[Federal Register Volume 81, Number 249 (Wednesday, December 28, 2016)]
[Rules and Regulations]
[Pages 95471-95472]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31411]



Internal Revenue Service

26 CFR Part 1

[TD 9792]
RIN 1545-BJ48

United States Property Held by Controlled Foreign Corporations in 
Transactions Involving Partnerships; Rents and Royalties Derived in the 
Active Conduct of a Trade or Business; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendment.


SUMMARY: This document contains corrections to the final regulations 
(TD 9792) that were published in the Federal Register on Thursday, 
November 3, 2016 (81 FR 76497). The final regulations provide rules 
regarding the treatment as United States property of property held by a 
controlled foreign corporation (CFC) in connection with certain 
transactions involving partnerships.

DATES: This correction is effective December 28, 2016 and is applicable 
on or after November 3, 2016.

FOR FURTHER INFORMATION CONTACT: Rose E. Jenkins, at (202) 317-6934 
(not a toll-free number).



    The final regulations (TD 9792) that are the subject of these 
corrections are under sections 954 and 956 of the Internal Revenue 

Need for Correction

    As published, the final regulations (TD 9792) 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.

Amendments to the Regulations

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:


Paragraph 1. The authority citation for part 1 is amended by deleting 
the entry for Sec.  1.956-3T to read in part as follows:

    Authority: 26 U.S.C. 7805 * * *
* * * * *

Sec.  1.954-2  [Amended]

Par. 2. Section 1.954-2 is amended by removing paragraph (j).

Par. 3. Section 1.956-1T is amended by revising the section heading and 
the paragraph headings for paragraphs (a)(5) and (f) to read as 

Sec.  1.956-1T  Shareholder's pro rata share of the average of the 
amounts of United States property held by a controlled foreign 
corporation (temporary).

    (a) * * *
    (5) Exclusion for certain recourse obligations. * * *
* * * * *
    (f) Effective/applicability date. * * *
* * * * *

Par. 4. Section 1.956-4 is amended by revising paragraphs (b)(2)(ii), 
(b)(3) introductory text, and (c)(3)(i) introductory text, and in 
paragraph (c)(4), Example 3, by removing ``U.S.C.'' each place that it 
appears and adding in its place, ``USP2''.
    The revisions read as follows:

Sec.  1.956-4  Certain rules applicable to partnerships.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Special allocations. For purposes of paragraph (b)(1) of this 
section, if a partnership agreement provides for the allocation of book 
income (or, where appropriate, book gain) from a subset of the property 
of the partnership to a partner other than in accordance with the 
partner's liquidation value percentage in a particular taxable year (a 
special allocation), then the partner's attributable share of that 
property is determined solely by reference to the partner's special 
allocation with respect to the property, provided the special 
allocation will be respected for federal income tax purposes under 
section 704(b) and the regulations thereunder and does not have a 
principal purpose of avoiding the purposes of section 956.
    (3) Examples. The following examples illustrate the rules of this 
paragraph (b): * * *
* * * * *
    (c) * * *
    (3) * * *
    (i) General rule. For purposes of determining a partner's share of 
a foreign partnership's obligation under section 956, if the foreign 
partnership distributes an amount of money or property to a partner 
that is related to a controlled foreign corporation within the meaning 
of section 954(d)(3) and whose obligation would be United States 
property if held (or if treated as held) by the controlled foreign

[[Page 95472]]

corporation, and the foreign partnership would not have made the 
distribution but for a funding of the partnership through an obligation 
held (or treated as held) by the controlled foreign corporation, 
notwithstanding Sec.  1.956-1(e), the partner's share of the 
partnership obligation is the greater of--
* * * * *

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2016-31411 Filed 12-27-16; 8:45 am]