[Federal Register Volume 79, Number 141 (Wednesday, July 23, 2014)]
[Rules and Regulations]
[Pages 42679-42680]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17335]



[[Page 42679]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9681]
RIN 1545-BL06


Partnerships; Start-Up Expenditures; Organization and Syndication 
Fees

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations concerning the 
deductibility of start-up expenditures and organizational expenses for 
partnerships. The final regulations provide guidance regarding the 
deductibility of start-up expenditures and organizational expenses for 
partnerships following a termination of a partnership under section 
708(b)(1)(B). These final regulations affect partnerships that undergo 
section 708(b)(1)(B) terminations and their partners.

DATES: These regulations are effective on July 23, 2014.

FOR FURTHER INFORMATION CONTACT: Rachel S. Smith, (202) 317-6852 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains final amendments to the Income Tax 
Regulations (26 CFR part 1) under section 708(b) of the Internal 
Revenue Code (Code). On December 9, 2013, proposed regulations (REG-
126285-12, 78 FR 73753) were published in the Federal Register. The 
proposed regulations were intended to eliminate uncertainty regarding 
whether a partnership is entitled to immediately deduct any unamortized 
start-up and organizational expenses upon its technical termination. 
Specifically, the proposed regulations provided that the new 
partnership was required to continue to amortize those expenditures 
using the same amortization period adopted by the terminating 
partnership. No written or electronic comments were received in 
response to the notice of proposed rulemaking. No requests for a public 
hearing were received, and accordingly, no hearing was held.

Explanation of Provisions

    The Treasury decision adopts the proposed regulations with one 
minor change for clarity. Specifically, in Sec.  1.708-1(b)(6)(i), 
``using the same amortization period adopted by the terminating 
partnership'' has been changed to ``over the remaining portion of the 
amortization period adopted by the terminating partnership'' to make 
clear that the amortization period does not restart. No substantive 
change is intended.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13563. Therefore, a regulatory 
assessment is not required. It has also 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 a collection of information on small entities, the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to 
section 7805(f) of the Code, the notice of proposed rulemaking 
preceding these regulations was submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small businesses. No comments were received.

Drafting Information

    The principal author of these regulations is Rachel S. Smith, IRS 
Office of the Associate Chief Counsel (Passthroughs and Special 
Industries). However, other personnel from the IRS and the Treasury 
Department participated in their development.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

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 1.195-2 is added to read as follows:


Sec.  1.195-2  Technical termination of a partnership.

    (a) In general. If a partnership that has elected to amortize 
start-up expenditures under section 195(b) and Sec.  1.195-1 terminates 
in a transaction (or a series of transactions) described in section 
708(b)(1)(B) or Sec.  1.708-1(b)(2), the termination shall not be 
treated as resulting in a disposition of the partnership's trade or 
business for purposes of section 195(b)(2). See Sec.  1.708-1(b)(6) for 
rules concerning the treatment of these start-up expenditures by the 
new partnership.
    (b) Effective/applicability date. This section applies to a 
technical termination of a partnership under section 708(b)(1)(B) that 
occurs on or after December 9, 2013.

0
Par. 3. Section 1.708-1 is amended by adding paragraph (b)(6) to read 
as follows:


Sec.  1.708-1  Continuation of partnership.

* * * * *
    (b) * * *
    (6) Treatment of certain start-up or organizational expenses 
following a technical termination--(i) In general. If a partnership 
that has elected to amortize start-up expenditures under section 195(b) 
or organizational expenses under section 709(b)(1) terminates in a 
transaction (or a series of transactions) described in section 
708(b)(1)(B) or paragraph (b)(2) of this section, the new partnership 
must continue to amortize those expenditures over the remaining portion 
of the amortization period adopted by the terminating partnership. See 
section 195 and Sec.  1.195-1 for rules concerning the amortization of 
start-up expenditures and section 709 and Sec.  1.709-1 for rules 
concerning the amortization of organizational expenses.
    (ii) Effective/applicability date. This paragraph (b)(6) applies to 
a technical termination of a partnership under section 708(b)(1)(B) 
that occurs on or after December 9, 2013.

0
Par. 4. Section 1.709-1 is amended by:
0
1. Redesignating paragraph (b)(3) as (b)(3)(i).
0
2. Adding a heading to newly designated paragraph (b)(3)(i).
0
3. Adding paragraph (b)(3)(ii).
0
4. Adding a sentence at the end of paragraph (b)(5).
    The additions read as follows:


Sec.  1.709-1  Treatment of organization and syndication costs.

* * * * *
    (b) * * *
    (3) Liquidation of partnership--(i) In general. * * *
    (ii) Technical termination of a partnership. If a partnership that 
has elected to amortize organizational costs under section 709(b) 
terminates in a transaction (or a series of transactions) described in 
section 708(b)(1)(B) or Sec.  1.708-1(b)(2), the termination shall not 
be treated as resulting in a liquidation of the partnership for 
purposes of section 709(b)(2). See Sec.  1.708-1(b)(6) for rules 
concerning the

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treatment of these organizational costs by the new partnership.
* * * * *
    (5) * * * Paragraph (b)(3)(ii) of this section applies to a 
technical termination of a partnership under section 708(b)(1)(B) that 
occurs on or after December 9, 2013.

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: May 29, 2014.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2014-17335 Filed 7-22-14; 8:45 am]
BILLING CODE 4830-01-P