[Federal Register Volume 79, Number 62 (Tuesday, April 1, 2014)]
[Rules and Regulations]
[Pages 18159-18161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-07160]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9644]
RIN 1545-BK44
Net Investment Income Tax; Correction
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Correcting amendment.
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SUMMARY: This document contains corrections to final regulations (TD
9644) that were published in the Federal Register on Monday, December
2, 2013 (78 FR 72394). The final regulations provide guidance on the
general application of the Net Investment Income Tax and the
computation of Net Investment Income.
DATES: This correction is effective April 1, 2014 and applicable
December 2, 2013.
FOR FURTHER INFORMATION CONTACT: Adrienne M. Mikolashek, at (202) 317-
6852 (not a toll free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations (TD 9644) that are the subject of this
correction is under section 1411 of the Internal Revenue Code.
Need for Correction
As published, the final regulations (TD 9644) contain errors that
may prove to be misleading and are in need of clarification.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Correction of Publication
Accordingly, 26 CFR part 1 is corrected by making the following
correcting amendments:
PART 1--INCOME TAXES
0
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 1.469-11 is amended by revising the first sentence of
paragraph (b)(3)(iv)(C)(1) and the last sentence of paragraph
(b)(3)(iv)(C)(3) Example 4. to read as follows:
Sec. 1.469-11 Effective date and transition rules.
* * * * *
(b) * * *
(3) * * *
(iv) * * *
(C) * * * (1) * * * An individual, estate, or trust also may
regroup activities, in the manner described in paragraph (b)(3)(iv)(A)
of this section, on an amended return only if the changes reported on
such amended return cause the taxpayer to meet the Eligibility Criteria
for the first time beginning in the taxable year for which the amended
return is applicable and that the taxable year is not closed by the
[[Page 18160]]
period of limitations on assessments under section 6501. * * *
* * * * *
(3) * * *
Example 4. * * * Third, Y may file an original or an amended
return to regroup in a manner different from groupings in effect
prior to Year 1 and different from the Year 1 groupings (for
example, Y could choose to group Activity C and D into a single
activity, thus causing Y to have two groups; Group A-B and Group C-
D).
* * * * *
0
Par. 3. Section 1.1411-0 is amended by revising the entries in the
table of contents for Sec. 1.1411-3(c)(2)(ii) and (iii) to read as
follows:
Sec. 1.1411-0 Table of contents of provisions applicable to section
1411.
* * * * *
Sec. 1.1411-3 Application to Estates and Trusts.
* * * * *
(c) * * *
(2) * * *
(ii) Step two.
(iii) Step three.
* * * * *
0
Par. 4. Section 1.1411-2 is amended by revising the first sentence of
paragraph (b)(2) to read as follows:
Sec. 1.1411-2 Application to individuals.
* * * * *
(b) * * *
(2)
Example. During Year 1 (a year in which section 1411 is in
effect), A, an unmarried United States citizen, has modified
adjusted gross income (as defined in paragraph (c) of this section)
of $190,000, which includes $50,000 of net investment income. * * *
* * * * *
0
Par. 5. Section 1.1411-3 is amended by revising the second sentence of
paragraph (c)(3)(ii)(A) and the first sentence of paragraph
(c)(3)(iii)(B) to read as follows:
Sec. 1.1411-3 Application to estates and trusts.
* * * * *
(c) * * *
(3) * * *
(ii) * * * (A) * * * The undistributed net investment income for
the S portion is $27,600 and is determined as follows:
* * * * *
(iii) * * *
(B) The adjusted gross income for the ESBT is $40,000 and is
determined as follows: * * *
* * * * *
0
Par. 6. Section 1.1411-4 is amended as follows:
0
1. The first sentence of paragraph (d)(4)(i)(C) Example 2. (i) is
revised.
0
2. The language ``deduction'' in the last sentence of paragraph
(f)(2)(v) Example 1. (iv) is removed and ``deductions'' is added in its
place.
0
3. The language ``A'' in the third sentence of paragraph (f)(2)(v)
Example 2. (iii) is removed and ``A's'' is added in its place.
0
4. Paragraph (f)(3)(iii) is revised.
0
5. The language ``Sec. 1.171-2T(a)(4)(i)(C)'' in paragraph (f)(3)(vii)
is removed and ``Sec. 1.171-2(a)(4)(i)(C)'' is added in its place.
0
6. The second sentence of paragraph (f)(4)(ii) Example 1. (iii) is
revised.
0
7. The language ``one or more'' in paragraph (g)(7)(i) introductory
text is removed and ``a'' is added in its place.
0
8. The language ``activities'' in paragraph (g)(7)(i) introductory text
is removed and ``activity'' is added in its place.
0
9. Paragraph (h)(2) introductory text is revised.
0
10. The language ``.2'' in paragraph (h)(5) Example 1. (ii) is removed
and added in its place ``0.2''.
The revisions read as follows:
Sec. 1.1411-4 Definition of net investment income.
* * * * *
(d) * * *
(4) * * *
(i) * * *
(C) * * *
Example 2. * * * (i) PRS, a partnership for Federal income tax
purposes, operates an automobile dealership. * * *
* * * * *
(f) * * *
(3) * * *
(iii) Taxes described in section 164(a)(3). State, local, and
foreign income, war profits, and excess profit taxes described in
section 164(a)(3) that are allocable to net investment income pursuant
to paragraph (g)(1) of this section. Except to the extent specifically
expected from section 275(a)(4), foreign income, war profits, and
excess profit taxes are not allowed as deductions under section
164(a)(3) in determining net investment income if the taxpayer claims
the benefit of the foreign tax credit under section 901 with respect to
the same taxable year. For rules applicable to refunds of taxes
described in this paragraph, see paragraph (g)(2) of this section.
* * * * *
(4) * * *
(ii) * * *
Example 1. * * *
(iii) * * * Pursuant to paragraph (d) of this section, A takes
into account the $60,000 at ordinary loss from PRS and the $50,000
of long term capital gain in the computation of A's net gain. * * *
* * * * *
(h) * * *
(2) Applicable portion of a net operating loss. In any taxable year
beginning after December 31, 2012, in which a taxpayer incurs a net
operating loss, the applicable portion of such loss is the lesser of:
* * * * *
0
Par. 7. Section 1.1411-5 is amended by revising paragraph (b)(2)(i) and
(b)(2)(iii) to read as follows:
Sec. 1.1411-5 Trades or businesses to which tax applies.
* * * * *
(b) * * *
(2) * * * (i) Income and gain recharacterization. To the extent
that any income or gain from a trade or business is recharaterized as
``not from a passive activity'' by reason of Sec. 1.469-2T(f)(2),
Sec. 1.469-2(f)(5), or Sec. 1.469-2(f)(6), such trade or business
does not constitute a passive activity within the meaning of paragraph
(b)(1)(ii) of this section solely with respect to such recharaterized
income or gain.
* * * * *
(iii) Exception for certain portfolio recharacterizations. To the
extent that any income or gain from a trade or business is
recharacterized as ``not from a passive activity'' and is further
characterized as portfolio income under Sec. 1.469-2(f)(10) or Sec.
1.469-2(c)(2)(iii)(F), then such trade or business constitutes a
passive activity within the meaning of paragraph (b)(1)(ii) of this
section solely with respect to such recharacterized income or gain.
* * * * *
0
Par. 8. Section 1.1411-10 is amended as follows:
0
1. Revise paragraph (c)(5)(i)(B).
0
2. In paragraph (h) Example 2. (ii)(A), revise the first sentence.
The revisions read as follows:
Sec. 1.1411-10 Controlled foreign corporations and passive foreign
investment companies.
* * * * *
(c) * * *
(5) * * *
(i) * * *
(B) Decreasing the amount of investment income determined for
chapter 1 purposes under section 163(d)(4)(B) by the amount included in
gross income for chapter 1 purposes under section 951(a) or section
1293(a) that is attributable to a CFC or QEF with respect to which an
election under paragraph (g) of this section is not in effect; and
* * * * *
(h) * * *
Example 2. * * *
[[Page 18161]]
(ii) * * * (A) In 2016, A does not include the $15,000 section
951(a)(1)(A) income inclusion in A's net investment income under
section 1411(c)(1)(A)(i) and Sec. 1.1411-1(a)(1)(i). * * *
* * * * *
Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division,
Associate Chief Counsel, (Procedure and Administration).
[FR Doc. 2014-07160 Filed 3-31-14; 8:45 am]
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