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