code sections mentioned by the commenter, the 
only change proposed was the mere insertion of references to section 
1022 in addition to existing references to section 1014. Accordingly, 
the Treasury Department and the IRS determined that no further 
explanation of those changes was necessary.
    A commenter also asked why the proposed regulations did not 
incorporate the treatment of items under the various Code sections 
addressed in Revenue Procedure 2011-41, 2011-35 IRB 188. That revenue 
procedure provides a safe harbor that determines the effect on the 
application of various Code sections of a Section 1022 Election. The 
provisions relating to that safe harbor are available only if the 
executor of the estate makes a Section 1022 Election and takes no 
position contrary to a provision in that revenue procedure. Nothing in 
these final regulations changes or invalidates the provisions of 
Revenue Procedure 2011-41, so the safe harbor will remain available to 
qualifying taxpayers. Consequently, it is unnecessary to incorporate 
the revenue procedure into these 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. The Regulatory Flexibility Act (5 U.S.C. chapter 6) does 
not apply to these final regulations because the final regulations do 
not impose a collection of information requirement on small entities. 
Therefore, a Regulatory Flexibility Analysis is not required. Pursuant 
to section 7805(f) of the Code, the notice of proposed rulemaking 
preceding this regulation has been submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business, and no comments were received.

Drafting Information

    The principal author of these final regulations is Mayer R. 
Samuels, Office of the Associate Chief Counsel (Passthroughs and 
Special Industries). 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.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is 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 * * *


0
Par. 2. Section 1.48-12 is amended by revising the last sentence of 
paragraph (b)(2)(vii)(B) and adding paragraph (g) to read as follows:


Sec.  1.48-12  Qualified rehabilitated building; expenditures incurred 
after December 31, 1981.

* * * * *
    (b) * * *
    (2) * * *
    (vii) * * *
    (B) * * * If a transferee's basis is determined under section 1014 
or section 1022, any expenditures incurred by the decedent within the 
measuring period that are treated as having been incurred by the 
transferee under paragraph (c)(3)(ii) of this section shall decrease 
the transferee's basis for purposes of the substantial rehabilitation 
test.
* * * * *
    (g) Effective/applicability date. This section applies on and after 
January 19, 2017. For rules before January 19, 2017, see Sec.  1.48-12 
as contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 3. Section 1.83-4 is amended by revising the last sentence of 
paragraph (b)(1) and adding paragraph (d) to read as follows:


Sec.  1.83-4  Special rules.

* * * * *
    (b) * * *
    (1) * * * Such basis shall also reflect any adjustments to basis 
provided under sections 1015, 1016, and 1022.
* * * * *
    (d) Effective/applicability date. The provisions in this section 
are applicable for taxable years beginning on or after July 21, 1978. 
The provisions of paragraph (b)(1) of this section relating to section 
1022 are effective on and after January 19, 2017.

0
Par. 4. Section 1.179-4 is amended by revising the first sentence of 
paragraph (c)(1)(iv) to read as follows:


Sec.  1.179-4  Definitions.

* * * * *
    (c) * * *
    (1) * * *
    (iv) The property is not acquired by purchase if the basis of the 
property in the hands of the person acquiring it is determined in whole 
or in part by reference to the adjusted basis of such property in the 
hands of the person from whom acquired, is determined under section 
1014(a), relating to property acquired from a decedent, or is 
determined under section 1022, relating to property acquired from 
certain decedents who died in 2010. * * *
* * * * *

0
Par. 5. Section 1.179-6 is amended by:
0
1. Revising the section heading and the first sentence of paragraph 
(a).
0
2. Adding paragraph (d).
    The revision and addition read as follows:


Sec.  1.179-6  Effective/applicability dates.

    (a) * * * Except as provided in paragraphs (b), (c), and (d) of 
this section, the provisions of Sec. Sec.  1.179-1 through 1.179-5 
apply for property placed in service by the taxpayer in taxable years 
ending after January 25, 1993. * * *
* * * * *
    (d) Application of Sec.  1.179-4(c)(1)(iv). The provisions of Sec.  
1.179-4(c)(1)(iv)

[[Page 6237]]

relating to section 1022 are effective on and after January 19, 2017.

0
Par. 6. Section 1.197-2 is amended by revising paragraphs (h)(5)(i) and 
(h)(12)(viii) and adding paragraph (l)(5) to read as follows:


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

* * * * *
    (h) * * *
    (5) * * *
    (i) The acquisition of a section 197(f)(9) intangible if the 
acquiring taxpayer's basis in the intangible is determined under 
section 1014(a) or 1022; or
* * * * *
    (12) * * *
    (viii) Operating rule for transfers upon death. For purposes of 
this paragraph (h)(12), if the basis of a partner's interest in a 
partnership is determined under section 1014(a) or 1022, such partner 
is treated as acquiring such interest from a person who is not related 
to such partner, and such interest is treated as having previously been 
held by a person who is not related to such partner.
* * * * *
    (l) * * *
    (5) Application of section 1022. The provisions of Sec.  1.197-
2(h)(5)(i) and (h)(12)(viii) relating to section 1022 are effective on 
and after January 19, 2017.

0
Par. 7. Section 1.267(d)-1 is amended by revising paragraph (a)(3) to 
read as follows:


Sec.  1.267(d)-1  Amount of gain where loss previously disallowed.

    (a) * * *
    (3) The benefit of the general rule is available only to the 
original transferee but does not apply to any original transferee (for 
example, a donee or a person acquiring property from a decedent where 
the basis of property is determined under section 1014 or 1022) who 
acquired the property in any manner other than by purchase or exchange.
* * * * *

0
Par. 8. Section 1.267(d)-2 is amended by revising the section heading 
and adding a sentence to the end of the paragraph to read as follows:


Sec.  1.267(d)-2  Effective/applicability dates.

    * * * The provisions of Sec.  1.267(d)-1(a)(3) relating to section 
1022 are effective on and after January 19, 2017.

0
Par. 9. Section 1.273-1 is revised to read as follows:


Sec.  1.273-1  Life or terminable interests.

    (a) In general. Amounts paid as income to the holder of a life or a 
terminable interest acquired by gift, bequest, or inheritance shall not 
be subject to any deduction for shrinkage (whether called by 
depreciation or any other name) in the value of such interest due to 
the lapse of time. In other words, the holder of such an interest so 
acquired may not set up the value of the expected future payments as 
corpus or principal and claim deduction for shrinkage or exhaustion 
thereof due to the passage of time. For the treatment generally of 
distributions to beneficiaries of an estate or trust, see Subparts A, 
B, C, and D (section 641 and following), Subchapter J, Chapter 1 of the 
Code, and the regulations thereunder. For basis of property acquired 
from a decedent and by gifts and transfers in trust, see sections 1014, 
1015, and 1022, and the regulations thereunder.
    (b) Effective/applicability date. The provisions in this section 
are applicable for taxable years beginning on or after September 16, 
1958. The provisions of this section relating to section 1022 are 
effective on and after January 19, 2017.

0
Par. 10. Section 1.306-3 is amended by removing the last sentence of 
paragraph (e) and adding two sentences in its place to read as follows:


Sec.  1.306-3  Section 306 stock defined.

* * * * *
    (e) * * * Section 306 stock ceases to be so classified if the basis 
of such stock is determined by reference to its fair market value on 
the date of the decedent-stockholder's death under section 1014 or the 
optional valuation date under section 2032. Section 306 stock continues 
to be so classified if the basis of such stock is determined under 
section 1022.
* * * * *

0
Par. 11. Section 1.306-4 is added to read as follows:


Sec.  1.306-4  Effective/applicability date.

    The provisions of Sec. Sec.  1.306-1 through 1.306-3 are applicable 
on or after June 22, 1954. The provisions of Sec.  1.306-3 relating to 
section 1022 are effective on and after January 19, 2017.

0
Par. 12. Section 1.336-1 is amended by revising paragraph (b)(5)(i)(A) 
to read as follows:


Sec.  1.336-1  General principles, nomenclature, and definitions for a 
section 336(e) election.

* * * * *
    (b) * * *
    (5) * * *
    (i) * * *
    (A) The basis of the stock in the hands of the purchaser is not 
determined in whole or in part by reference to the adjusted basis of 
such stock in the hands of the person from whom the stock is acquired, 
is not determined under section 1014(a) (relating to property acquired 
from a decedent), or is not determined under section 1022 (relating to 
the basis of property acquired from certain decedents who died in 
2010);
* * * * *

0
Par. 13. Section 1.336-5 is amended by revising the section heading and 
adding a sentence to the end of the paragraph to read as follows:


Sec.  1.336-5   Effective/applicability dates.

    * * * The provisions of Sec.  1.336-1(b)(5)(i)(A) relating to 
section 1022 are effective on and after January 19, 2017.

0
Par. 14. Section 1.355-6 is amended by revising paragraphs 
(d)(1)(i)(A)(2) and (g) to read as follows:


Sec.  1.355-6  Recognition of gain on certain distributions of stock or 
securities in controlled corporation.

* * * * *
    (d) * * *
    (1) * * *
    (i) * * *
    (A) * * *
    (2) Under section 1014(a) or 1022; and
* * * * *
    (g) Effective/applicability dates. This section applies to 
distributions occurring after December 20, 2000, except that they do 
not apply to any distributions occurring pursuant to a written 
agreement that is (subject to customary conditions) binding on December 
20, 2000, and at all later times. The provisions of paragraph 
(d)(1)(i)(A)(2) of this section relating to section 1022 are effective 
on and after January 19, 2017.

0
Par. 15. Section 1.382-1 is amended by revising the entry for Sec.  
1.382-9(d)(6) to read as follows:


Sec.  1.382-9   Special rules under section 382 for corporations under 
the jurisdiction of a court in a title 11 or similar case.

* * * * *
    (d) * * *
    (6) Effective/applicability date.
* * * * *

0
Par. 16. Section 1.382-9 is amended by revising paragraphs 
(d)(5)(ii)(D) and (d)(6)(i) to read as follows:


Sec.  1.382-9  Special rules under section 382 for corporations under 
the jurisdiction of a court in a title 11 or similar case.

* * * * *
    (d) * * *
    (5) * * *
    (ii) * * *
    (D) The transferee's basis in the indebtedness is determined under

[[Page 6238]]

section 1014, 1015, or 1022 or with reference to the transferor's basis 
in the indebtedness;
* * * * *
    (6) Effective/applicability date--(i) In general. This paragraph 
(d) applies to ownership changes occurring on or after March 17, 1994. 
The provisions of paragraph (d)(5)(ii)(D) of this section relating to 
section 1022 are effective on and after January 19, 2017.
* * * * *

0
Par. 17. Section 1.421-2 is amended by:
0
1. Revising paragraphs (c)(4)(i)(a) and (c)(4)(ii).
0
2. Revising the heading of paragraph (f) and adding paragraph (f)(3).
    The revisions and addition read as follows:


Sec.  1.421-2  General rules.

* * * * *
    (c) * * *
    (4)(i)(a) In the case of the death of an optionee, the basis of any 
share of stock acquired by the exercise of an option under this 
paragraph (c), determined under section 1011, shall be increased by an 
amount equal to the portion of the basis of the option attributable to 
such share. For example, if a statutory option to acquire 10 shares of 
stock has a basis of $100, the basis of one share acquired by a partial 
exercise of the option, determined under section 1011, would be 
increased by 1/10th of $100, or $10. The option acquires a basis, 
determined under section 1014(a) or under section 1022, if applicable, 
only if the transfer of the share pursuant to the exercise of such 
option qualifies for the special tax treatment provided by section 
421(a). To the extent the option is so exercised, in whole or in part, 
it will acquire a basis equal to its fair market value (or the basis as 
determined under section 1022, if applicable) at the date of the 
employee's death or, if an election is made under section 2032, its 
value at its applicable valuation date. In certain cases, the basis of 
the share is subject to the adjustments provided by paragraphs 
(c)(4)(i)(b) and (c) of this section, but such adjustments are only 
applicable in the case of an option that is subject to section 423(c).
* * * * *
    (ii) If a statutory option is not exercised by the estate of the 
individual to whom the option was granted, or by the person who 
acquired such option by bequest or inheritance or by reason of the 
death of such individual, the option shall be considered to be property 
that constitutes a right to receive an item of income in respect of a 
decedent to which the rules of sections 691 and 1014(c) (or section 
1022(f), if applicable) apply.
* * * * *
    (f) Effective/applicability date. * * *
* * * * *
    (3) Application of section 1022. The provisions of paragraph (c) of 
this section relating to section 1022 are effective on and after 
January 19, 2017.

0
Par. 18. Section 1.423-2 is amended by:
0
1. Revising the third sentence of paragraph (k)(2).
0
2. Adding a sentence to the end of paragraph (l).
    The revision and addition read as follows:


Sec.  1.423-2  Employee stock purchase plan defined.

* * * * *
    (k) * * *
    (2) * * * If the special rules provided in this paragraph (k) are 
applicable to a share of stock upon the death of an employee, then the 
basis of the share in the hands of the estate or the person receiving 
the stock by bequest or inheritance shall be determined under section 
1014 or under section 1022, if applicable, and shall not be increased 
by reason of the inclusion upon the decedent's death of any amount in 
the decedent's gross income under this paragraph (k). * * *
* * * * *
    (l) * * * The provisions of this section relating to section 1022 
are effective on and after January 19, 2017.

0
Par. 19. Section 1.424-1 is amended by revising the last sentence of 
paragraph (c)(2) and adding paragraph (g)(3) to read as follows:


Sec.  1.424-1  Definitions and special rules applicable to statutory 
options.

* * * * *
    (c) * * *
    (2) * * * For determination of basis in the hands of the survivor 
where joint ownership is terminated by the death of one of the owners, 
see section 1014 or section 1022, if applicable.
* * * * *
    (g) * * *
    (3) Application of section 1022. The provisions of paragraph (c)(2) 
of this section relating to section 1022 are effective on and after 
January 19, 2017.

0
Par. 20. Section 1.467-7 is amended by revising paragraph (c)(2) and 
revising the first sentence of paragraph (c)(4) to read as follows:


Sec.  1.467-7  Section 467 recapture and other rules relating to 
dispositions and modifications.

* * * * *
    (c) * * *
    (2) Dispositions at death. Paragraph (a) of this section does not 
apply to a disposition if the basis of the property in the hands of the 
transferee is determined under section 1014(a) or section 1022. 
However, see paragraph (c)(4) of this section for dispositions of 
property subject to section 1022 by transferees. This paragraph (c)(2) 
does not apply to property that constitutes a right to receive an item 
of income in respect of a decedent. See sections 691, 1014(c), and 
1022(f).
* * * * *
    (4) * * * If the recapture amount with respect to a disposition of 
property (the first disposition) is limited under paragraph (c)(1) or 
(c)(3) of this section, or under paragraph (c)(2) of this section 
because the basis of the property in the hands of the transferee is 
determined under section 1022, and the transferee subsequently disposes 
of the property in a transaction to which paragraph (a) of this section 
applies, the prior understated inclusion determined under paragraph 
(b)(2) of this section is computed by taking into account the amounts 
attributable to the period of the transferor's ownership of the 
property prior to the first disposition. * * *
* * * * *

0
Par. 21. Section 1.467-9 is amended by revising the section heading and 
adding paragraph (f) to read as follows:


Sec.  1.467-9  Effective/applicability dates and automatic method 
changes for certain agreements.

* * * * *
    (f) Application of section 1022. The provisions of Sec.  1.467-
7(c)(2) and (4) relating to section 1022 are effective on and after 
January 19, 2017.

0
Par. 22. Section 1.617-3 is amended by revising paragraph (d)(5)(ii)(b) 
to read as follows:


Sec.  1.617-3  Recapture of exploration expenditures.

* * * * *
    (d) * * *
    (5) * * *
    (ii) * * *
    (b) The transactions referred to in paragraph (d)(5)(ii)(a) of this 
section are:
    (1) A disposition that is in part a sale or exchange and in part a 
gift;
    (2) A disposition that is described in section 617(d) through the 
incorporation by reference of the provisions of section 1245(b)(3) 
(relating to certain tax free transactions); or
    (3) A transfer at death where basis of property in the hands of the 
transferee is determined under section 1022.
* * * * *

[[Page 6239]]


0
Par. 23. Section 1.617-4 is amended by revising the second sentence of 
paragraph (c)(1)(i) to read as follows:


Sec.  1.617-4  Treatment of gain from disposition of certain mining 
property.

* * * * *
    (c) * * *
    (1)(i) * * * For purposes of this paragraph (c), the term gift 
means, except to the extent that paragraph (c)(1)(ii) of this section 
applies, a transfer of mining property that, in the hands of the 
transferee, has a basis determined under the provisions of section 
1015(a) or 1015(d) (relating to basis of property acquired by gift) or 
section 1022 (relating to the basis of property acquired from certain 
decedents who died in 2010). * * *
* * * * *

0
Par. 24. Section 1.617-5 is added to read as follows:


Sec.  1.617-5  Effective/applicability date.

    Sections 1.617-3 and 1.617-4 apply on and after January 19, 2017. 
For rules before January 19, 2017, see Sec. Sec.  1.617-3 and 1.617-4 
as contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 25. Section 1.684-3 is amended by revising paragraph (c) to read 
as follows:


Sec.  1.684-3  Exceptions to general rule of gain recognition.

* * * * *
    (c) Certain transfers at death--(1) Section 1014 basis. The general 
rule of gain recognition under Sec.  1.684-1 shall not apply to any 
transfer of property to a foreign trust or foreign estate or, in the 
case of a transfer of property by a U.S. transferor decedent dying in 
2010, to a foreign trust, foreign estate, or a nonresident alien, by 
reason of death of the U.S. transferor, if the basis of the property in 
the hands of the transferee is determined under section 1014(a).
    (2) Section 1022 basis election. For U.S. transferor decedents 
dying in 2010, the general rule of gain recognition under Sec.  1.684-1 
shall apply to any transfer of property by reason of death of the U.S. 
transferor if the basis of the property in the hands of the foreign 
trust, foreign estate, or the nonresident alien individual is 
determined under section 1022. The gain on the transfer shall be 
calculated as set out under Sec.  1.684-1(a), except that adjusted 
basis will reflect any increases allocated to such property under 
section 1022.
* * * * *

0
Par. 26. Section 1.684-5 is revised to read as follows:


Sec.  1.684-5   Effective/applicability dates.

    (a) Sections 1.684-1 through 1.684-4 apply to transfers of property 
to foreign trusts and foreign estates after August 7, 2000, except as 
provided in paragraph (b) of this section.
    (b) In the case a U.S. transferor decedent dying in 2010, Sec.  
1.684-3(c) applies to transfers of property to foreign trusts, foreign 
estates, and nonresident aliens after December 31, 2009, and before 
January 1, 2011.

0
Par. 27. Section 1.691(a)-3 is amended by revising the last two 
sentences of paragraph (a) and adding paragraph (c) to read as follows:


Sec.  1.691(a)-3   Character of gross income.

    (a) * * * The provisions of section 1014(a), relating to the basis 
of property acquired from a decedent, and section 1022, relating to the 
basis of property acquired from certain decedents who died in 2010, do 
not apply to these amounts in the hands of the estate and such persons. 
See sections 1014(c) and 1022(f).
* * * * *
    (c) Effective/applicability dates. The last two sentences of 
paragraph (a) of this section apply on and after January 19, 2017. For 
rules before January 19, 2017, see Sec.  1.691(a)-3 as contained in 26 
CFR part 1 revised as of April 1, 2016.

0
Par. 28. Section 1.742-1 is revised to read as follows:


Sec.  1.742-1  Basis of transferee partner's interest.

    (a) In general. The basis to a transferee partner of an interest in 
a partnership shall be determined under the general basis rules for 
property provided by part II (section 1011 and following), Subchapter 
O, Chapter 1 of the Internal Revenue Code. Thus, the basis of a 
purchased interest will be its cost. Generally, the basis of a 
partnership interest acquired from a decedent is the fair market value 
of the interest at the date of his death or at the alternate valuation 
date, increased by his estate's or other successor's share of 
partnership liabilities, if any, on that date, and reduced to the 
extent that such value is attributable to items constituting income in 
respect of a decedent (see section 753 and Sec. Sec.  1.706-1(c)(3)(v) 
and 1.753-1(b)) under section 691. See section 1014(c). However, the 
basis of a partnership interest acquired from a decedent is determined 
under section 1022 if the decedent died in 2010 and the decedent's 
executor elected to have section 1022 apply to the decedent's estate. 
For basis of contributing partner's interest, see section 722. The 
basis so determined is then subject to the adjustments provided in 
section 705.
    (b) Effective/applicability date. This section applies on and after 
January 19, 2017. For rules before January 19, 2017, see Sec.  1.742-1 
as contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 29. Section 1.743-1 is amended by revising paragraphs (k)(2)(ii) 
and (l) to read as follows:


Sec.  1.743-1   Optional adjustment to basis of partnership property.

* * * * *
    (k) * * *
    (2) * * *
    (ii) Special rule. A transferee that acquires, on the death of a 
partner, an interest in a partnership with an election under section 
754 in effect for the taxable year of the transfer, must notify the 
partnership, in writing, within one year of the death of the deceased 
partner. The written notice to the partnership must be signed under 
penalties of perjury and must include the names and addresses of the 
deceased partner and the transferee, the taxpayer identification 
numbers of the deceased partner and the transferee, the relationship 
(if any) between the transferee and the transferor, the deceased 
partner's date of death, the date on which the transferee became the 
owner of the partnership interest, the fair market value of the 
partnership interest on the applicable date of valuation set forth in 
section 1014 or section 1022, the manner in which the fair market value 
of the partnership interest was determined, and the carryover basis as 
adjusted under section 1022 (if applicable).
* * * * *
    (l) Effective/applicability date. The provisions in this section 
apply to transfers of partnership interests that occur on or after 
December 15, 1999. The provisions of this section relating to section 
1022 are effective on and after January 19, 2017.

0
Par. 30. Section 1.755-1 is amended by:
0
1. Revising paragraphs (a)(4)(i)(C) and the first sentence of 
(b)(4)(i).
0
2. Revising the heading of paragraph (e) and paragraph (e)(2).
    The revisions read as follows:


Sec.  1.755-1  Rules for allocation of basis.

    (a) * * *
    (4) * * *
    (i) * * *
    (C) Income in respect of a decedent. Solely for the purpose of 
determining partnership gross value under this paragraph (a)(4)(i), 
where a partnership interest is transferred as a result of the death of 
a partner, the transferee's basis

[[Page 6240]]

in its partnership interest is determined without regard to section 
1014(c) or section 1022(f), and is deemed to be adjusted for that 
portion of the interest, if any, that is attributable to items 
representing income in respect of a decedent under section 691.
* * * * *
    (b) * * *
    (4) * * *
    (i) * * * Where a partnership interest is transferred as a result 
of the death of a partner, under section 1014(c) or section 1022(f), 
the transferee's basis in its partnership interest is not adjusted for 
that portion of the interest, if any, that is attributable to items 
representing income in respect of a decedent under section 691. * * *
* * * * *
    (e) Effective/applicability dates. * * *
    (2) Special rules. Paragraphs (a) and (b)(3)(iii) of this section 
apply to transfers of partnership interests and distributions of 
property from a partnership that occur on or after June 9, 2003. The 
provisions of paragraphs (a)(4)(i)(C) and (b)(4)(i) of this section 
relating to section 1022 are effective on and after the date January 
19, 2017.

0
Par. 31. Section 1.995-4 is amended by revising the first sentence of 
paragraph (d)(2) and adding paragraph (f) to read as follows:


Sec.  1.995-4  Gain on disposition of stock in a DISC.

* * * * *
    (d) * * *
    (2) * * * For purposes of this section, the period during which a 
shareholder has held stock includes the period he is considered to have 
held it by reason of the application of section 1223 and, if his basis 
is determined in whole or in part under the provisions of section 
1014(d) (relating to special rule for DISC stock acquired from 
decedent) or section 1022 (relating to property acquired from certain 
decedents who died in 2010), the holding period of the decedent. * * *
* * * * *
    (f) Effective/applicability date. This section applies on and after 
January 19, 2017. For rules before January 19, 2017, see Sec.  1.995-4 
as contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 32. Section 1.1001-1 is amended by revising the last sentence of 
paragraph (a), revising paragraph (f)(1), and adding paragraph (i) to 
read as follows:


Sec.  1.1001-1   Computation of gain or loss.

    (a) * * * Section 1001(e) and paragraph (f) of this section 
prescribe the method of computing gain or loss upon the sale or other 
disposition of a term interest in property the adjusted basis (or a 
portion) of which is determined pursuant, or by reference, to section 
1014 (relating to the basis of property acquired from a decedent), 
section 1015 (relating to the basis of property acquired by gift or by 
a transfer in trust), or section 1022 (relating to the basis of 
property acquired from certain decedents who died in 2010).
* * * * *
    (f) * * *
    (1) General rule. Except as otherwise provided in paragraph (f)(3) 
of this section, for purposes of determining gain or loss from the sale 
or other disposition after October 9, 1969, of a term interest in 
property (as defined in paragraph (f)(2) of this section), a taxpayer 
shall not take into account that portion of the adjusted basis of such 
interest that is determined pursuant, or by reference, to section 1014 
(relating to the basis of property acquired from a decedent), section 
1015 (relating to the basis of property acquired by gift or by a 
transfer in trust), or section 1022 (relating to the basis of property 
acquired from certain decedents who died in 2010) to the extent that 
such adjusted basis is a portion of the adjusted uniform basis of the 
entire property (as defined in Sec.  1.1014-5). Where a term interest 
in property is transferred to a corporation in connection with a 
transaction to which section 351 applies and the adjusted basis of the 
term interest:
    (i) Is determined pursuant to sections 1014, 1015, or 1022; and
    (ii) Is also a portion of the adjusted uniform basis of the entire 
property, a subsequent sale or other disposition of such term interest 
by the corporation will be subject to the provisions of section 1001(e) 
and this paragraph (f) to the extent that the basis of the term 
interest so sold or otherwise disposed of is determined by reference to 
its basis in the hands of the transferor as provided by section 362(a). 
See paragraph (f)(2) of this section for rules relating to the 
characterization of stock received by the transferor of a term interest 
in property in connection with a transaction to which section 351 
applies. That portion of the adjusted uniform basis of the entire 
property that is assignable to such interest at the time of its sale or 
other disposition shall be determined under the rules provided in Sec.  
1.1014-5. Thus, gain or loss realized from a sale or other disposition 
of a term interest in property shall be determined by comparing the 
amount of the proceeds of such sale with that part of the adjusted 
basis of such interest that is not a portion of the adjusted uniform 
basis of the entire property.
* * * * *
    (i) Effective/applicability date. Except as provided in paragraphs 
(g) and (h) of this section, this section applies on and after January 
19, 2017. For rules before January 19, 2017, see Sec.  1.1001-1 as 
contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 33. Section 1.1014-1 is amended by revising paragraph (a) and 
adding paragraph (d) to read as follows:


Sec.  1.1014-1   Basis of property acquired from a decedent.

    (a) General rule. The purpose of section 1014 is, in general, to 
provide a basis for property acquired from a decedent that is equal to 
the value placed upon such property for purposes of the federal estate 
tax. Accordingly, the general rule is that the basis of property 
acquired from a decedent is the fair market value of such property at 
the date of the decedent's death, or, if the decedent's executor so 
elects, at the alternate valuation date prescribed in section 2032, or 
in section 811(j) of the Internal Revenue Code (Code) of 1939. However, 
the basis of property acquired from certain decedents who died in 2010 
is determined under section 1022, if the decedent's executor made an 
election under section 301(c) of the Tax Relief, Unemployment Insurance 
Reauthorization, and Job Creation Act of 2010, Public Law 111-312 (124 
Stat. 3296, 3300 (2010)). See section 1022. Property acquired from a 
decedent includes, principally, property acquired by bequest, devise, 
or inheritance, and, in the case of decedents dying after December 31, 
1953, property required to be included in determining the value of the 
decedent's gross estate under any provision of the Code of 1954 or the 
Code of 1939. The general rule governing basis of property acquired 
from a decedent, as well as other rules prescribed elsewhere in this 
section, shall have no application if the property is sold, exchanged, 
or otherwise disposed of before the decedent's death by the person who 
acquired the property from the decedent. For general rules on the 
applicable valuation date where the executor of a decedent's estate 
elects under section 2032, or under section 811(j) of the Code of 1939, 
to value the decedent's gross estate at the alternate valuation date 
prescribed in such sections, see Sec.  1.1014-3(e).
* * * * *
    (d) Effective/applicability date. This section applies on and after 
January 19, 2017. For rules before January 19, 2017,

[[Page 6241]]

see Sec.  1.1014-1 as contained in 26 CFR part 1 revised as of April 1, 
2016.

0
Par. 34. Section 1.1014-4 is amended by revising the first sentence of 
paragraph (a)(1), revising the second sentence of paragraph (a)(2), and 
adding paragraph (d) to read as follows:


Sec.  1.1014-4  Uniformity of basis; adjustment to basis.

    (a) * * *
    (1) The basis of property acquired from a decedent, as determined 
under section 1014(a) or section 1022, is uniform in the hands of every 
person having possession or enjoyment of the property at any time under 
the will or other instrument or under the laws of descent and 
distribution. * * *
    (2) * * * Accordingly, there is a common acquisition date for all 
titles to property acquired from a decedent within the meaning of 
section 1014 or section 1022, and, for this reason, a common or uniform 
basis for all such interests. * * *
* * * * *
    (d) Effective/applicability date. This section applies on and after 
January 19, 2017. For rules before January 19, 2017, see Sec.  1.1014-4 
as contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 35. Section 1.1014-5 is amended by revising paragraph (b) to read 
as follows:


Sec.  1.1014-5   Gain or loss.

* * * * *
    (b) Sale or other disposition of certain term interests--(1) In 
general. In determining gain or loss from the sale or other disposition 
after October 9, 1969, of a term interest in property (as defined in 
Sec.  1.1001-1(f)(2)) the adjusted basis of which is determined 
pursuant, or by reference, to section 1014 (relating to the basis of 
property acquired from a decedent), section 1015 (relating to the basis 
of property acquired by gift or by a transfer in trust), or section 
1022 (relating to the basis of property acquired from certain decedents 
who died in 2010), that part of the adjusted uniform basis assignable 
under the rules of paragraph (a) of this section to the interest sold 
or otherwise disposed of shall be disregarded to the extent and in the 
manner provided by section 1001(e) and Sec.  1.1001-1(f).
    (2) Effective/applicability date. The provisions of paragraph 
(b)(1) of this section relating to section 1022 are effective on and 
after January 19, 2017. For rules before January 19, 2017, see Sec.  
1.1014-5 as contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 36. Section 1.1223-1 is amended by adding a sentence to the end of 
paragraph (b) and adding paragraph (l) to read as follows:


Sec.  1.1223-1  Determination of period for which capital assets are 
held.

* * * * *
    (b) * * * Similarly, the period for which property acquired from a 
decedent who died in 2010 was held by the decedent must be included in 
determining the period during which the property was held by the 
recipient, if the recipient's basis in the property is determined under 
section 1022.
* * * * *
    (l) Effective/applicability date. This section applies January 19, 
2017. For rules before January 19, 2017, see Sec.  1.1223-1 as 
contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 37. Section 1.1245-2 is amended by revising paragraph (c)(2)(ii) 
and adding paragraph (d) to read as follows:


Sec.  1.1245-2  Definition of recomputed basis.

* * * * *
    (c) * * *
    (2) * * *
    (ii) The transactions referred to in paragraph (c)(2)(i) of this 
section are:
    (A) A disposition that is in part a sale or exchange and in part a 
gift (see Sec.  1.1245-4(a)(3));
    (B) A disposition (other than a disposition to which section 
1245(b)(6)(A) applies) that is described in section 1245(b)(3) 
(relating to certain tax-free transactions);
    (C) An exchange described in Sec.  1.1245-4(e)(2) (relating to 
transfers described in section 1081(d)(1)(A)); or
    (D) A transfer at death where the basis of property in the hands of 
the transferee is determined under section 1022.
* * * * *
    (d) Effective/applicability date. This section applies on and after 
January 19, 2017. For rules before January 19, 2017, see Sec.  1.1245-2 
as contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 38. Section 1.1245-3 is amended by revising paragraph (a)(3) and 
adding paragraph (d) to read as follows:


Sec.  1.1245-3   Definition of section 1245 property.

    (a) * * *
    (3) Even though property may not be of a character subject to the 
allowance for depreciation in the hands of the taxpayer, such property 
may nevertheless be section 1245 property if the taxpayer's basis for 
the property is determined by reference to its basis in the hands of a 
prior owner of the property and such property was of a character 
subject to the allowance for depreciation in the hands of such prior 
owner, or if the taxpayer's basis for the property is determined by 
reference to the basis of other property that in the hands of the 
taxpayer was property of a character subject to the allowance for 
depreciation, or if the taxpayer's basis for the property is determined 
under section 1022 and such property was of a character subject to the 
allowance for depreciation in the hands of the decedent. Thus, for 
example, if a father uses an automobile in his trade or business during 
a period after December 31, 1961, and then gives the automobile to his 
son as a gift for the son's personal use, the automobile is section 
1245 property in the hands of the son.
* * * * *
    (d) Effective/applicability date. This section applies on and after 
January 19, 2017. For rules before January 19, 2017, see Sec.  1.1245-3 
as contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 39. Section 1.1245-4 is amended by revising the second sentence of 
paragraph (a)(1) and adding paragraph (i) to read as follows:


Sec.  1.1245-4  Exceptions and Limitations.

    (a) * * *
    (1) * * * For purposes of this paragraph (a), the term gift means, 
except to the extent that paragraph (a)(3) of this section applies, a 
transfer of property that, in the hands of the transferee, has a basis 
determined under the provisions of section 1015(a) or 1015(d) (relating 
to basis of property acquired by gifts) or section 1022 (relating to 
basis of property acquired from certain decedents who died in 2010). * 
* *
* * * * *
    (i) Effective/applicability date. This section applies on and after 
January 19, 2017. For rules before January 19, 2017, see Sec.  1.1245-4 
as contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 40. Section 1.1250-4 is amended by adding paragraphs (c)(5) and 
(h) to read as follows:


Sec.  1.1250-4  Holding period.

* * * * *
    (c) * * *
    (5) A transfer at death where the basis of the property in the 
hands of the transferee is determined under section 1022.
* * * * *
    (h) Effective/applicability date. This section applies on and after 
January 19, 2017. For rules before January 19, 2017, see Sec.  1.1250-4 
as contained in 26 CFR part 1 revised as of April 1, 2016.

0
Par. 41. Section 1.1254-2 is amended by revising the second sentence of 
paragraph (a)(1) to read as follows:

[[Page 6242]]

Sec.  1.1254-2  Exceptions and limitations.

    (a) * * *
    (1) * * * For purposes of this paragraph (a), the term gift means, 
except to the extent that paragraph (a)(2) of this section applies, a 
transfer of natural resource recapture property that, in the hands of 
the transferee, has a basis determined under the provisions of section 
1015(a) or 1015(d) (relating to basis of property acquired by gift) or 
section 1022 (relating to the basis of property acquired from certain 
decedents who died in 2010). * * *
* * * * *

0
Par. 42. Section 1.1254-3 is amended by revising paragraphs (b)(2)(ii) 
and (iii) and adding paragraph (b)(2)(iv) to read as follows:


Sec.  1.1254-3  Section 1254 costs immediately after certain 
acquisitions.

* * * * *
    (b) * * *
    (2) * * *
    (ii) A transaction described in section 1041(a);
    (iii) A disposition described in Sec.  1.1254-2(c)(3) (relating to 
certain tax-free transactions); or
    (iv) A transfer at death where basis of property in the hands of 
the transferee is determined under section 1022.
* * * * *

0
Par. 43. Section 1.1254-4 is amended by revising paragraph (e)(4) 
introductory text to read as follows:


Sec.  1.1254-4   Special rules for S corporations and their 
shareholders.

* * * * *
    (e) * * *
    (4) * * * If stock is acquired in a transfer that is a gift, in a 
transfer that is a part sale or exchange and part gift, in a transfer 
that is described in section 1041(a), or in a transfer at death where 
the basis of property in the hands of the transferee is determined 
under section 1022, the amount of section 1254 costs with respect to 
the property held by the corporation in the acquiring shareholder's 
hands immediately after the transfer is an amount equal to--
* * * * *

0
Par. 44. Section 1.1254-5 is amended by revising paragraph (c)(2)(iv) 
introductory text to read as follows:


Sec.  1.1254-5  Special rules for partnerships and their partners.

* * * * *
    (c) * * *
    (2) * * *
    (iv) * * * If an interest in a partnership is transferred in a 
transfer that is a gift, in a transfer that is a part sale or exchange 
and part gift, in a transfer that is described in section 1041(a), or 
in a transfer at death where the basis of property in the hands of the 
transferee is determined under section 1022, the amount of the 
transferee partner's section 1254 costs with respect to property held 
by the partnership immediately after the transfer is an amount equal 
to--
* * * * *

0
Par. 45. Section 1.1254-6 is revised to read as follows:


Sec.  1.1254-6  Effective/applicability date.

    (a) Sections 1.1254-1 through 1.1254-3 and 1.1254-5 are effective 
with respect to any disposition of natural resource recapture property 
occurring after March 13, 1995. The rule in Sec.  1.1254-
1(b)(2)(iv)(A)(2), relating to a nonoperating mineral interest carved 
out of an operating mineral interest with respect to which an 
expenditure has been deducted, is effective with respect to any 
disposition occurring after March 13, 1995, of property (within the 
meaning of section 614) that is placed in service by the taxpayer after 
December 31, 1986. Section 1.1254-4 applies to dispositions of natural 
resource recapture property by an S corporation (and a corporation that 
was formerly an S corporation) and dispositions of S corporation stock 
occurring on or after October 10, 1996. Sections 1.1254-2(d)(1)(ii) and 
1.1254-3(b)(1)(i), (b)(1)(ii), (d)(1)(i), and (d)(1)(ii) are effective 
for dispositions of property occurring on or after October 10, 1996.
    (b) The provisions of Sec. Sec.  1.1254-2(a)(1), 1.1254-3(b)(2), 
1.1254-4(e)(4), and 1.1254-5(c)(2)(iv) that relate to section 1022 are 
effective on and after January 19, 2017.

0
Par. 46. Section 1.1296-1 is amended by revising paragraphs (d)(4) and 
(j) to read as follows:


Sec.  1.1296-1  Mark to market election for marketable stock.

* * * * *
    (d) * * *
    (4) Stock acquired from a decedent. In the case of stock of a PFIC 
that is acquired by bequest, devise, or inheritance (or by the 
decedent's estate) and with respect to which a section 1296 election 
was in effect as of the date of the decedent's death, notwithstanding 
section 1014 or section 1022, the basis of such stock in the hands of 
the person so acquiring it shall be the adjusted basis of such stock in 
the hands of the decedent immediately before his death (or, if lesser, 
the basis that would have been determined under section 1014 or section 
1022 without regard to this paragraph (d)).
* * * * *
    (j) Effective/applicability date. The provisions in this section 
are applicable for taxable years beginning on or after May 3, 2004. The 
provisions of paragraph (d)(4) of this section relating to section 1022 
are effective on and after January 19, 2017.

0
Par. 47. Section 1.1312-7 is amended by revising paragraph (b) and 
adding paragraph (d) to read as follows:


Sec.  1.1312-7  Basis of property after erroneous treatment of a prior 
transaction.

* * * * *
    (b)(1) For this section to apply, the taxpayer with respect to whom 
the erroneous treatment occurred must be:
    (i) The taxpayer with respect to whom the determination is made; or
    (ii) A taxpayer who acquired title to the property in the 
erroneously treated transaction and from whom, mediately or 
immediately, the taxpayer with respect to whom the determination is 
made derived title in such a manner that he will have a basis 
ascertained by reference to the basis in the hands of the taxpayer who 
acquired title to the property in the erroneously treated transaction; 
or
    (iii) A taxpayer who had title to the property at the time of the 
erroneously treated transaction and from whom, mediately or 
immediately, the taxpayer with respect to whom the determination is 
made derived title, if the basis of the property in the hands of the 
taxpayer with respect to whom the determination is made is determined 
under section 1015(a) (relating to the basis of property acquired by 
gift) or section 1022 (relating to the basis of property acquired from 
certain decedents who died in 2010).
    (2) No adjustment is authorized with respect to the transferor of 
the property in a transaction upon which the basis of the property 
depends, when the determination is with respect to the original 
transferee or a subsequent transferee of the original transferee.
* * * * *
    (d) Effective/applicability date. This section applies on and after 
January 19, 2017. For rules before January 19, 2017,

[[Page 6243]]

see Sec.  1.1312-7 as contained in 26 CFR part 1 revised as of April 1, 
2016.

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: November 11, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2017-01365 Filed 1-18-17; 8:45 am]
 BILLING CODE 4830-01-P