Internal Revenue Bulletin 2015-34 (PDF rendition): IRS Revenue Rulings

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HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Notice 2015–54, page 210.
This notice announces that the Treasury Department and the
IRS intend to issue regulations under section 721(c) to ensure
that, when a U.S. person transfers certain property to a part-
nership that has foreign partners related to the transferor,
income or gain attributable to the property will be taken into
account by the transferor either immediately or periodically.
This notice also announces that the Treasury Department and
the IRS intend to issue regulations under sections 482 and
6662 applicable to controlled transactions involving partner-
ships to ensure the appropriate valuation of such transactions.
EMPLOYEE PLANS
Notice 2015–55, page 217.
This notice sets forth updates on the corporate bond monthly
yield curve, the corresponding spot segment rates for August
2015 used under § 417(e)(3)(D), the 24-month average seg-
ment rates applicable for August 2015, and the 30-year Trea-
sury rates. These rates reflect the application of
§ 430(h)(2)(C)(iv), which was added by the Moving Ahead for
Progress in the 21st Century Act, Public Law 112–141 (MAP–
21) and amended by section 2003 of the Highway and Trans-
portation Funding Act of 2014 (HATFA).
EXEMPT ORGANIZATIONS
Announcement 2015–21, page 220.
Revocation of IRC 501(c)(3) Organizations for failure to meet
the code section requirements. Contributions made to the
organizations by individual donors are no longer deductible
under IRC 170(b)(1)(A).
ESTATE TAX
Rev. Rul. 2015–18, page 209.
Special Use Value; Farms; Interest Rates. The 2015 interest
rates to be used in computing the special use value of farm real
property for which an election is made under section 2032A of
the Code are listed for estates of decedents.
Finding Lists begin on page ii.
Bulletin No. 2015–34
August 24, 2015

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings to
taxpayers or technical advice to Service field offices, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Sec-
retary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
August 24, 2015Bulletin No. 2015–34

Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
Section 2032A.—Valuation
of Certain Farm, Etc., Real
Property
26 CFR 20.2032A– 4: Method of valuing farm real
property.
Rev. Rul. 2015–18
This revenue ruling contains a list of
the average annual effective interest rates
on new loans under the Farm Credit Sys-
tem. This revenue ruling also contains a
list of the states within each Farm Credit
System Bank Territory.
Under § 2032A(e)(7)(A)(ii) of the In-
ternal Revenue Code, rates on new Farm
Credit System Bank loans are used in
computing the special use value of real
property used as a farm for which an
election is made under § 2032A. The rates
in Table 1 of this revenue ruling may be
used by estates that value farmland under
§ 2032A as of a date in 2015.
Average annual effective interest rates, cal-
culated in accordance with § 2032A(e)(7)(A)
and § 20.2032A– 4(e) of the Estate
Tax Regulations, to be used under
§ 2032A(e)(7)(A)(ii), are set forth in the
accompanying Table of Interest Rates
(Table 1). Thestates within each Farm
Credit System Bank Territory are set forth in
the accompanying Table of Farm Credit Sys-
tem Bank Territories (Table 2).
Rev. Rul. 81–170, 1981–1 C.B. 454,
contains an illustrative computation of an
average annual effective interest rate. The
rates applicable for valuation in 2014 are
in Rev. Rul. 2014 –21, 2014 –34 I.R.B.
381. For rate information for years prior to
2014, see Rev. Rul. 2013–19, 2013–39
I.R.B. 240, and other revenue rulings that
are referenced therein.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Lane Damazo of the Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). For further infor-
mation regarding this revenue ruling, con-
tact Lane Damazo at (202) 317-6859 (not
a toll-free number).
REV. RUL. 2015–18 TABLE 1
TABLE OF INTEREST RATES
(Year of Valuation 2015)
Farm Credit System Bank Servicing State in Which Property is LocatedRate
AgFirst, FCB ......................................................................................................................................................................... 5.21
AgriBank, FCB ..................................................................................................................................................................... 4.56
CoBank, ACB ....................................................................................................................................................................... 4.17
Texas, FCB............................................................................................................................................................................ 4.73
REV. RUL. 2015–18 TABLE 2
TABLE OF FARM CREDIT SYSTEM BANK TERRITORIES
Farm Credit System BankLocation of Property
AgFirst, FCB...................................... Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina,
Pennsylvania, South Carolina, Virginia, West Virginia.
AgriBank, FCB .................................. Arkansas, Illinois, Indiana, Lowa, Kentucky, Michigan, Minnesota, Missouri,
Nebraska, North Dakota, Ohio, South Dakota, Tennessee, Wisconsin, Wyoming.
CoBank, ACB .................................... Alaska, Arizona, California, Colorado, Connecticut, Hawaii, Idaho, Kansas, Maine,
Massachusetts, Montana, New Hampshire, New Jersey, New Mexico,
New York, Nevada, Oklahoma, Oregon, Rhode Island,
Utah, Vermont, Washington.
Texas, FCB ........................................ Alabama, Louisiana, Mississippi, Texas.
Bulletin No. 2015–34August 24, 2015
209

Part III. Administrative, Procedural, and Miscellaneous
Transfers of Property to
Partnerships with Related
Foreign Partners and
Controlled Transactions
Involving Partnerships
Notice 2015–54
SECTION 1. OVERVIEW
This noticeannounces that the De-
partment of the Treasury (Treasury De-
partment) and the Internal Revenue Ser-
vice (IRS) intend to issue regulations
under section 721(c) to ensure that,
when a U.S. person transfers certain
property to a partnership that has for-
eign partners related to the transferor,
income or gain attributable to the prop-
erty will be taken into account by the
transferor either immediately or period-
ically. This notice also announces that
the Treasury Department and the IRS
intend to issue regulations under sec-
tions 482 and 6662 applicable to con-
trolled transactions involving partner-
ships to ensure the appropriate valuation
of such transactions.
Section 2 ofthis notice provides rel-
evant background. Section 3 of this no-
tice outlines the reasons the Treasury
Department and the IRS intend to exer-
cise their regulatory authority to issue
the regulations described in this notice.
Section 4 of this notice describes regu-
lations that the Treasury Department
and the IRS intend to issue under section
721(c) that will override the general
nonrecognition treatment provided by
section 721(a) unless certain conditions
are satisfied. Section 5 of this notice
describes regulations that the Treasury
Department and the IRS intend to issue
that will address the application of sec-
tions 482 and 6662 to controlled trans-
actions involving partnerships. Section
6 of this notice provides the effective
dates of the regulations described in this
notice. Section 7 of this notice requests
comments and provides contact infor-
mation for purposes of submitting com-
ments.
SECTION 2. BACKGROUND
.01 Repeal of Sections 1491 through
1494
Until they were repealed as part of the
Taxpayer Relief Act of 1997 (the 1997
Act), sections 1491 through 1494 imposed
an excise tax on certain transfers of ap-
preciated property by a U.S. person to a
foreign partnership, which generally was
35 percent of the amount of gain inherent
in the property. Staff of the Joint Commit-
tee on Taxation, General Explanation of
Tax Legislation Enacted in 1997, Part
Two: Taxpayer Relief Act of 1997 (H.R.
2014) (Dec. 19, 1997). As the Joint Com-
mittee explained, Congress believed that
the imposition of enhanced information
reporting obligations (including sections
6038, 6038B, and 6046A) with respect to
foreign partnerships would eliminate the
need for sections 1491 through 1494.Id.
Notwithstanding these enhanced infor-
mation reporting requirements, the 1997
Act granted the Secretary regulatory au-
thority in section 721(c) to override the
application of the nonrecognition provi-
sion of section 721(a) to gain realized on
the transfer of property to a partnership
(domestic or foreign) if the gain, when
recognized, would be includible in the
gross income of a person other than a U.S.
person. In the 1997 Act, Congress also
enacted section 367(d)(3), which provides
the Secretary regulatory authority to apply
the rules of section 367(d)(2) to transfers
of intangible property to partnerships in
circumstances consistent with the pur-
poses of section 367(d).Id.Regulations
have never been issued pursuant to section
721(c) or section 367(d)(3).
.02 Sections 367 and 721
Congress enacted section 367 (and its
predecessor) in order to prevent U.S. per-
sons from avoiding U.S. tax by transfer-
ringappreciated property to foreign corpo-
rations using nonrecognition transactions.
Staff of the Joint Committee on Taxation,
General Explanation of the Revenue Provi-
sions of the Deficit Reduction Act of 1984
(H.R. 4170) (Dec. 31, 1984). The outbound
transfer of intangible property raises addi-
tional issues that Congress also sought to
address. Specifically, section 367(d) was en-
acted to prevent U.S. persons from transfer-
ring intangibles offshore in order to achieve
deferral of U.S. tax on the profits generated
by the intangibles. H.R. Rep. No. 98 – 432,
at 1311–15 (1984). Under section 367(d),
a U.S. person that transfers intangible
property (within the meaning of section
936(h)(3)(B)) to a foreign corporation in
an exchange described in section 351 or
section 361 (a section 351 exchange or a
section 361 exchange, respectively) is
treated as having sold such property in
exchange for payments that are contingent
upon the productivity, use, or disposition
of such property, and receiving amounts
that reasonably reflect the amounts that
would have been received annually in the
form of such payments over the useful life
of such property, or, in the case of a dispo-
sition following such transfer (whether di-
rect or indirect), at the time of the disposi-
tion. Section 367(d)(2)(A). The amounts
taken into account must be commensurate
with the income attributable to the intangi-
ble.Id.
The regulations under sections 367(a)
and 367(d) contain special rules for trans-
fers to foreign corporations in a section
351 exchange or section 361 exchange
under certain circumstances involving
partnerships. Specifically, in the case of a
transfer of property to a foreign corpora-
tion by a partnership in which a U.S.
personisapartner,§§1.367(a)–
1T(c)(3)(i)(A) and 1.367(d)–1T(a) treat
the partnership’s transfer as if the U.S.
partner had transferred its proportionate
share of the partnership’s assets (deter-
mined under sections 701 through 761)
directly to the foreign corporation. In the
case of a transfer of a partnership interest
to a foreign corporation by a U.S. person,
§§ 1.367(a)–1T(c)(3)(ii)(A) and 1.367(d)–
1T(a) treat the U.S. partner as if it had
transferred its proportionate share of the
property of the partnership (determined
under sections 701 through 761) directly
to the foreign corporation. In both cases, if
section 367(a) requires gain recognition,
the regulations provide rules for making
basis adjustments to take into account the
gain recognized.
Section 721(a) provides a general rule
that no gain or loss is recognized to a
August 24, 2015Bulletin No. 2015–34
210

partnership or to any of its partners in the
case of a contribution of property to the
partnership in exchange for an interest in
the partnership. Because section 367 only
applies to the transfer of property to a
foreign corporation, absent regulations
under section 721(c) or section 367(d)(3),
a U.S. person generally does not recog-
nize gain on the contribution of appreci-
ated property to a partnership with foreign
partners.
.03 Section 704
Section 704(c)(1)(A) requires partner-
ships to allocate income, gain, loss, and
deduction with respect to property con-
tributed by a partner to the partnership so
as to take into account any variation be-
tween the adjusted tax basis of the prop-
erty and its fair market value at the time of
contribution.
Section 1.704 –3(a)(1) provides that the
purpose of section 704(c) is to prevent the
shifting of tax consequences among part-
ners with respect to pre-contribution gain
or loss. Section 704(c) allocations must be
made using any reasonable method con-
sistent with that purpose. § 1.704 –3(a)(1).
Section 1.704 –3 describes three methods
of making section 704(c) allocations that
are generally reasonable, including the re-
medial allocation method.Id. Under the
remedial allocation method, a partnership
may eliminate distortions caused by the
ceiling rule (as described in § 1.704 –
3(b)(1)) by making remedial allocations
of income, gain, loss, or deduction to the
noncontributing partners equal to the full
amount of the limitation caused by the
ceiling rule, and offsetting those alloca-
tions with remedial allocations of income,
gain, loss, or deduction to the contributing
partner. T.D. 8585, 1995–1 C.B. 120. If a
partnership’s section 704(c) allocation
method is unreasonable, the Secretary can
make adjustments by exercising his au-
thority under the anti-abuse rule at
§ 1.704 –3(a)(10); however, the IRS does
not require a partnership to use the remedial
allocation method. § 1.704 –3(d)(5)(ii).
Section 704(a) and (b) provide that a
partner’s distributive share of income,
gain, loss, deduction, or credit shall be
determined under thepartnership agree-
ment unless the partnership agreement does
not provide rules for such allocation or the
allocation does not have substantial eco-
nomic effect. Section 1.704 –1(b)(1)(iii)
provides that an allocation that is respected
under section 704(b) and the regulations
promulgated thereunder may still be reallo-
cated under other provisions, such as section
482.See also Rodebaugh v. Commissioner,
T.C. Memo. 1974 –36 (holding that the
Commissioner could make allocations un-
der section 482 that differed from the for-
mula set forth in the partnership agreement),
aff’d,518 F.2d 73 (6th Cir. 1975).
.04 Sections 482 and 6662 and the
Regulations Thereunder
Section 482 provides, in part, that the
Secretary may make allocations between
or among two or more organizations,
trades, or businesses (whether or not in-
corporated or affiliated and whether or not
organized in the United States) that are
owned or controlled directly or indirectly
by the same interests in order to prevent
evasion of taxes or clearly to reflect the
income of any such organizations, trades,
or businesses. Section 1.482–1(a)(2) pro-
vides that the IRS may make allocations
between or among the members of a con-
trolled group if a controlled taxpayer has
not reported its true taxable income. In
such a case, the IRS may allocate income,
deductions, credits, allowances, basis, or
any other item or element affecting tax-
able income.
Section 1.482–1(b)(1) provides that, in
determining the true taxable income of a
controlled taxpayer, the standard to be
applied in every case is that of a taxpayer
dealing at arm’s length with an uncon-
trolled taxpayer. A controlled transaction
meets the arm’s length standard if the
results of the transaction are consistent
with the results that would have been re-
alized if uncontrolled taxpayers had en-
gaged in the same transaction under the
same circumstances (arm’s length result).
§ 1.482–1(b)(1). For purposes of section
482, § 1.482–1(i)(7) and (8) provide that
controlled transactions include contribu-
tions. Section 1.482–1(c)(1) provides that
the arm’s length result of a controlled
transaction must be determined under the
method (or application of a method) that,
under the facts and circumstances, pro-
vides the most reliable measure of an
arm’s length result.
Determining the degree of comparabil-
ity between controlled and uncontrolled
transactions includes the following analy-
ses: (i) a functional analysis of the eco-
nomically significant activities undertaken
or to be undertaken; (ii) a consideration of
the resources that are employed, or to be
employed, in conjunction with the activi-
ties undertaken; and (iii) a comparison of
the significant contractual terms and risks
of the two transactions. § 1.482–1(d)(3).
The contractual terms, including the allo-
cation of risks specified or implied by
those terms, will be respected if such
terms are consistent with the substance of
the underlying transactions, including the
actual conduct of the controlled taxpayers.
§ 1.482–1(d)(3)(ii)(B) and (iii)(B). In the
absence of a written agreement between
the controlled taxpayers or when the con-
tractual terms are inconsistent with the
substance of the underlying transaction,
the IRS may impute a contractual agree-
ment between the controlled taxpayers
that is consistent with the substance of the
transaction.Id.
In determining true taxable income, the
combined effect of two or more separate
(controlled or uncontrolled) transactions
(whether before, during, or after the tax-
able year under review) may be consid-
ered if such transactions, taken as a whole,
are so interrelated that consideration of
multiple transactions is the most reliable
means of determining the arm’s length
consideration for the controlled transac-
tions. § 1.482–1(f)(2)(i).
The IRS will evaluate the results of a trans-
action as actually structured by the taxpayer
unless the terms of the transaction lack
economic substance. § 1.482–1(f)(2)(ii)(A).
However, the IRS may consider the alter-
native transactions available to the tax-
payer in determining whether the terms of
the controlled transaction would be ac-
ceptable to an uncontrolled taxpayer faced
with the same alternatives and operating
under comparable circumstances.Id.The
IRS may adjust the consideration charged
in the controlled transaction based on the
cost or profit of an alternative as adjusted
to account for material differences be-
tween the alternative and the controlled
transaction, but will not restructure the
transaction as if the alternative had been
adopted by the taxpayer.Id.
Section 1.482–7 provides the specific
methods to be used to evaluate whether a
cost sharing arrangement as defined in
Bulletin No. 2015–34August 24, 2015
211

§ 1.482–7 produces results consistent with
an arm’s length result. § 1.482–1(b)(2)(i).
Section 1.482–7(g)(1) provides for speci-
fied and unspecified methods for purposes
of evaluating the arm’s length amount
charged in a platform contribution trans-
action. Sections 1.482– 4 and 1.482–9, as
appropriate, provide specified and unspec-
ified methods to be used to determine
arm’s length results of arrangements,
other than cost sharing arrangements cov-
ered by § 1.482–7, for sharing the costs
and risks of developing intangibles.
§ 1.482–1(b)(2)(iii). These other arrange-
ments expressly include partnerships.Id.
In the case of such other arrangements, the
principles, methods, comparability, and
reliability considerations set forth in
§ 1.482–7 are relevant in determining the
best method, including an unspecified
method, as appropriately adjusted in light
of the differences in the facts and circum-
stances between such arrangements and a
cost sharing arrangement. §§ 1.482– 4(g)
and 1.482–9(m)(3).
In the case of any transfer or license of
intangible property (within the meaning of
section 936(h)(3)(B)), the consideration
charged by the transferor with respect to
such transfer or license must be commen-
surate with the income attributable to the
intangible. Section 482 (second sentence);
§ 1.482– 4(a) (third sentence) and (f)(2)
and (6); and § 1.482–7(i)(6). If such con-
sideration does not satisfy the commensu-
rate with income requirement, the Com-
missioner may make periodic adjustments
to such consideration in a subsequent tax-
able year without regard to whether the
taxable year of the original transfer re-
mains open for statute of limitations pur-
poses. §§ 1.482– 4(f)(2)(i) and 1.482–
7(i)(6)(i). If an intangible is transferred in
a controlled transaction in exchange for
annual royalty payments, the Commis-
sioner may make periodic adjustments to
such payments as necessary to ensure an
arm’s length royalty amount is paid in
each taxable year. § 1.482– 4(f)(2)(i). If an
intangible is transferred in a controlled
transaction for a lump sum, § 1.482–
4(f)(6) provides that the lump sum must
be commensurate with the income attrib-
utable to the intangible. Section 1.482–
4(f)(6) also explains how to determine a
periodic adjustment for a particular tax-
able year with respect to that lump sum.
Section 6664(c) provides generally that
a penalty may not be asserted under sec-
tion 6662 with respect to a portion of an
underpayment if it is shown that there was
reasonable cause for such portion and that
the taxpayer acted in good faith with re-
spect to such portion. However, when the
IRS determines that a penalty otherwise
would apply as theresult of a net section
482 transfer price adjustment, as defined in
section 6662(e)(3), or as the result of a gross
valuation misstatement, as defined in sec-
tion 6662(h)(2), section 6662(e)(3)(D) pro-
vides that, for purposes of section 6664(c),
the taxpayer is not treated as having reason-
able cause for a portion of an underpayment
attributable to a net section 482 adjustment
unless the taxpayer meets the requirements
of section 6662(e)(3)(B)(i), (ii), or (iii) with
respect to such portion. Those requirements
are further described in § 1.6662– 6(d) and
generally require a taxpayer to select and
apply a specified or unspecified method that
the taxpayer could reasonably conclude met
the relevant measure of reliability set forth
in § 1.6662– 6(d). Those requirements also
include a requirement to maintain sufficient
contemporaneous documentation to estab-
lish the taxpayer’s reasonable conclusion.
SECTION 3. REASONS FOR
EXERCISING REGULATORY
AUTHORITY
The Treasury Department and the IRS
are aware that certain taxpayers purport to
be able to contribute, consistently with
sections 704(b), 704(c), and 482, property
to a partnership that allocates the income
or gain from the contributed property to
related foreign partners that are not sub-
ject to U.S. tax. Many of these taxpayers
choose a section 704(c) method other than
the remedial method and/or use valuation
techniques that are inconsistent with the
arm’s length standard.
In 1997 Congress recognized that tax-
payers might use a partnership to shift
gain to a foreign person and consequently
enacted sections 721(c) and 367(d)(3).
Based on the experience of the IRS with
the taxpayer positions described above,
the Treasury Department and the IRS
have determined that it is appropriate to
exercise the regulatory authority granted
in section 721(c) to override the applica-
tion of section 721(a) to gain realized on
the transfer of property to a partnership
(domestic or foreign) in certain circum-
stances in which the gain, when recog-
nized, ultimately would be includible in
the gross income of a foreign person. Al-
though Congress also provided specific
authority in section 367(d)(3) to address
transfers of intangibles to partnerships, the
Treasury Department and the IRS have
concluded that acting pursuant to section
721(c) is more appropriate because the
transactions at issue are not limited to
transfers of intangible property.
Although section 704(b) provides part-
nerships a measure of flexibility to make
special allocations of partnership income,
the Treasury Department and the IRS be-
lieve that in some cases partnership trans-
actions involving special allocations lead
to inappropriate results. The Treasury De-
partment and the IRS also are aware that
certain taxpayers may be valuing property
contributed to partnerships, or the prop-
erty or services involved in related con-
trolled transactions, in a manner contrary
to section 482. As a result, partnership
interests or consideration received in re-
lated controlled transactions also may be
incorrectly valued, thereby reducing the
amount of income or gain allocated to
U.S. partners. For example, a partnership
agreement might provide a domestic part-
ner with a fixed preferred interest in ex-
change for the contribution of an intangi-
ble that is assigned a value that is
inappropriately low, while specially allo-
cating a greater share of the income from
the intangible to a related foreign partner.
Even though the IRS has broad authority
under section 482 to make allocations to
properly reflect the economics of a con-
trolled transaction, administrative chal-
lenges arise, for example, when the IRS
must make adjustments years after a trans-
action occurred. Because taxpayers have
better access to information about their
businesses and risk profiles, the IRS may
be at a disadvantage in evaluating the
transactions. Therefore, along with pro-
viding rules under section 721(c), the
Treasury Department and the IRS intend
to augment the section 482 rules as they
apply to controlled transactions involving
partnerships.
The Treasury Department and the IRS
believe that remedial allocations can have
the effect, in part, of ensuring that pre-
contribution gain from contributed prop-
August 24, 2015Bulletin No. 2015–34
212

erty is properly taken into account by the
contributing partner. Further, allocating
all section 704(b) book items (e.g., gain,
income, loss, and deduction) associated
with the contributed property in a consis-
tent manner with respect to the contribut-
ing partner and any related foreign partner
can help to ensure that the built-in gain
associated with contributed property is
properly taken into account by the con-
tributing partner and that income is not
inappropriately separated from related de-
ductions. Accordingly, the Treasury De-
partment and the IRS have determined
that it is appropriate to allow for the con-
tinued application of section 721(a) to
transfers to partnerships with related for-
eign partners only when the conditions
described in section 4.03 of this notice are
satisfied.
SECTION 4. REGULATIONS TO
ADDRESS CERTAIN TRANSFERS
OF PROPERTY TO PARTNERSHIPS
WITH RELATED FOREIGN
PARTNERS
.01 Definitions
(1) U.S. Transferor
A U.S. Transferor is a United States
person within the meaning of section
7701(a)(30) (U.S. person), other than a
domestic partnership.
(2) Built-in Gain
With respect to an item of property
contributed to a partnership, Built-in Gain
is the excess section 704(b) book value of
the property over the contributing part-
ner’s adjusted tax basis in the property at
the time of the contribution (and does not
include gain created when a partnership
revalues partnership property).
(3) Section 721(c) Property
Section 721(c) Property is property,
other than Excluded Property, with
Built-in Gain.
(4) Excluded Property
Excluded Property is (i) cash equiva-
lents, (ii) any asset that is a security within
the meaning of section 475(c)(2), without
regard to section 475(c)(4), and (iii) any
item of tangible property with Built-in
Gain that does not exceed $20,000.
(5) Section 721(c) Partnership
A partnership (domestic or foreign) is a
Section 721(c) Partnership if a U.S.
Transferor contributes Section 721(c)
Property to the partnership, and, after the
contribution and any transactions related
to the contribution, (i) a Related Foreign
Person is a Direct or Indirect Partner in
the partnership, and (ii) the U.S. Trans-
feror and one or more Related Persons
own more than fifty percent of the inter-
ests in partnership capital, profits, deduc-
tions or losses.
(6) Related Person
A Related Person is a person that is
related (within the meaning of section
267(b) or section 707(b)(1)) to a U.S.
Transferor.
(7) Related Foreign Person
A Related Foreign Person is a Related
Person (other than a partnership) that is
not a U.S. person.
(8) Direct or Indirect Partner
A Direct or Indirect Partner is a person
(other than a partnership) that owns an
interest in a partnership directly or indi-
rectly through one or more partnerships.
(9) Gain Deferral Method
The Gain Deferral Method is the
method described in section 4.03 of this
notice.
(10) Acceleration Event
An Acceleration Event has the mean-
ing provided in section 4.05 of this notice.
.02 General Rule – Current Gain
Recognition
The Treasury Department and the IRS
intend to issue regulations providing that
section 721(a) will not apply when a U.S.
Transferor contributes an item of Section
721(c) Property (or portion thereof) to a
Section 721(c) Partnership, unless the
Gain Deferral Method described in sec-
tion 4.03 of this notice is applied with
respect to the Section 721(c) Property.
The regulations will include a de minimis
rule providing that section 721(a) (if oth-
erwise applicable) will continue to apply
(without regard to whether the require-
ments of the Gain Deferral Method are
satisfied) if during the U.S. Transferor’s
taxable year (1) the sum of the Built-In
Gain with respect to all Section 721(c)
Property contributed in that year to the
Section 721(c) Partnership by the U.S.
Transferor and all other U.S. Transferors
that are Related Persons does not exceed
$1 million, and (2) the Section 721(c)
Partnership is not applying the Gain De-
ferral Method with respect to a prior con-
tribution of Section 721(c) Property by the
U.S. Transferor or another U.S. Trans-
feror that is a Related Person.
.03 Gain Deferral Method
The requirements for applying the
Gain Deferral Method are as follows:
(1)The Section 721(c) Partnership
adopts the remedial allocation method de-
scribed in § 1.704 –3(d) for Built-in Gain
with respect to all Section 721(c) Property
contributed to the Section 721(c) Partner-
ship pursuant to the same plan by a U.S.
Transferor and all other U.S. Transferors
that are Related Persons.
(2)During any taxable year in which
there is remaining Built-In Gain with re-
spect to an item of Section 721(c) Prop-
erty, the Section 721(c) Partnership allo-
cates all items of section 704(b) income,
gain, loss, and deduction with respect to
that Section 721(c) Property in the same
proportion (for example, if income with
respect to an item of Section 721(c) Prop-
erty is allocated 60 percent to the U.S
Transferor and 40 percent to a Related
Foreign Person in a taxable year, then
gain, deduction, and loss with respect to
that Section 721(c) Property must also be
allocated 60 percent to the U.S. Transferor
and 40 percent to the Related Foreign
Person).
(3)The reporting requirements de-
scribed in section 4.06 of this notice are
satisfied.
(4)The U.S. Transferor recognizes
Built-in Gain with respect to any item of
Section 721(c) property upon an Acceler-
ation Event described in section 4.05 of
this notice.
(5)The Gain Deferral Method is ad-
opted for all Section 721(c) Property sub-
sequently contributed to the Section
721(c) Partnership by the U.S. Transferor
and all other U.S. Transferors that are
Related Persons until the earlier of: (i) the
date that no Built-in Gain remains with
respect to any Section 721(c) Property to
which the Gain Deferral Method first ap-
plied; or (ii) the date that is 60 months
after the date of the initial contribution of
Section 721(c) Property to which the Gain
Deferral Method first applied.
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.04 Tiered Partnerships
The regulations described in this notice
will apply to transactions involving tiered
partnerships in a manner consistent with
the purpose of these rules as described in
section 3 of this notice. Thus, for example,
(i) if a U.S. Transferor is a Direct or
Indirect Partner in a partnership and that
partnership contributes Section 721(c)
Property to a lower-tier partnership, or (ii)
if a U.S. Transferor contributes an interest
in a partnership that owns Section 721(c)
Property to a lower-tier partnership, then
the rules described in this notice will ap-
ply as though the U.S. Transferor contrib-
uted its share of the Section 721(c) Prop-
erty directly.
.05 Rules Regarding Acceleration Events
(1) Acceleration Event defined
Except as otherwise provided in this
section 4.05, an Acceleration Event with
respect to an item of Section 721(c) Prop-
erty is any transaction that either would
reduce the amount of remaining Built-in
Gain that a U.S. Transferor would recog-
nize under the Gain Deferral Method if
the transaction had not occurred or could
defer the recognition of the Built-in Gain.
Furthermore, an Acceleration Event is
deemed to occur with respect to all Sec-
tion 721(c) Property of a Section 721(c)
Partnership for the taxable year of the
Section 721(c) Partnership in which any
party fails to comply with all of the re-
quirements for applying the Gain Deferral
Method.
(2) Gain recognized upon an Acceler-
ation Event
Upon an Acceleration Event with re-
spect to an item of Section 721(c) Prop-
erty, a U.S. Transferor must recognize
gain in an amount equal to the remaining
Built-in Gain that would have been allo-
cated to the U.S. Transferor if the Section
721(c) Partnership had sold the item of
Section 721(c) Property immediately be-
fore the Acceleration Event for its fair
market value. The regulations will provide
for corresponding adjustments to the basis
of the Section 721(c) Property and the
U.S. Transferor’s partnership interest to
reflect the recognition of the remaining
Built-In Gain. An Acceleration Event with
respect to an item of Section 721(c) Prop-
erty may require a U.S. Transferor to rec-
ognize only a portion of the remaining
Built-in Gain. For example, if a U.S.
Transferor sold only part of its interest in
a Section 721(c) Partnership, the U.S.
Transferor would have an Acceleration
Event only to the extent of the Section
721(c) Property attributable to the partner-
ship interest sold.
(3) Transfer of partnership interest to a
domestic corporation
An Acceleration Event will not occur if
(i) a U.S. Transferor transfers an interest
in a Section 721(c) Partnership to a do-
mestic corporation in a transaction to
which either section 351(a) or section
381(a) applies, or (ii) a Section 721(c)
Partnership transfers an interest in a
lower-tier partnership that owns Section
721(c) Property to a domestic corporation
in a transaction to which section 351(a)
applies, provided that in both cases the
parties continue to apply the Gain Defer-
ral Method by treating the transferee do-
mestic corporation as the U.S. Transferor
for all purposes of this notice.
(4) Special rules for certain transfers
of Section 721(c) Property described in
section 351(a)
An Acceleration Event will not occur if
a Section 721(c) Partnership transfers
Section 721(c) Property to a domestic cor-
poration in a transaction to which section
351(a) applies.
If a Section 721(c) Partnership transfers
Section 721(c) Property (or an interest in a
partnership that owns Section 721(c) Prop-
erty) to a foreign corporation in a transaction
described in section 351(a), an Accelera-
tion Event will not occur to the extent
the Section 721(c) Property is treated as
being transferred by a U.S. person (other
than a domestic partnership) pursuant to
§ 1.367(a)–1T(c)(3)(i) or (ii).
The stock in a transferee corporation
received by a Section 721(c) Partnership
in a transaction described in this section
4.05(4) will not be subject to the Gain
Deferral Method.
.06 Reporting Requirements
(1) Reporting required for taxable
years beginning in 2015
If a Section 721(c) Partnership is a
foreign partnership, a U.S. Transferor (or
a domestic partnership in which a U.S.
Transferor is a Direct or Indirect Partner)
must fulfill any reporting requirements
imposed under sections 6038, 6038B, and
6046A and the existing regulations there-
under with respect to the contribution of
the Section 721(c) Property to the Section
721(c) Partnership. The IRS intends to
modify Schedule O, Transfer of Property
to a Foreign Partnership, of Form 8865
(Return of U.S. Persons With Respect to
Certain Foreign Partnerships), or its in-
structions, for taxable years beginning in
2015 to require supplemental information
for contributions of Section 721(c) Prop-
erty to Section 721(c) Partnerships.
(2) Reporting regulations to be issued
The Treasury Department and the IRS
intend to issue regulations describing ad-
ditional reporting requirements for a U.S.
Transferor for each taxable year in which
the Gain Deferral Method applies. The
regulations will not require any new fil-
ings for taxable years that end before the
date of publication of the regulations.
The regulations will require taxpayers
to report certain information concerning
Section 721(c) Property subject to the
Gain Deferral Method (regardless of
whether the Section 721(c) Partnership is
a domestic or foreign partnership). The
Treasury Department and the IRS antici-
pate that the requested information will
include a description of the Section 721(c)
Property; information regarding the amount
of income, gain, deduction, or loss with
respect to the Section 721(c) Property; and a
description of any Acceleration Events. The
new information reporting requirements
will be coordinated with the information
reporting requirements under sections 6038,
6038B, and 6046A, including amending the
regulations under those sections or relevant
IRS forms and instructions, as necessary.
The regulations will require certain
U.S. Transferors that contribute Section
721(c) Property to a Section 721(c) Part-
nership that is a foreign partnership to
comply with the information return filing
requirements described in § 1.6038 –3 to
the extent not required under current reg-
ulations.
(3) Extension of statute of limitations
The Treasury Department and the IRS
intend to issue regulations providing that,
as an additional requirement for applying
the Gain Deferral Method, a U.S. Trans-
feror (and, in certain cases, a Section
721(c) Partnership) must extend the pe-
riod on limitations of assessment of tax
August 24, 2015Bulletin No. 2015–34
214

with respect to all items related to the
Section 721(c) Property contributed to
the Section 721(c) Partnership through the
close of the eighth full taxable year fol-
lowing the taxable year of the contribu-
tion. The regulations will not require the
extension of the period of limitations for
taxable years that end before the date of
publication of the regulations.
.07 Examples
The following examples illustrate the
rules described in section 4 of this notice.
For simplicity of presentation, assume that
there are no other controlled transactions
that are related to the transactions de-
scribed in the examples. See section 5 of
this notice.
Example 1.(i) Facts.USP, a domestic corpora-
tion, wholly owns FS, a foreign corporation. USP
and FS form a new partnership, PRS. FS contributes
cash of $1.5 million to PRS, and USP contributes the
following three assets: a patent with an arm’s length
price of $1.2 million and an adjusted basis of zero; a
security (within the meaning of section 475(c)(2))
with an arm’s length price of $100,000 and an ad-
justed basis of $20,000; and a machine with an arm’s
length price of $200,000 and an adjusted basis of
$600,000.
(ii) Analysis.Because the patent has Built-in
Gain, it is Section 721(c) Property. Although the
security also has Built-in Gain, it is Excluded Prop-
erty because it is an asset described in section
475(c)(2). The machine has a built-in loss and is
therefore not Section 721(c) Property. Thus, because
USP is a U.S. person and not a domestic partnership,
USP is a U.S. Transferor that has contributed Section
721(c) Property. FS is related to USP under section
267(b) and is not a U.S. person. Accordingly, FS is
a Related Foreign Person to USP. USP and FS col-
lectively own more than 50% of the interests in the
capital, profits, deductions, and losses of PRS.
Therefore, PRS is a Section 721(c) Partnership. The
de minimis rule described in section 4.02 of this
notice does not apply because the sum of the Built-In
Gain for all Section 721(c) Property is $1.2 million,
which exceeds the $1 million de minimis threshold.
The built-in loss in the machine does not factor into
determining whether the contribution is below the de
minimis threshold. As a result, under section 4.02 of
this notice, section 721(a) does not apply to USP’s
contribution of the patent to PRS, unless the Gain
Deferral Method is applied.
Example 2.(i) Facts. In Year 1, USP, a U.S.
Transferor, contributes Section 721(c) Property (As-
set 1) with Built-in Gain of more than $1 million to
a Section 721(c) Partnership in which FS, a Related
Foreign Person, is also a partner. The partnership
allocates all items of income, gain, deduction, and
loss with respect to Asset 1 60% to USP and 40% to
FS and adopts the remedial allocation method with
respect to Asset 1. The parties comply with the
applicable reporting requirements under sections
6038, 6038B, and 6046A and the regulations there-
under. The parties properly apply the Gain Deferral
Method with respect to Asset 1 in Years 1 through 3.
In an unrelated transaction in Year 4, USP con-
tributes Section 721(c) Property (Asset 2) with a
Built-in Gain of $100,000 to the partnership. The
partnership allocates all items of income, gain, and
loss with respect to Asset 2 20% to USP and 80% to
FS, but allocates deductions with respect to Asset 2
90% to USP and 10% to FS. The partnership adopts the
remedial allocation method with respect to Asset 2.
(ii) Analysis.In Year 4, although Asset 2 has
Built-in Gain of less than $1 million, the de minimis
rule will not apply because the parties are applying
the Gain Deferral Method with respect to Asset 1.
Because the deductions with respect to Asset 2 are
allocated in a different proportion than the other
section 704(b) items with respect to Asset 2, the
requirements for satisfying the Gain Deferral
Method are not met with respect to Asset 2, and USP
must recognize the Built-in Gain with respect to
Asset 2. Furthermore, because the Gain Deferral
Method does not apply to Asset 2, which was con-
tributed within 60 months of Asset 1 (the Section
721(c) Property to which the Gain Deferral Method
was first applied), an Acceleration Event is deemed
to occur with respect to Asset 1 under section 4.05(1)
of this notice, and USP must recognize any remain-
ing Built-In Gain with respect to Asset 1.
Example 3.The facts are the same as in Example
2 except that USP does not contribute Asset 2. In
Year 3, the partners amend the partnership agree-
ment so that all items of income, gain, deduction,
and loss with respect to Asset 1 are now allocated
30% to USP and 70% to FS. Assume the amendment
is accompanied by any consideration required by
section 482 and has substantial economic effect as
required by section 704(b). Because each section
704(b) item with respect to Asset 1 continues to be
allocated in the same proportion to each partner, the
Gain Deferral Method will continue to apply so long
as the other requirements of the Gain Deferral
Method are satisfied.
Example 4. (i) Facts. In Year 1, USP, a U.S.
Transferor, contributes Section 721(c) Property (As-
set 1) with Built-in Gain of more than $1 million to
a Section 721(c) Partnership (PRS) in which FS, a
Related Foreign Person, and USX, an unrelated U.S.
person, are also partners. The parties properly apply
the Gain Deferral Method with respect to Asset 1. In
Year 3, USP transfers all of its assets, including its
interest in PRS, to USS, a domestic corporation, in a
transaction to which section 381(a) applies. In Year
9 (a year in which there is remaining Built-In Gain
with respect to Asset 1), PRS distributes Asset 1 to
FS.
(ii) Analysis - Section 381(a) transfer to a do-
mestic corporation.Although USP will no longer
recognize any remaining Built-In Gain with respect
to Asset 1 under the Gain Deferral Method following
the transfer to USS, USS is a successor U.S. Trans-
feror. Therefore, provided the requirements of the
Gain Deferral Method continue to be satisfied, in-
cluding treating USS as the U.S. Transferor, the
transfer of USP’s interest in PRS to USS is not an
Acceleration Event.
(iii) Analysis - Distribution of Section 721(c)
Property.Although section 704(c)(1)(B) does not
apply to the distribution, the distribution is an Ac-
celeration Event because USS will not recognize any
remaining Built-In Gain with respect to Asset 1
under the Gain Deferral Method following the dis-
tribution. Therefore, USS must recognize gain in an
amount equal to the remaining Built-in Gain that
would have been allocated to USS if PRS had sold
Asset 1 immediately before the distribution for its
fair market value.
Example 5.(i) Facts.The facts are the same as in
Example 4 except that in Year 3, instead of USP
transferring its assets to USS, PRS instead contrib-
utes Asset 1 to FC, a foreign corporation, in a trans-
fer described in section 351(a). There is no distribu-
tion in Year 9.
(ii) Analysis.For purposes of section 367(a) and
(d), each partner in PRS that is a U.S. person is treated
as having transferred its share of the Section 721(c)
Property directly to FC (see § 1.367(a)–1T(c)(3)(i)). An
Acceleration Event occurs, but not to the extent of
USP’s and USX’s shares of the Section 721(c) Prop-
erty. The FC stock received by PRS in the transaction
is not subject to the Gain Deferral Method.
.08 Anti-Abuse Rule
If a U.S. Transferor engages in a trans-
action (or series of transactions) with a
principal purpose of avoiding the applica-
tion of the regulations described in this
notice, then, for purposes of those regula-
tions, the transaction (or series of transac-
tions) may be disregarded or the arrange-
ment may be recharacterized (including
disregarding an intermediate entity) in ac-
cordance with its substance.
SECTION 5. RULES REGARDING
CONTROLLED TRANSACTIONS
INVOLVING PARTNERSHIPS
.01 Regulations to Be Issued Regarding
Controlled Transactions Involving
Partnerships
The Treasury Department and the IRS
intend to issue regulations regarding the
application to controlled transactions in-
volving partnerships of certain rules in
§ 1.482–7 that are currently applicable to
cost sharing arrangements. In particular,
the Treasury Department and the IRS in-
tend to issue regulations that provide
specified methods for such controlled
transactions based on the specified meth-
ods in § 1.482–7(g) as appropriately ad-
justed in light of the differences in the
facts and circumstances between such
partnerships and cost sharing arrange-
ments. Additionally, the regulations will
provide periodic adjustment rules that are
based on the principles of § 1.482–7(i)(6)
for controlled transactions involving part-
nerships. The regulations will provide
Bulletin No. 2015–34August 24, 2015
215

that, in the event of a trigger based on a
significant divergence of actual returns
from projected returns for controlled
transactions involving a partnership, the
IRS may make periodic adjustments to the
results of such transactions under a
method based on § 1.482–7(i)(6)(v), as
appropriately adjusted, as well as any nec-
essary corresponding adjustments to sec-
tion 704(b) or section 704(c) allocations.
The Treasury Department and the IRS
also are considering issuing regulations
under § 1.6662– 6(d) to require additional
documentationforcertaincontrolled
transactions involving partnerships. These
regulations may require, for example,
documentation of projected returns for
property contributed to a partnership (as
well as attributable to related controlled
transactions) and of projected partnership
allocations, including projected remedial
allocations covered by section 4 of this
notice, for a specified number of years.
.02 Application of Current Law to
Transactions Described in this Notice
Under existing law, section 482 and
related penalties apply to controlled trans-
actions involving partnerships, including
the transactions described in this notice.
For example, where U.S. and foreign per-
sons under common control enter into a
partnership, the amounts of their contribu-
tions to, and distributions from, the part-
nership are subject to adjustment in order
to reflect arm’s length results. Also sub-
ject to adjustment are partnership alloca-
tions, including allocations under section
704(c), and the relative magnitudes of the
partners’ partnership interests in light of
their respective contributions and the re-
lated controlled transactions. Accord-
ingly, the amount of a remedial allocation
pursuant to section 4 of this notice for
controlled taxpayers that choose the Gain
Deferral Method, or the amount of gain
recognized if section 721(a) does not ap-
ply, potentially will be subject to adjust-
ment by the IRS under section 482. In
addition, when the conduct of partners, a
partnership, or related controlled taxpay-
ers is not reflected in, or is inconsistent
with, the terms of the partnership agree-
ment or any related agreements of the
controlled taxpayers, the IRS may for pur-
poses of an adjustment impute terms in
the partnership or related agreements that
are consistent with the substance of the
transaction. The imputation of terms may
be appropriate, for example, when a part-
ner provides services to the partnership
but neither the partnership agreement nor
any other agreement reflects the provision
of such services.
For purposes of the best method anal-
ysis under § 1.482–1(c), the principles,
methods, comparability, and reliability
considerations set forth in § 1.482–7 are
relevant to controlled transactions involv-
ing partnerships, as appropriately adjusted
in light of the differences in the facts and
circumstances between such arrangements
and a cost sharing arrangement. Thus, de-
pending on the facts and circumstances,
an unspecified method based on a method
specified in § 1.482–7(g)(1), as appropri-
ately adjusted, may provide the most reli-
able measure of the arm’s length results of
controlled transactions involving a part-
nership.
To the extent that controlled transac-
tions involving a partnership, including
contributions of tangible and intangible
property and the provision of services by
the controlled partners or their affiliates,
are interrelated, an aggregate analysis of
their combined effects is necessary under
§ 1.482–1(f)(2)(i) if the aggregate analysis
provides the most reliable means of deter-
mining the arm’s length results for the
controlled transactions.
When intangible property within the
meaning of section 936(h)(3)(B) is con-
tributed to a partnership, the IRS may
consider making periodic adjustments un-
der § 1.482– 4(f)(2) in years subsequent to
thecontribution,withoutregardto
whether the taxable year of the original
transfer remains open for statute of limi-
tations purposes. For purposes of making
periodic adjustments in open years, the
IRS may consider the consequences of
what would have been appropriate adjust-
ments to the commonly controlled part-
ners’ interests in the partnership, or to any
partnership allocations under section
704(b) or 704(c), in light of their respec-
tive contributions and the associated con-
trolled transactions, even when those oc-
curred in closed years. Furthermore, the
IRS may consider the application of the
periodic adjustment rules regardless of
whether, under the regulations described
in section 4 of this notice, section 721(a)
applies to the initial contribution of intan-
gible property to the partnership. Where
section 721(a) is inapplicable, the IRS
may consider the application of the equiv-
alent royalty rule under § 1.482– 4(f)(6) to
determine periodic adjustments to the rec-
ognition of gain on the contribution of the
intangible property to the partnership.
In the absence of a basis, including the
requirement of contemporaneous docu-
mentation, for establishing that the tax-
payer reasonably concluded its valuation
methods used for controlled transactions
involving a partnership met the relevant
measureofreliabilitysetforthin
§1.6662– 6(d),penaltiespotentially
would apply under section 6662(e) or (h).
SECTION 6. EFFECTIVE DATES
The regulations described in sections
4.01 through 4.06(1), 4.07, and 4.08 of
this notice will apply to transfers occur-
ring on or after August 6, 2015, and to
transfers occurring before August 6, 2015,
resulting from entity classification elec-
tions made under § 301.7701–3 that are
filed on or after August 6, 2015, and that
are effective on or before August 6, 2015.
The reporting requirements described in
section 4.06(2) and (3) of this notice and
the regulations described in section 5 of
this notice will apply to transfers and con-
trolled transactions occurring on or after
the date of publication of the regulations
described in those sections.
No inference is intended regarding the
treatment of transactions described in this
notice under current law, and the IRS may
challenge such transactions under applica-
ble Code provisions, Treasury regulations,
and judicial doctrines. For example, the
IRS may challenge a partnership’s ad-
opted section 704(c) method (for purposes
of § 1.704 –3(a)(1)) under the anti-abuse
rule in § 1.704 –3(a)(10).
SECTION 7. REQUEST FOR
COMMENTS AND CONTACT
INFORMATION
The Treasury Department and the IRS
request comments on the regulations de-
scribed in section 4.06 of this notice (con-
cerning reporting requirements). Specifi-
cally, comments are requested on whether
the regulations should provide rules sim-
ilar to those in the recently finalized reg-
August 24, 2015Bulletin No. 2015–34
216

ulations under sections 367(a) and 6038B
regarding failures to file gain recognition
agreements or to satisfy other reporting
obligations, including the standards for re-
lief therein. See T.D. 9704, 2014 –50
I.R.B. 922. Comments also are requested
on whether an Acceleration Event should
exclude a distribution of Section 721(c)
Property to an unrelated foreign partner
beyond the seven-year limitation of sec-
tion 704(c)(1)(B). Finally, comments are
also requested regarding the regulations
described in section 5 of this notice that
will provide specified valuation methods
and periodic adjustment rules for con-
trolled transactions involving partnerships
based on § 1.482–7(g) and (i)(6), and the
extent to which the documentation re-
quirementsdescribedin§1.6662–
6(d)(2)(iii) should be expanded to include
specific requirements for transactions in-
volving partnerships.
Written comments may be submitted to
the Internal Revenue Service, CC:PA:
LPD (Notice 2015–54), Room 5207, P.O.
Box 7604, Ben Franklin Station, Wash-
ington, D.C. 20044. Comments also may
be hand-delivered Monday through Friday
between the hours of 8:00 a.m. to 4:00
p.m. to the Courier’s Desk, Internal Rev-
enue Service, 1111 Constitution Avenue,
NW, Washington, DC. Attn: CC:PA:LP-
D:PR (Notice 2015–54). Comments also
may be submitted electronically to notice.
comments@irscounsel.treas.gov.Please
include “Notice 2015–54” in the subject
line of any electronic submission. Com-
ments will be available for public inspec-
tion and copying. The principal authors of
this notice are Ryan A. Bowen and Ken-
neth A. Jeruchim of the Office of Associ-
ate Chief Counsel (International). How-
ever, other personnel from the Treasury
Department and the IRS also participated
in its development. For further informa-
tion regarding this notice contact Mr. Bo-
wen (section 4) at (202) 317-6937 or Mr.
Jeruchim (section 5) at (202) 317-6939
(not a toll-free number).
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2015–55
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used un-
der § 417(e)(3), and the 24-month average
segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the interest
rate on 30-year Treasury securities under
§ 417(e)(3)(A)(ii)(II) as in effect for plan
years beginning before 2008 and the 30-
year Treasury weighted average rate un-
der § 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Generally, except for certain plans under
sections 104 and 105 of the Pension Protec-
tion Act of 2006 and CSEC plans under
§ 414(y), § 430 of the Code specifies the
minimum funding requirements that apply
to single-employer plans pursuant to § 412.
Section 430(h)(2) specifies the interest rates
that must be used to determine a plan’s
target normal cost and funding target. Under
this provision, present value is generally de-
termined using three 24-month average in-
terest rates (“segment rates”), each of which
applies to cash flows during specified
periods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates are
adjusted by the applicable percentage of the
25-year average segment rates for the period
ending September 30 of the year preceding
the calendar year in which the plan year
begins.
1
However, an election may be made
under § 430(h)(2)(D)(ii) to use the monthly
yield curve in place of the segment rates.
Notice 2007– 81, 2007– 44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond seg-
ment rates used to compute the target nor-
mal cost and the funding target. Consis-
tent with the methodology specified in
Notice 2007– 81, the monthly corporate
bond yield curve derived from July 2015
data is in Table I at the end of this notice.
The spot first, second, and third segment
rates for the month of July 2015 are, re-
spectively, 1.63, 4.14, and 5.13.
The 24-month average segment rates
determinedunder§430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) to be within the appli-
cable minimum and maximum percent-
ages of the corresponding 25-year average
segment rates. For plan years beginning
before 2018, the applicable minimum per-
centage is 90% and the applicable maxi-
mum percentage is 110%. The 25-year
average segment rates for plan years be-
ginning in 2012, 2013, 2014 and 2015
were published in Notice 2012–55,
2012–36 I.R.B. 332, Notice 2013–11,
2013–11 I.R.B. 610, Notice 2013–58,
2013– 40 I.R.B. 294, and Notice 2014 –50,
2014 – 40 I.R.B. 590, respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corporate
bond segment rates applicable for August
2015 without adjustment for the 25-year
average segment rate limits are as follows:
Applicable
Month
First
Segment
Second
Segment
Third
Segment
August 20151.324.065.09
pc;norm
Based on § 430(h)(2)(C)(iv), the 24-month averages applicable for August 2015 adjusted to be within the applicable minimum
and maximum percentages of the corresponding 25-year average segment rates, are as follows:
1
Pursuant to § 433(h)(3)(A), the 3
rd
segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).
Bulletin No. 2015–34August 24, 2015
217

For Plan
Years
Beginning
In
Adjusted 24-Month Average
Segment Rates, Based on the HATFA
Applicable Percentage of
25-Year Average Rates
Applicable
Month
First
Segment
Second
Segment
Third
Segment
2014August20154.996.326.99
2015August20154.726.116.81
30-YEAR TREASURY SECURITIES
INTEREST RATES
Generally for plan years beginning af-
ter 2007, § 431 specifies the minimum
funding requirements that apply to mul-
tiemployer plans pursuant to § 412. Sec-
tion 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation de-
scribed in § 431(c)(6)(A), based on the
plan’scurrentliability.Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 per-
cent below the weighted average of the
rates of interest on 30-year Treasury se-
curities during the four-year period ending
on the last day before the beginning of the
plan year. Notice 88 –73, 1988 –2 C.B.
383, provides guidelines for determining
the weighted average interest rate. The
rate of interest on 30-year Treasury secu-
rities for July 2015 is 3.07 percent. The
Service determined this rate as the aver-
age of the daily determinations of yield on
the 30-year Treasury bond maturing in
May 2045. For plan years beginning in the
month shown below, the weighted aver-
age of the rates of interest on 30-year
Treasury securities and the permissible
range of rate used to calculate current
liability are as follows:
For Plan Years
Beginning in
30-Year
Treasury
Weighted
Average
Permissible Range
MonthYear90%to105%
August20153.172.853.33
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Notice 2007– 81 provides guide-
lines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value seg-
ment rates determined for July 2015 are as
follows:
First
Segment
Second
Segment
Third
Segment
1.634.145.13
DRAFTING INFORMATION
The principal author of this notice is
Tom Morgan of the Office of the Associ-
ate Chief Counsel (Tax Exempt and Gov-
ernment Entities). However, other person-
nel from the IRS participated in the
development of this guidance. For further
information regarding this notice, contact
Mr. Morgan at 202-317-8719 or Tony
Montanaro at 202-317-8698 (not a toll-
free number).
August 24, 2015Bulletin No. 2015–34
218

Table I
Monthly Yield Curve for July 2015
Derived from July 2015 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield
0.50.4820.54.8440.55.1760.55.2880.55.34
1.00.8021.04.8641.05.1761.05.2881.05.34
1.51.1021.54.8741.55.1761.55.2881.55.34
2.01.3722.04.8942.05.1862.05.2882.05.34
2.51.6122.54.9042.55.1862.55.2982.55.34
3.01.8223.04.9143.05.1963.05.2983.05.34
3.52.0123.54.9243.55.1963.55.2983.55.34
4.02.1924.04.9344.05.1964.05.2984.05.34
4.52.3724.54.9444.55.2064.55.2984.55.34
5.02.5425.04.9645.05.2065.05.2985.05.35
5.52.7125.54.9745.55.2065.55.3085.55.35
6.02.8726.04.9846.05.2166.05.3086.05.35
6.53.0326.54.9846.55.2166.55.3086.55.35
7.03.1827.04.9947.05.2167.05.3087.05.35
7.53.3227.55.0047.55.2267.55.3087.55.35
8.03.4628.05.0148.05.2268.05.3088.05.35
8.53.5928.55.0248.55.2268.55.3188.55.35
9.03.7129.05.0349.05.2269.05.3189.05.35
9.53.8229.55.0449.55.2369.55.3189.55.35
10.03.9330.05.0450.05.2370.05.3190.05.35
10.54.0230.55.0550.55.2370.55.3190.55.36
11.04.1131.05.0651.05.2471.05.3191.05.36
11.54.1931.55.0751.55.2471.55.3191.55.36
12.04.2732.05.0752.05.2472.05.3292.05.36
12.54.3332.55.0852.55.2472.55.3292.55.36
13.04.3933.05.0953.05.2573.05.3293.05.36
13.54.4533.55.0953.55.2573.55.3293.55.36
14.04.5034.05.1054.05.2574.05.3294.05.36
14.54.5434.55.1154.55.2574.55.3294.55.36
15.04.5835.05.1155.05.2675.05.3295.05.36
15.54.6235.55.1255.55.2675.55.3295.55.36
16.04.6536.05.1256.05.2676.05.3396.05.36
16.54.6836.55.1356.55.2676.55.3396.55.36
17.04.7137.05.1357.05.2677.05.3397.05.37
17.54.7337.55.1457.55.2777.55.3397.55.37
18.04.7538.05.1458.05.2778.05.3398.05.37
18.54.7738.55.1558.55.2778.55.3398.55.37
19.04.7939.05.1559.05.2779.05.3399.05.37
19.54.8139.55.1659.55.2879.55.3399.55.37
20.04.8340.05.1660.05.2880.05.34100.05.37
Bulletin No. 2015–34August 24, 2015
219

Part IV. Items of General Interest
Deletions From Cumulative
List of Organizations,
Contributions to Which are
Deductible Under Section
170 of the Code
Announcement 2015–21
The Internal Revenue Service has re-
voked its determination that the organiza-
tions listed below qualify as organizations
described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the IRS will not disallow
deductions for contributions made to a
listed organization on or before the date of
announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the IRS is not pre-
cluded from disallowing a deduction for
any contributions made after an organiza-
tion ceases to qualify under section
170(c)(2) if the organization has not
timely filed a suit for declaratory judg-
ment under section 7428 and if the con-
tributor (1) had knowledge of the revoca-
tion of the ruling or determination letter,
(2) was aware that such revocation was
imminent, or (3) was in part responsible
for or was aware of the activities or omis-
sions of the organization that brought
about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on August 24, 2015
and would end on the date the court first
determines the organization is not de-
scribed in section 170(c)(2) as more par-
ticularly set for in section 7428(c)(1). For
individual contributors, the maximum de-
duction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were
the basis for revocation.
NAME OF ORGANIZATIONEffective Date of RevocationLOCATION
Foundation for Harmony and HappinessFebruary 1, 1999Santa Barbara, CA
Kids Against Drugs of WV, Inc.January 1, 2011Martinsburg, WV
Harbor Rose LodgeJanuary 1, 2012San Pedro, CA
Somerset Home SchoolMarch 1, 2011Silverton, OR
Summit FoundationSeptember 14, 2009Grand Rapids, MI
Disabled Veterans Services, Inc.January 1, 2011Las Vegas, NV
August 24, 2015Bulletin No. 2015–34
220

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified andclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Supersededdescribes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
supersededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE
—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Bulletin No. 2015–34August 24, 2015
i

Numerical Finding List
1
Bulletins 2015–27 through 2015–34
Announcements:
2015-17, 2015-28 I.R.B.67
2015-18, 2015-33 I.R.B.198
2015-19, 2015-32 I.R.B.157
2015-21, 2015-34 I.R.B.220
Notices:
2015-43, 2015-29 I.R.B.73
2015-46, 2015-28 I.R.B.64
2015-47, 2015-30 I.R.B.76
2015-48, 2015-30 I.R.B.77
2015-49, 2015-30 I.R.B.79
2015-50, 2015-30 I.R.B.81
2015-51, 2015-31 I.R.B.133
2015-53, 2015-33 I.R.B.190
2015-54, 2015-34 I.R.B.210
2015-55, 2015-34 I.R.B.217
Proposed Regulations:
REG-109370-10, 2015-33 I.R.B.198
REG-115452-14, 2015-32 I.R.B.158
REG-138526-14, 2015-28 I.R.B.67
REG-102648-15, 2015-31 I.R.B.134
REG-102837-15, 2015-27 I.R.B.43
Revenue Procedures:
2015-34, 2015-27 I.R.B.4
2015-36, 2015-27 I.R.B.20
2015-39, 2015-33 I.R.B.195
Revenue Rulings:
2015-15, 2015-27 I.R.B.1
2015-16, 2015-31 I.R.B.130
2015-18, 2015-34 I.R.B.209
Treasury Decisions:
9723, 2015-31 I.R.B.84
9726, 2015-31 I.R.B.98
9727, 2015-32 I.R.B.154
9728, 2015-33 I.R.B.169
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2015– 01 through 2015–26 is in Internal Revenue Bulletin
2015–26, dated June 29, 2015.
August 24, 2015Bulletin No. 2015–34
ii

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2015–27 through 2015–34
Notices:
2014-4
Modified by
Notice 2015-51, 2015-31 I.R.B.133
Revenue Procedures:
2011-49
Modified by
Rev. Proc. 2015-36, 2015-27 I.R.B.20
2011-49
Superseded by
Rev. Proc. 2015-36, 2015-27 I.R.B.20
2015-14
Modified by
Rev. Proc. 2015-39, 2015-33 I.R.B.195
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2015– 01 through 2015–26 is in Internal Revenue Bulletin
2015–26, dated June 29, 2015.
Bulletin No. 2015–34August 24, 2015
iii

INTERNAL REVENUE BULLETIN
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Bulletins are available atwww.irs.gov/irb/.
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would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
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