Internal Revenue Bulletin 2020-8 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2020–8
February 18, 2020
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.
EMPLOYMENT TAX, INCOME TAX
T.D. 9892, page 439.
These final regulations update the due dates and available
extensions of time to file certain tax returns and informa-
tion returns, to reflect statutory requirements set by section
2006 of the Surface Transportation and Veterans Health
Care Choice Improvement Act of 2015 and section 201
of the Protecting Americans from Tax Hikes Act of 2015.
Additionally, the regulations remove a provision for elect-
ing large partnerships that was made obsolete by section
1101(b)(1) of the Bipartisan Budget Act of 2015. The regu-
lations also delete temporary regulations.
EXEMPT ORGANIZATIONS
Rev. Proc. 2020-8, page 447.
This revenue procedure modifies Rev. Proc. 2020-5 to al-
low for the new electronic submission process of the Form
1023. This revenue procedure also modifies language relat-
ed to the submission of written requests of Canadian chari-
ties to be listed on the Tax Exempt Organizations Search da-
tabase or for a determination on private foundation status.
Finally, this revenue procedure provides a 90 day transition
relief period, during which paper Form 1023 applications
will be accepted and processed by EO Determinations.
INCOME TAX
Rev. Rul. 2020-4, page 444.
This revenue ruling clarifies the manner to properly com-
pute the income limits applicable to the low-income housing
credit under § 42 of the Internal Revenue Code. The Consol-
idated Appropriations Act of 2018 added a new minimum
set-aside test, the average income test (§ 42(g)(1)(C)), to
the existing minimum set-aside tests available to owners of
a low-income housing project. This revenue ruling address-
es the additional income limits available in the average in-
come test.
T.D. 9891, page 419.
These final regulations would finalize the rules in the tempo-
rary regulations under REG-127203-15, published January
19, 2017. These final regulations provide rules that address
certain transfers of appreciated property by United States
persons to partnerships with foreign partners that are re-
lated to the transferor. Specifically, these final regulations
override the rules providing for nonrecognition of gain on a
contribution of property to a partnership in exchange for an
interest in the partnership unless the partnership complies
with certain requirement. Those requirements, in turn, are
intended to prevent the shifting of tax consequences of pre-
contribution gain to the related foreign partner by ensuring
that built-in gain with respect to the contributed property
will be subject to U.S. tax.
Finding Lists begin on page ii.

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Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, 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 sub-
stantive 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 inter-
nal management are not published; however, statements of
internal 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 rul-
ings to taxpayers or technical advice to Service field offices,
identifying 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,
Legislation 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
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (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.
February 18, 2020 Bulletin No. 2020–8

Part I
26 CFR 1.721(c)
T.D. 9891
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Transfers of Certain
Property by U.S. Persons to
Partnerships with Related
Foreign Partners
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains fi-
nal regulations that provide guidance ap-
plicable to transfers of appreciated prop-
erty by U.S. persons to partnerships with
foreign partners related to the transferor.
Specifically, when a U.S. person transfers
appreciated property to a partnership with
a foreign partner related to the transferor,
the regulations override the general non-
recognition rule unless the partnership
adopts the remedial allocation method and
certain other requirements are satisfied.
The regulations affect U.S. partners in do-
mestic or foreign partnerships.
DATES: Effective Date: These regulations
are effective on January 17, 2020.
Applicability Dates: For dates of applica-
bility, see §§1.197-2(l)(5)(i), 1.704-1(f),
1.704-3(g)(1), 1.721(c)-1(e), 1.721(c)-2(e),
1.721(c)-3(e), 1.721(c)-4(d), 1.721(c)-5(g),
1.721(c)-6(g), and 1.6038B-2(j)(4).
FOR FURTHER INFORMATION CON-
TACT: Chadwick Rowland, (202) 317-
6937 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 721(c) was added to the Inter-
nal Revenue Code (the “Code”) by the
Taxpayer Relief Act of 1997, Public Law
105-34 (111 Stat. 788). In section 721(c),
Congress granted the Secretary regulato-
ry authority to override the application of
the nonrecognition provision of section
721(a) to gain realized on the transfer of
property to a partnership (domestic or for-
eign) if the gain, when recognized, would
be includible in the gross income of a per-
son other than a U.S. person.
On August 6, 2015, the Department of
the Treasury (the “Treasury Department”)
and the IRS issued Notice 2015-54, 2015-
34 I.R.B. 210, which announces an intent
to issue regulations under section 721(c).
On January 19, 2017, the Treasury De-
partment and the IRS published temporary
and final regulations (T.D. 9814) under
sections 721(c), 197, 704, and 6038B in
the Federal Register (82 FR 7582) (the
“temporary regulations”). A notice of
proposed rulemaking (REG-127203-15)
cross-referencing the temporary regula-
tions was published in the same issue of
the Federal Register (82 FR 6368 (the
“proposed regulations” and together with
the temporary regulations the “2017 reg-
ulations”).
No public hearing on the 2017 regu-
lations was requested or held; however,
the Treasury Department and the IRS re-
ceived one written comment with respect
to the 2017 regulations. The Comment
Summary and Explanation of Revisions
section summarizes the comment and
discusses relevant provisions of the 2017
regulations.
Comment Summary and Explanation
of Revisions
I. Overview
The Treasury Department and the IRS
received one comment regarding the 2017
regulations. After full consideration of the
comment, this Treasury Decision adopts
the rules contained in the proposed reg-
ulations with certain modifications. This
Comment Summary and Explanation of
Provisions section summarizes the com-
ment received, explains the Treasury De-
partment and the IRS’s response to that
comment, and discusses the modifications
to the proposed regulations adopted in this
Treasury Decision.
II. Comment
The comment expressed concern that
an intercompany transaction between
a U.S. person and a foreign person may
result in a deemed or “accidental partner-
ship,” despite no intention by the partners
to create one and no realization one was
created. As a consequence, the require-
ments under the regulations would not be
met to avoid gain recognition under sec-
tion 721(c). The comment recommended
an additional exception to gain recogni-
tion under section 721(c) in these circum-
stances if the taxpayer has reasonably de-
termined that the property in question was
not contributed to a partnership, the tax-
payer is not amortizing or depreciating the
property for section 704(b) purposes with
respect to the arrangement for which the
property owner has entered into a transac-
tion with a related party, and all parties in-
volved consistently treat the arrangement,
with respect to the subject property, as one
to which subchapter K of the Code does
not apply.
The final regulations do not adopt this
recommendation. The issue of what con-
stitutes deemed or accidental partnerships
and any relief that should be provided for
them is not unique to the application of
these regulations and, thus, goes beyond
the scope of this Treasury Decision. Nev-
ertheless, when an accidental partnership
exists as the comment describes, the fil-
ing obligations under §1.6038B-2(a)(1)
(iii) (which cross references the reporting
requirements under §1.721(c)-6(b)) will
have not been fulfilled and, therefore, the
limitations period on assessment under
section 6501(c)(8) will remain open until
three years after the IRS is provided the
information required to be reported under
Bulletin No. 2020–8 419 February 18, 2020

section 6038B. Accordingly, a taxpayer
that makes a contribution to an accidental
partnership could file amended returns ap-
plying the gain deferral method, including
fulfilling its reporting requirements (see
§1.721(c)-6(f)).
III. Modifications and Clarifications
A. Related party definition
Section 1.721(c)-1T(b) provides defi-
nitions that apply for purposes of the
2017 regulations. Section 1.721(c)-1T(b)
(12) provides that a related person is, with
respect to a U.S. transferor, a person that
is related (within the meaning of section
267(b) or 707(b)(1)) to the U.S. transferor.
A related foreign person is, with respect to
a U.S. transferor, a related person (other
than a partnership) that is not a U.S. per-
son. See §1.721(c)-1T(b)(11).
The Treasury Department and the IRS
have determined that a modification to the
definition of related person is appropri-
ate to limit the application of these rules
in certain situations. Specifically, a new
paragraph is added in §1.721(c)-1(b)(12)
that provides that for purposes of deter-
mining if a person is a related person with
respect to a U.S. transferor, section 267(b)
is applied without regard to section 267(c)
(3). This modification to the definition of
related person provides relief when certain
foreign individual partners of a partner-
ship would be treated as a related person
with respect to a domestic corporation by
reason of section 267(c)(3). This change
is consistent with section 707(b)(3) and is
intended to address the following specific
fact pattern, or a variation thereof:
A partnership (PRS1) has two partners:
a foreign individual that holds 4 percent
of the interests in PRS1’s capital and prof-
its and a U.S. individual (unrelated to the
foreign individual) that holds 96 percent
of the interests in PRS1’s capital and prof-
its. PRS1 wholly owns a domestic cor-
poration (UST) and holds 90 percent of
the interests in a lower-tier partnership’s
(PRS2) capital and profits. In Year 1, UST
and PRS2 form a new partnership (PRS3);
as part of the formation, UST contributes
section 721(c) property (as defined in
§1.721(c)-1(b)(15)) in return for a 90 per-
cent interest in PRS3’s capital and profits,
and a U.S. individual (unrelated to UST)
contributes cash in return for the remain-
ing interest in PRS3’s capital and profits.
For purposes of determining whether
PRS3 is a section 721(c) partnership (as
defined in §1.721(c)-1(b)(14)), the rules of
section 267(b) must be applied to determine
whether the foreign individual is a related
foreign person with respect to UST. Sec-
tion 267(b)(2) provides that an individual
is related to a corporation if the individual
holds, directly or indirectly, more than 50
percent in value of the corporation’s out-
standing stock. In applying section 267(b)
(2), however, the constructive stock owner-
ship rules of section 267(c) must be taken
into account. Section 267(c)(1) provides
that stock owned, directly or indirectly, by
a partnership will be treated as owned pro-
portionally by its partners. Section 267(c)
(5) provides that stock owned constructive-
ly by reason of section 267(c)(1) will be
treated as actually owned for purposes of
applying section 267(c)(3). Section 267(c)
(3) provides that an individual owning any
stock in a corporation shall be considered
as owning the stock owned, directly or in-
directly, by or for his partner. But section
267(c)(3) will not apply, and will therefore
not attribute stock ownership to an indi-
vidual partner, if the individual does not
actually own, or constructively own under
section 267(c)(1), stock in the corporation
that is owned directly or indirectly by or
for another partner of the partnership. See
§1.267(c)-1(a)(2).
In the facts provided, section 267(c)(1)
treats the foreign individual as constructive-
ly owning a proportionate share of the UST
stock that is owned by PRS1; accordingly,
the foreign individual is treated as construc-
tively owning 4 percent of the UST stock.
And because the foreign individual con-
structively owns stock in UST under sec-
tion 267(c)(1), section 267(c)(3) attributes
the stock owned by the U.S individual (the
other partner in PRS1) to the foreign indi-
vidual. As a result, the foreign individual is
treated as owning all of the value of UST’s
outstanding stock for purposes of determin
-
ing relatedness under section 267(b)(2);
therefore, the foreign individual is a related
person with respect to the U.S. transferor
under the rule provided in §1.721(c)-1T(b)
(12) of the 2017 regulations. However,
because the modified definition of related
person provided in this Treasury Decision
applies section 267(b) without regard to
section 267(c)(3), the foreign individual
will not be treated as a related person under
§1.721(c)-1(b)(12)(ii). As a consequence,
PRS3 is not a section 721(c) partnership.
B. Consistent allocation method
Section 1.721(c)-3T(b) of the 2017
regulations provides the requirements of
the gain deferral method. Among the re-
quirements, a section 721(c) partnership
is required to adopt the remedial alloca-
tion method and apply the consistent al-
location method with respect to section
721(c) property. The consistent allocation
method, as described in §1.721(c)-3T(c)
(1), provides that for each taxable year
of a section 721(c) partnership in which
there is remaining built-in gain in section
721(c) property, the section 721(c) part-
nership must allocate each book item of
income, gain, deduction, and loss with re-
spect to the section 721(c) property to the
U.S. transferor in the same percentage for
the taxable year. Although the consistent
allocation method requires each book item
of income, gain, deduction, and loss with
respect to section 721(c) property to be
allocated to a U.S. transferor in the same
percentage for a single taxable year, the
consistent allocation method does not re-
quire the allocations to be in the same per-
centage among all taxable years in which
the gain deferral method is applied. The
consistent allocation method, therefore,
prevents a U.S. transferor from rendering
the remedial allocation method ineffective
by, for example, having the partnership al-
locate a higher percentage of book depre-
cation to the U.S. transferor than the U.S.
transferor’s percentage share of income
or gain with respect to the section 721(c)
property. See preamble to the temporary
regulations (82 FR at 7589). The consis-
tent allocation method, therefore, ensures
that the built-in gain in section 721(c)
property will be subject to U.S. tax.
The Treasury Department and the IRS
have determined that a modification to
§1.721(c)-3T(c)(1) of the 2017 regula-
tions is appropriate to clarify the applica-
tion of the consistent allocation method.
Specifically, a new sentence is added in
§1.721(c)-3(c)(1); the new sentence pro-
vides that upon a variation (as described
in §1.706-4(a)(1)) of a U.S. transferor’s
interest in a section 721(c) partnership,
February 18, 2020 420 Bulletin No. 2020–8

Bulletin No. 2020–8 421 February 18, 2020
book items with respect to section 721(c)
property that are allocated under the in-
terim closing method (as described in
§1.706-4) will be treated as allocated in
the same percentage for purposes of ap-
plying the consistent allocation method in
a single taxable year unless the variation
results from a transaction undertaken with
a principal purpose of avoiding the tax
consequences of the gain deferral method.
If any partner’s interest in a partnership
changes during a taxable year of the part-
nership, section 706(d) grants the Secre-
tary regulatory authority to prescribe rules
for determining each partner’s distributive
share of any partnership item for the tax-
able year that takes into account the part-
ner’s varying interests in the partnership.
The variations described in section 706(d)
include, among other things, a reduction
in a partner’s interest in a partnership, in-
cluding a reduction that occurs due to the
entry of a new partner. See §1.706-4(a).
If a partner’s interest in a partnership is
reduced during a taxable year, but not
completely disposed of, the taxable year
of the partnership will not close as a re-
sult of the variation. See section 706(c)(2)
(B). Instead, if a variation occurs during
the taxable year of a partnership, §1.706-
4(a)(3) generally allows the partnership
to choose how to determine each part-
ner’s share of the partnership items for
the taxable year under either the proration
method or the interim closing method.
See §1.706-4(a)(3)(iii). The interim clos-
ing method divides the taxable year of the
partnership into segments based on the in-
terim closings of the partnership’s books;
the segments are then used to apportion
the partnership items for the year among
its segments, and to determine, taking into
account the partners’ interests during each
segment, the partners’ distributive shares
of the partnership items. See generally
§1.706-4(a)(3).
The modification to the consistent al-
location method when the interim closing
method is applied is intended to clarify
that a U.S. transferor continues to com-
ply with the consistent allocation method
following certain economic events that do
not close the taxable year of the section
721(c) partnership. Given the high thresh-
olds required to be subject to these rules,
the Treasury Department and the IRS have
determined that allowing the partnership
to choose the proration method is not
appropriate for the consistent allocation
method: a section 721(c) partnership will
have the resources and capabilities neces-
sary to comply with the more precise in-
terim closing method without imposing an
undue burden on the partnership.
C. Reporting
The final regulations include the re-
porting requirements provided in the 2017
regulations regarding both gain deferral
contributions and the annual reporting re-
quirements with respect to section 721(c)
property to which the gain deferral meth-
od applies. The 2017 regulations require
much of the reporting to be on statements
attached to returns. See §§1.721(c)-6T
and 1.6038B-2T. Since the issuance of
the 2017 regulations, however, the IRS
has updated and added new schedules to
Form 8865, Return of U.S. Persons With
Respect to Certain Foreign Partnerships,
to facilitate compliance with these report-
ing requirements. The IRS has also issued
new Form 8838-P, Consent To Extend the
Time To Assess Tax Pursuant to the Gain
Deferral Method (Section 721(c)). The
purpose of these changes was to include
the information that previously was re-
ported on the statements. The final regula-
tions reference and require the use of these
forms and schedules to fulfill the reporting
requirements. For tax returns filed before
July 17, 2020, however, §1.721(c)-6(g)(3)
(ii) provides relief for reporting that met
the requirements of §1.721(c)-6T (as in
effect before January 1, 2020).
The final regulations also clarify the
duration for which the U.S. transferor
must extend the period of limitations on
the assessment of tax under §1.721(c)-
6(b). Section 1.721(c)-6(b)(5) clarifies the
relevant periods to which Form 8838-P
applies by measuring each period by the
number of months occurring after the rel-
evant date; accordingly, the final regula-
tions measure each period by a fixed term
that is determinable on the date of contri-
bution. The final regulations also provide
a similar clarification in §1.721(c)-6(f)(2).
D. Technical terminations
Section 708(b) generally provides
that a partnership will terminate if the
partnership ceases to do business. Be-
fore the enactment of the Tax Cuts and
Jobs Act, Public Law 115-97 (2017) (the
“TCJA”), section 708(b)(1)(B) provided
another way for a partnership to termi-
nate: a partnership terminated if within
any 12-month period, 50 percent or more
of the total interest in partnership capital
and profits was sold or exchanged. The
termination described in section 708(b)
(1)(B) is commonly referred to as a
“technical termination.” The regulations
in §1.708-1(b)(4) provide that a technical
termination results in a deemed contri-
bution of all the terminated partnership’s
assets and liabilities to a new partnership
in exchange for an interest in the new
partnership, followed by a deemed distri-
bution of interests in the new partnership
to both the purchasing partners and the
remaining partners.
The TCJA repealed section 708(b)(1)
(B) for all partnership taxable years begin-
ning after December 31, 2017; therefore,
technical terminations no longer apply.
See Conference Report on H.R. 1, Tax
Cuts and Jobs Act, H. Rept. 115-446, at
416.
The 2017 regulations provide rules re-
garding technical terminations in two con-
texts: they provide that a partnership will
not be treated as a section 721(c) partner-
ship (as defined in §1.721(c)-1T(b)(14))
following a deemed contribution that oc-
curs as a result of a technical termination,
and they treat certain technical termina-
tions as successor events for purposes of
the acceleration event exceptions provid-
ed in §1.721(c)-5T. See §§1.721(c)-2T(d)
(2) and 1.721(c)-5T(c)(4).
The rules in the 2017 regulations re-
garding technical terminations are re-
tained in this Treasury Decision. Although
the TCJA repealed section 708(b)(1)(B),
the applicability date for these final reg-
ulations relates back to the applicability
date provided in the 2017 regulations,
which is before the effective date provided
in the TCJA. Accordingly, the rules pro-
vided in this Treasury Decision regarding
technical terminations will have limited
applicability; the rules will only apply to
technical terminations occurring on or af-
ter the applicability date provided in the
2017 regulations but before the effective
date for the repeal of section 708(b)(1)(B)
provided in the TCJA.

February 18, 2020 422 Bulletin No. 2020–8
E. Request for comments
Under the final regulations, as well
as the 2017 regulations, stock is exclud-
ed from the definition of section 721(c)
property and, therefore, a contribution
of stock of a controlled foreign corpora-
tion (within the meaning of section 957)
(“CFC”) to a section 721(c) partnership is
not subject to the final regulations. How-
ever, the Treasury Department and the
IRS are concerned that taxpayers may
avail themselves of partnerships to shift
the tax liability, in whole or in part, with
respect to earnings of a CFC attributable
to subpart F income (within the meaning
of section 952) or tested income (within
the meaning of section 951A(c)(2)(A)
and §1.951A-2(b)(1)) to a related for-
eign partner that is not owned (within the
meaning of section 958(a)) by a United
States shareholder (within the meaning of
section 951(b)). The Treasury Department
and the IRS are studying the use of part-
nerships in this context, including under
what circumstances it may be appropriate
to apply section 721(c) to a contribution
of stock of a CFC to a partnership. The
Treasury Department and the IRS request
comments on this matter.
Special Analyses
I. Regulatory Planning and Review
The Administrator of the Office of In-
formation and Regulatory Affairs (OIRA),
Office of Management and Budget, has
determined that this rule is not a signifi-
cant regulatory action, as that term is de-
fined in section 3(f) of Executive Order
12866. Therefore, OIRA has not reviewed
this rule pursuant to section 6(a)(3)(A)
of Executive Order 12866 and the April
11, 2018, Memorandum of Agreement
between the Department of Treasury and
the Office of Management and Budget
(OMB).
Pursuant to the Regulatory Flexibili-
ty Act (5 U.S.C. chapter 6), it is hereby
certified that the collection of informa-
tion contained in this regulation will not
have a significant economic impact on a
substantial number of small entities. This
certification is based on the fact that the
regulations include a $1,000,000 de mi-
nimis exception for certain transfers and
exclude contributions of tangible proper-
ty with built-in gain that does not exceed
$20,000. In addition, the regulations apply
only when a U.S. transferor contributes
property to a partnership with a partner
that is a related foreign person and per-
sons related to the U.S. transferor own
more than 80 percent of the interests in
the partnership. Accordingly, the Treasury
Department and the IRS expect that these
regulations primarily will affect large do-
mestic corporations. Pursuant to section
7805(f) of the Code, these regulations
have been submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on their impact
on small business.
II. Paperwork Reduction Act
The collection of information im-
posed by these regulations is contained in
§§1.721(c)-6 and 1.6038B-2. The collec-
tion of information provided by these reg-
ulations has been reviewed and approved
by the Office of Management and Budget
under control numbers 1545-1668 and
1545-0123. The information is required
to comply with the gain deferral method,
which generally allows a U.S. transferor
to avoid immediate gain recognition upon
a contribution of section 721(c) property
to a section 721(c) partnership. The like-
ly respondents are domestic corporations.
Estimates for completing these forms can
be located in the instructions to Forms
8865, 8838-P, and 1065.
Upon a contribution of section 721(c)
property to a section 721(c) partnership, a
U.S. transferor must comply with the gain
deferral method described in §1.721(c)-
3 to avoid immediate gain recognition.
To comply with the gain deferral meth-
od, §1.721(c)-3(b)(3) provides that the
procedural and reporting requirements
of §1.721(c)-6 must be met; additional-
ly, §1.721(c)-3(b)(4) provides that a U.S.
transferor must consent to an extension of
the period of limitations on assessment of
tax as required by §1.721(c)-6(b)(5).
Section 1.721(c)-6(b) describes the
procedural and reporting requirements of a
U.S. transferor. The collection of informa-
tion described in §§1.721(c)-6(b)(2) and
(c)(2) and 1.6038B-2(a)(1)(iii) regarding
a gain deferral contribution is provided by
the U.S. transferor to the IRS on any ap-
plicable Schedules to Form 8865, Return
of U.S. Persons With Respect to Certain
Foreign Partnerships, and is mandatory;
the relevant Schedules include, as appli-
cable, Schedule A-1, Certain Foreign
Partners; Schedule A-2, Foreign Partners
of Section 721(c) Partnership; Schedule
G, Statement of Application of the Gain
Deferral Method Under Section 721(c);
Schedule H, Acceleration Events and Ex-
ceptions Reporting Relating to Gain De-
ferral Method Under Section 721(c); and
Schedule O, Transfer of Property to a For-
eign Partnership. The information will be
used by the U.S. transferor to comply with
the gain deferral method.
The collection of information described
in §§1.721(c)-6(b)(3) and 1.6038B-2(a)
(1)(iii) is provided on Schedules G, H,
and O of Form 8865 and is mandatory.
The information will be used by the U.S.
transferor to annually report information
for each gain deferral contribution.
The collection of information de-
scribed in §1.721(c)-6(b)(3)(iii), if not al-
ready provided elsewhere, is provided on
Form 8865, Return of U.S. Persons With
Respect to Certain Foreign Partnerships,
and is mandatory. The information will be
used by the U.S. transferor to comply with
the gain deferral method.
The collection of information de-
scribed in §1.721(c)-6(b)(5) is provided
by the U.S. transferor to the IRS on Form
8838-P, Consent To Extend the Time To
Assess Tax Pursuant to the Gain Deferral
Method (Section 721(c)), and is manda-
tory. The information will be used by the
U.S. transferor to extend the period of lim-
itations on the assessment of tax to ensure
that the gain deferral method is properly
applied.
If a section 721(c) partnership does
not have a filing obligation under section
6031, the collection of information de-
scribed in §1.721(c)-6(c)(3) is provided
by a section 721(c) partnership to a U.S.
transferor on Schedule K-1 (Form 8865),
Partner’s Share of Income, Deduction,
Credits, etc., for all related foreign per-
sons that are direct or indirect partners in
the section 721(c) partnership. The infor-
mation will be used by the U.S. transferor
to annually report information for each
gain deferral contribution.
If a section 721(c) partnership has a
filing obligation under section 6031, the

Bulletin No. 2020–8 423 February 18, 2020
collection of information described in
§1.721(c)-6(d)(2) is provided by the sec-
tion 721(c) partnership to the U.S. trans-
feror on Schedule K-1 (Form 1065). The
information will be used by the U.S. trans-
feror to comply with the requirements
of the gain deferral method provided in
§1.721(c)-6(b)(2) and (3).
Revision of Existing Forms
NewRevision of existing form
Number of additional respondents
(estimated, rounded to nearest 100)
Form 8865Y<200
Form 8838-PY<200
Form 1065Y<200
Source: RAAS:CDW and SOI
The numbers of respondents in the Re-
vision of Existing Forms table were esti-
mated by the Research, Applied Analytics
and Statistics Division of the IRS from the
Compliance Data Warehouse and Statis-
tics of Income, using tax year 2017. Data
for each of the Forms 8865, 8838-P, and
1065 represent preliminary estimates of
the total number of additional taxpayers
that are expected to file these forms. The
tax data for 2018 is not yet available.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions be-
fore issuing a final rule that includes any
Federal mandate that may result in expen-
ditures in any one year by a state, local, or
tribal government, in the aggregate, or by
the private sector, of $100 million in 1995
dollars, updated annually for inflation.
In 2019, that threshold is approximately
$154 million. These regulations do not in-
clude any Federal mandate that may result
in expenditures by state, local, or tribal
governments, or by the private sector in
excess of that threshold.
IV. Executive Order 13132: Federalism
Executive Order 13132 (entitled
“Federalism”) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial, direct compliance costs on
state and local governments, and is not
required by statute, or preempts state law,
unless the agency meets the consultation
and funding requirements of section 6 of
the Executive order. This final rule does
not have federalism implications and does
not impose substantial direct compliance
costs on state and local governments or
preempt state law within the meaning of
the Executive order.
Drafting Information
The principal authors of these regula-
tions are Chadwick Rowland and Ronald
M. Gootzeit, Office of the Associate Chief
Counsel (International). However, other
personnel from the Treasury Department
and the IRS participated in their develop-
ment.
Statement of Availability
Notice 2015-54 (cited in this pream-
ble) is published in the Internal Revenue
Bulletin and is available from the Super-
intendent of Documents, U.S. Govern-
ment Publishing Office, Washington, DC
20402, or by visiting the IRS website at
https://www.irs.gov.
Effect on Other Documents
The following section of the following
publication is obsolete as of January 17,
2020:
Section 4 of Notice 2015-54 (2015-34
I.R.B. 210).
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is amend-
ed as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by removing the sec-
tional authority citations for §§1.197-2T,
1.704-3T, 1.721(c)-1T through 1.721(c)-
7T, and 1.6038B-2T and adding entries in
numerical order for §§1.721(c)-1 through
1.721(c)-7 to read in part as follows:
Authority: 26 U.S.C. 7805, unless oth-
erwise noted.
* * * * *
Section 1.721(c)-1 also issued under 26
U.S.C. 721(c).
Section 1.721(c)-2 also issued under 26
U.S.C. 721(c).
Section 1.721(c)-3 also issued under 26
U.S.C. 721(c).
Section 1.721(c)-4 also issued under 26
U.S.C. 721(c).
Section 1.721(c)-5 also issued under 26
U.S.C. 721(c).
Section 1.721(c)-6 also issued under 26
U.S.C. 721(c).

February 18, 2020 424 Bulletin No. 2020–8
Section 1.721(c)-7 also issued under 26
U.S.C. 721(c).
* * * * *
Par. 2. Section 1.197-2 is amended by
revising paragraphs (h)(12)(vii)(C) and (l)
(5) to read as follows:
§1.197-2 Amortization of goodwill and
certain other intangibles.
* * * * *
(h) * * *
(12) * * *
(vii) * * *
(C) Rules for section 721(c) partner-
ships. See §1.704-3(d)(5)(iii) if there is a
contribution of a section 197(f)(9) intan-
gible to a section 721(c) partnership (as
defined in §1.721(c)-1(b)(14)).
* * * * *
(l) * * *
(5) Applicability dates for section
721(c) partnerships—(i) In general. Ex-
cept as provided in paragraph (l)(5)(ii) of
this section, paragraph (h)(12)(vii)(C) of
this section applies with respect to contri-
butions occurring on or after January 18,
2017, and with respect to contributions
that occurred before January 18, 2017 re-
sulting from an entity classification elec-
tion made under §301.7701-3 of this chap-
ter that was effective on or before January
18, 2017 but was filed on or after January
18, 2017.
(ii) Application of the provisions de-
scribed in paragraph (l)(5)(i)(A) of this
section retroactively. Paragraph (h)(12)
(vii)(C) of this section may be applied
with respect to a contribution occurring
on or after August 6, 2015, and to a con-
tribution that occurred before August 6,
2015 resulting from an entity classifica-
tion election made under §301.7701-3 of
this chapter that was effective on or before
August 6, 2015 but was filed on or after
August 6, 2015. A taxpayer applying para-
graph (h)(12)(vii)(C) of this section ret-
roactively must apply paragraph (h)(12)
(vii)(C) of this section on a timely filed
original return (including extensions) or
an amended return filed no later than July
18, 2017.
§1.197-2T [Removed]
Par. 3. Section 1.197-2T is removed.
Par. 4. Section 1.704-1 is amended by
revising paragraphs (b)(2)(iv)(f)(6) and (f)
to read as follows:
§1.704-1 Partner’s distributive share.
* * * * *
(b) * * *
(2) * * *
(iv) * * *
(f) * * *
(6) Notwithstanding paragraph (b)(2)
(iv)(f)(5) of this section, the revaluation
is required under §1.721(c)-3(d)(1) as a
condition of the application of the gain de-
ferral method (as described in §1.721(c)-
3(b)) and is pursuant to an event described
in this paragraph (b)(2)(iv)(f)(6). If an
interest in a partnership is contributed to
a section 721(c) partnership (as defined
in §1.721(c)-1(b)(14)), the partnership
whose interest is contributed may revalue
its property in accordance with this sec-
tion. In this case, the revaluation by the
partnership whose interest was contrib-
uted must occur immediately before the
contribution. If a partnership that revalues
its property pursuant to this paragraph
owns an interest in another partnership,
the partnership in which it owns an inter-
est may also revalue its property in accor-
dance with this section. When multiple
partnerships revalue under this paragraph
(b)(2)(iv)(f)(6), the revaluations occur in
order from the lowest-tier partnership to
the highest-tier partnership.
* * * * *
(f) Applicability dates—(1) In general.
Except as provided in paragraph (f)(2) of
this section, paragraph (b)(2)(iv)(f)(6) of
this section applies with respect to contri-
butions occurring on or after January 18,
2017, and with respect to contributions
that occurred before January 18, 2017 re-
sulting from an entity classification elec-
tion made under §301.7701-3 of this chap-
ter that was effective on or before January
18, 2017 but was filed on or after January
18, 2017.
(2) Election to apply the provisions de-
scribed in paragraph (f)(1) of this section
retroactively. Paragraph (b)(2)(iv)(f)(6) of
this section may, by election, be applied
with respect to a contribution that oc-
curred on or after August 6, 2015 but be-
fore January 18, 2017, and with respect to
a contribution that occurred before August
6, 2015 resulting from an entity classifica-
tion election made under §301.7701-3 of
this chapter that was effective on or before
August 6, 2015 but was filed on or after
August 6, 2015. The election must have
been made by applying paragraph (b)(2)
(iv)(f)(6) of this section on a timely filed
original return (including extensions) or
an amended return filed no later than July
18, 2017.
§1.704-1T [Amended]
Par. 5. Paragraphs (b)(2)(iv)(f)(6) and
(f) of §1.704-1T are removed.
Par. 6. Section 1.704-3 is amended by
revising paragraphs (a)(13), (d)(5)(iii),
and (g) to read as follows:
§1.704-3 Contributed property.
(a) * * *
(13) Rules for tiered section 721(c)
partnerships—(i) Revaluations. If a part-
nership revalues its property pursuant to
§1.704-1(b)(2)(iv)(f)(6) immediately be-
fore an interest in the partnership is con-
tributed to another partnership, or if an
upper-tier partnership owns an interest
in a lower-tier partnership, and both the
upper-tier partnership and the lower-tier
partnership revalue partnership proper-
ty pursuant to §1.704-1(b)(2)(iv)(f)(6),
the principles of paragraph (a)(9) of this
section will apply to any reverse section
704(c) allocations made as a result of the
revaluation.
(ii) Basis-derivative items. If a low-
er-tier partnership that is a section 721(c)
partnership applies the gain deferral meth-
od, then, for purposes of applying this sec-
tion, the upper-tier partnership must treat
its distributive share of lower-tier part-
nership items of gain, loss, amortization,
depreciation, or other cost recovery with
respect to the lower-tier partnership’s sec-
tion 721(c) property as though they were
items of gain, loss, amortization, depreci-
ation, or other cost recovery with respect
to the upper-tier partnership’s interest in
the lower-tier partnership. For purposes
of this paragraph (a)(13)(ii), gain defer-
ral method is defined in §1.721(c)-1(b)
(8), section 721(c) partnership is defined
in §1.721(c)-1(b)(14), and section 721(c)
property is defined in §1.721(c)-1(b)(15).
* * * * *
(d) * * *
(5) * * *
(iii) Special rules for a section 721(c)
partnership and anti-churning proper-
ty—(A) In general. Solely in the case of
a gain deferral contribution of section
721(c) property that is a section 197(f)
(9) intangible that was not an amortizable
section 197 intangible in the hands of the
contributor, the remedial allocation meth-
od is modified with respect to allocations

Bulletin No. 2020–8 425 February 18, 2020
to a related person to the U.S. transfer-
or pursuant to paragraphs (d)(5)(iii)(B)
through (F) of this section. For purposes
of this paragraph (d)(5)(iii), gain deferral
contribution is defined in §1.721(c)-1(b)
(7), related person is defined in §1.721(c)-
1(b)(12), section 721(c) partnership is
defined in §1.721(c)-1(b)(14), section
721(c) property is defined in §1.721(c)-
1(b)(15), and U.S. transferor is defined in
§1.721(c)-1(b)(18). For an example ap-
plying the rules of this paragraph (d)(5)
(iii), see §1.721(c)-7(b)(6) (Example 6).
(B) Book basis recovery. The section
721(c) partnership must amortize the por-
tion of the partnership’s book value in the
section 197(f)(9) intangible that exceeds
the adjusted basis in the property upon
contribution using any recovery period
and amortization method available to the
partnership as if the property had been
newly purchased by the partnership from
an unrelated party.
(C) Effect of ceiling rule limitations.
If the ceiling rule causes the book alloca-
tion of the item of amortization of a sec-
tion 197(f)(9) intangible under paragraph
(d)(5)(iii)(B) of this section by a section
721(c) partnership to a related person with
respect to the U.S. transferor to differ
from the tax allocation of the same item
to the related person (a ceiling rule lim-
ited related person), the partnership must
not create a remedial item of deduction to
allocate to the related person but instead
must increase the adjusted basis of the
section 197(f)(9) intangible by an amount
equal to the difference solely with respect
to that related person. The partnership si-
multaneously must create an offsetting re-
medial item in an amount identical to the
increase in adjusted tax basis of the sec-
tion 197(f)(9) intangible and allocate it to
the contributing partner.
(D) Effect of basis adjustment—(1) In
general. The basis adjustment described
in paragraph (d)(5)(iii)(C) of this section
constitutes an adjustment to the adjusted
basis of a section 197(f)(9) intangible with
respect to the ceiling rule limited related
person only. No adjustment is made to the
common basis of partnership property.
Thus, for purposes of calculating gain and
loss, the ceiling rule limited related person
will have a special basis for that section
197(f)(9) intangible. The adjustment to
the basis of partnership property under
this section has no effect on the partner-
ship’s computation of any item under sec-
tion 703.
(2) Computation of a partner’s dis-
tributive share of partnership items. The
partnership first computes its items of gain
or loss at the partnership level under sec-
tion 703. The partnership then allocates
the partnership items among the partners,
including the ceiling rule limited related
person, in accordance with section 704,
and adjusts the partners’ capital accounts
accordingly. The partnership then adjusts
the ceiling rule limited related person’s
distributive share of the items of partner-
ship gain or loss, in accordance with para-
graph (d)(5)(iii)(D)(3) of this section, to
reflect the effects of that person’s basis ad-
justment under this section. These adjust-
ments to that person’s distributive shares
must be reflected on Schedules K and K-1
of the partnership’s return (Form 1065)
(when otherwise required to be complet-
ed) and do not affect that person’s capital
account.
(3) Effect of basis adjustment in deter-
mining items of income, gain, or loss. The
amount of a ceiling rule limited related
person’s gain or loss from the sale or ex-
change of a section 197(f)(9) intangible in
which that person has a tax basis adjust-
ment is equal to that person’s share of the
partnership’s gain or loss from the sale of
the asset (including any remedial alloca-
tions under this paragraph (d)), minus the
amount of that person’s tax basis adjust-
ment for the section 197(f)(9) intangible.
(E) Subsequent transfers—(1) In gen-
eral. Except as provided in paragraph (d)
(5)(iii)(E)(2) of this section, if a ceiling
rule limited related person transfers all or
part of its partnership interest, the portion
of the basis adjustment for a section 197(f)
(9) intangible attributable to the interest
transferred is eliminated. The transferor of
the partnership interest remains the ceiling
rule limited related person with respect to
any remaining basis adjustment for the
section 197(f)(9) intangible.
(2) Special rules for substituted basis
transactions. Paragraph (d)(5)(iii)(E)(1)
of this section does not apply to the extent
a ceiling rule limited related person trans-
fers its partnership interest in a transaction
in which the transferee’s basis in the part-
nership interest is determined in whole
or in part by reference to the ceiling rule
limited related person’s basis in that inter-
est. Instead, in such a case, the transferee
succeeds to that portion of the transfer-
or’s basis adjustment for a section 197(f)
(9) intangible attributable to the interest
transferred. In such a case, the basis ad-
justment in a section 197(f)(9) intangible
to which the transferee succeeds is taken
into account for purposes of determining
the transferee’s share of the adjusted ba-
sis to the partnership of the partnership’s
property for purposes of §§1.743-1(b) and
1.755-1(b)(5). To the extent a transferee
would be required to decrease the adjusted
basis of a section 197(f)(9) intangible pur-
suant to §§1.743-1(b)(2) and 1.755-1(b)
(5), the decrease first reduces the special
basis adjustment described in paragraph
(d)(5)(iii)(C) of this section, if any, to
which the transferee succeeds.
(F) Non-amortization of basis adjust-
ment. Neither the increase to the adjusted
basis of a section 197(f)(9) intangible with
respect to a ceiling rule limited related
person nor the portion of the basis of any
property that was determined by reference
to such increase is subject to amortization,
depreciation, or other cost recovery.
* * * * *
(g) Applicability dates for rules for sec-
tion 721(c) partnerships—(1) In general.
Notwithstanding paragraph (f) of this
section, except as provided in paragraph
(g)(2) of this section, paragraphs (a)(13)
and (d)(5)(iii) of this section apply with
respect to contributions occurring on or
after January 18, 2017, and with respect to
contributions that occurred before January
18, 2017 resulting from an entity classi-
fication election made under §301.7701-3
of this chapter that was effective on or be-
fore January 18, 2017 but was filed on or
after January 18, 2017.
(2) Election to apply the provisions de-
scribed in paragraph (g)(1) of this section
retroactively. Paragraphs (a)(13) and (d)
(5)(iii) of this section may, by election, be
applied with respect to a contribution that
occurred on or after August 6, 2015 but be-
fore January 18, 2017, and with respect to
a contribution that occurred before August
6, 2015 resulting from an entity classifica-
tion election made under §301.7701-3 of
this chapter that was effective on or before
August 6, 2015 but was filed on or after
August 6, 2015. The election must have
been made by applying paragraph (a)(13)

February 18, 2020 426 Bulletin No. 2020–8
or (d)(5)(iii) of this section, as applicable,
on a timely filed original return (including
extensions) or an amended return filed no
later than July 18, 2017.
§1.704-3T [Removed]
Par. 7. Section 1.704-3T is removed.
Par. 8. Section 1.721(c)-1 is added to
read as follows:
§1.721(c)-1 Overview, definitions, and
rules of general application.
(a) Overview—(1) In general. This
section and §§1.721(c)-2 through
1.721(c)-7 (collectively, the section
721(c) regulations) provide rules under
section 721(c). This section provides
definitions and rules of general applica-
tion for purposes of the section 721(c)
regulations. Section 1.721(c)-2 provides
the general operative rules that override
section 721(a) nonrecognition of gain
upon a contribution of section 721(c)
property to a section 721(c) partnership.
Section 1.721(c)-3 describes the gain
deferral method, which may be applied
in order to avoid the immediate recogni-
tion of gain upon a contribution of sec-
tion 721(c) property to a section 721(c)
partnership. Section 1.721(c)-4 provides
rules regarding acceleration events for
purposes of applying the gain deferral
method. Section 1.721(c)-5 identifies
exceptions to the rules regarding acceler-
ation events provided in §1.721(c)-4(b).
Section 1.721(c)-6 provides procedur-
al and reporting requirements. Section
1.721(c)-7 provides examples illustrating
the application of the section 721(c) reg-
ulations.
(2) Scope. Paragraph (b) of this section
provides definitions. Paragraph (c) of this
section describes the treatment of a change
in form of a partnership. Paragraph (d) of
this section provides an anti-abuse rule.
Paragraph (e) of this section provides the
dates of applicability.
(b) Definitions. The following defi-
nitions apply for purposes of the section
721(c) regulations. Unless otherwise indi-
cated, the definitions apply on a proper-
ty-by-property basis, as applicable.
(1) Acceleration event. An accelera-
tion event has the meaning provided in
§1.721(c)-4(b).
(2) Built-in gain. Built-in gain is, with
respect to property contributed to a part-
nership, the excess of the book value of
the property over the partnership’s adjust-
ed tax basis in the property upon the con-
tribution, determined without regard to
the application of §1.721(c)-2(b).
(3) Consistent allocation method. The
consistent allocation method is the meth-
od described in §1.721(c)-3(c).
(4) Controlled partnership. A part-
nership is a controlled partnership with
respect to a U.S. transferor if the U.S.
transferor and related persons control the
partnership. For purposes of this para-
graph (b)(4), control is determined based
on all the facts and circumstances, except
that a partnership will be deemed to be
controlled by a U.S. transferor and related
persons if those persons, in the aggregate,
own (directly or indirectly through one or
more partnerships) more than 50 percent
of the interests in the partnership capital
or profits.
(5) 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 indirectly through
one or more partnerships.
(6) Excluded property. Excluded prop-
erty is—
(i) A cash equivalent;
(ii) A security within the meaning of
section 475(c)(2), without regard to sec-
tion 475(c)(4);
(iii) Tangible property with a book
value exceeding adjusted tax basis by no
more than $20,000 or with an adjusted tax
basis in excess of book value; and
(iv) An interest in a partnership in
which 90 percent or more of the property
(as measured by value) held by the part-
nership (directly or indirectly through
interests in one or more partnerships that
are not excluded property) consists of
property described in paragraphs (b)(6)(i)
through (iii) of this section.
(7) Gain deferral contribution. A gain
deferral contribution is a contribution of
section 721(c) property to a section 721(c)
partnership with respect to which the rec-
ognition of gain is deferred under the gain
deferral method.
(8) Gain deferral method. The gain de-
ferral method is the method described in
§1.721(c)-3(b).
(9) Partial acceleration event. A partial
acceleration event is an event described in
§1.721(c)-5(d)(2) or (3).
(10) Regulatory allocation. A regulato-
ry allocation is—
(i) An allocation pursuant to a min-
imum gain chargeback, as defined in
§1.704-2(b)(2);
(ii) A partner nonrecourse deduction, as
determined in §1.704-2(i)(2);
(iii) An allocation pursuant to a partner
minimum gain chargeback, as described
in §1.704-2(i)(4);
(iv) An allocation pursuant to a
qualified income offset, as defined in
§1.704-1(b)(2)(ii)(d);
(v) An allocation with respect to the
exercise of a noncompensatory option de-
scribed in §1.704-1(b)(2)(iv)(s); and
(vi) An allocation of partnership lev-
el ordinary income or loss described in
§1.751-1(b)(3).
(11) Related foreign person. A related
foreign person is, with respect to a U.S.
transferor, a related person (other than a
partnership) that is not a U.S. person.
(12) Related person—(i) In general.
A related person is, with respect to a U.S.
transferor, a person that is related (within
the meaning of section 267(b) or 707(b)
(1)) to the U.S. transferor.
(ii) Modification to the application of
section 267(b). For purposes of determin-
ing if a person is a related person with re-
spect to a U.S. transferor, section 267(b)
is applied without regard to section 267(c)
(3).
(13) Remaining built-in gain—(i) In
general. Remaining built-in gain is, with
respect to section 721(c) property subject
to the gain deferral method, the built-in
gain reduced by decreases in the differ-
ence between the property’s book value
and adjusted tax basis, but, for purposes
of this paragraph (b)(13)(i), without tak-
ing into account increases or decreases
to the property’s book value pursuant to
§1.704-1(b)(2)(iv)(f) or (s).
(ii) Special rule for tiered partnerships.
If section 721(c) property is described
in §1.721(c)-3(d)(1)(ii), the remaining
built-in gain includes the new positive
reverse section 704(c) layer described in
§1.721(c)-3(d)(1)(ii), reduced by decreas-
es in the difference between the property’s
book value and adjusted tax basis, but,
for purposes of this paragraph (b)(13)
(ii), without taking into account increases
or decreases to the property’s book value
pursuant to §1.704-1(b)(2)(iv)(f) or (s)
that are unrelated to the revaluation de-
scribed in §1.721(c)-3(d)(1)(i).

Bulletin No. 2020–8 427 February 18, 2020
(14) Section 721(c) partnership—(i)
In general. A partnership (domestic or
foreign) is a section 721(c) partnership if
there is a contribution of section 721(c)
property to the partnership and, after the
contribution and all transactions related to
the contribution—
(A) A related foreign person with re-
spect to the U.S. transferor is a direct or
indirect partner in the partnership; and
(B) The U.S. transferor and related per-
sons own 80 percent or more of the inter-
ests in partnership capital, profits, deduc-
tions, or losses.
(ii) Special rule for tiered partnerships.
A partnership described in §1.721(c)-3(d)
(1) or (2) is deemed to be a section 721(c)
partnership for purposes of the gain defer-
ral method.
(15) Section 721(c) property—(i) In
general. Section 721(c) property is prop-
erty, other than excluded property, with
built-in gain that is contributed to a part-
nership by a U.S. transferor, including
pursuant to a contribution described in
§1.721(c)-2(d) (partnership look-through
rule). If the U.S. transferor is treated as
contributing its share of property to a
partnership pursuant to §1.721(c)-2(d),
the entire property will be section 721(c)
property.
(ii) Special rule for tiered partnerships.
Property described in §1.721(c)-3(d)(1)
(ii) and an interest in a partnership de-
scribed in §1.721(c)-3(d)(2)(ii) is deemed
to be section 721(c) property.
(16) Successor event. A successor event
is an event described in §1.721(c)-5(c)(2),
(3), (4), or (5).
(17) Termination event. A termination
event is an event described in §1.721(c)-
5(b)(2), (3), (4), (5), (6), or (7).
(18) U.S. transferor—(i) In general. A
U.S. transferor is a United States person
within the meaning of section 7701(a)
(30) (a U.S. person), other than a domestic
partnership.
(ii) Special rule for tiered partnerships.
Solely for purposes of applying the con-
sistent allocation method, a U.S. transfer-
or includes a partnership that is treated as
a U.S. transferor under §1.721(c)-3(d)(1)
(iii) or (d)(2)(i).
(c) Change in form of a partnership. A
mere change in identity, form, or place of
organization of a partnership or a recapi-
talization of a partnership will not cause
the partnership to become a section 721(c)
partnership.
(d) Anti-abuse rule. If a U.S. transfer-
or engages in a transaction (or series of
transactions) or an arrangement with a
principal purpose of avoiding the applica-
tion of the section 721(c) regulations, the
transaction (or series of transactions) or
the arrangement may be recharacterized
(including by aggregating or disregarding
steps or disregarding an intermediate enti-
ty) in accordance with its substance.
(e) Applicability dates—(1) In gener-
al. Except as provided in paragraphs (e)
(2) and (3) of this section, this section ap-
plies to contributions occurring on or after
August 6, 2015, and to contributions that
occurred before August 6, 2015 resulting
from an entity classification election made
under §301.7701-3 of this chapter that
was effective on or before August 6, 2015
but was filed on or after August 6, 2015.
(2) Certain provisions. Except as pro-
vided in paragraph (e)(3) of this section,
paragraphs (b)(6)(iv) and (c) of this sec-
tion apply to contributions occurring on
or after January 18, 2017, and to contri-
butions that occurred before January 18,
2017 resulting from an entity classifica-
tion election made under §301.7701-3 of
this chapter that was effective on or before
January 18, 2017 but was filed on or after
January 18, 2017. Except as provided in
paragraph (e)(3) of this section, paragraph
(b)(14)(i)(B) of this section applies by re-
placing “80 percent or more” with “great-
er than 50 percent” with respect to contri-
butions that occurred on or after August
6, 2015 but before January 18, 2017, and
with respect to contributions that occurred
before August 6, 2015 resulting from an
entity classification election made under
§301.7701-3 of this chapter that was ef-
fective on or before August 6, 2015, but
was filed on or after August 6, 2015 but
before January 18, 2017. Except as pro-
vided in paragraph (e)(3) of this section,
paragraph (b)(12)(ii) of this section ap-
plies to contributions occurring on or after
January 17, 2020.
(3) Election to apply the provisions de-
scribed in paragraph (e)(2) of this section
retroactively. Paragraphs (b)(6)(iv) and
(c) of this section and paragraph (b)(14)
(i)(B) of this section, without the modi-
fication described in paragraph (e)(2) of
this section, may, by election, be applied
to a contribution that occurred on or af-
ter August 6, 2015 but before January 18,
2017, and to a contribution that occurred
before August 6, 2015 resulting from an
entity classification election made under
§301.7701-3 of this chapter that was ef-
fective on or before August 6, 2015 but
was filed on or after August 6, 2015. The
election described in the preceding sen-
tence must have been made by applying
paragraph (b)(6)(iv) or (c) as described in
paragraph (e)(2) of this section or para-
graph (b)(14)(i)(B) of this section, with-
out the modification described in para-
graph (e)(2) of this section, as applicable,
to the contribution on a timely filed orig-
inal return (including extensions) or an
amended return filed no later than July 18,
2017. Paragraph (b)(12)(ii) of this section,
may, by election, be applied to a contri-
bution that occurred on or after August 6,
2015 but before January 17, 2020, and to
a contribution that occurred before August
6, 2015 resulting from an entity classifica-
tion election made under §301.7701-3 of
this chapter that was effective on or before
August 6, 2015 but was filed on or after
August 6, 2015. The election described in
the preceding sentence must be made by
applying paragraph (b)(12)(ii) of this sec-
tion to the contribution on a timely filed
original return (including extensions) or
an amended return filed no later July 17,
2020.
§1.721(c)-1T [Removed]
Par. 9. Section 1.721(c)-1T is removed.
Par. 10. Section 1.721(c)-2 is added to
read as follows:
§1.721(c)-2 Recognition of gain on
certain contributions of property to part-
nerships with related foreign partners.
(a) Scope. This section provides the
general operative rules that override sec-
tion 721(a) nonrecognition of gain upon
a contribution of section 721(c) property
to a section 721(c) partnership. Paragraph
(b) of this section provides the general rule
that nonrecognition of gain under section
721(a) does not apply to a contribution of
section 721(c) property to a section 721(c)
partnership. Paragraph (c) of this section
provides a de minimis exception to the ap-
plication of the general rule in paragraph
(b) of this section. Paragraph (d) of this
section provides rules for identifying a
section 721(c) partnership when a partner-
ship in which a U.S. transferor is a direct

February 18, 2020 428 Bulletin No. 2020–8
or indirect partner contributes property to
another partnership. Paragraph (e) of this
section provides the dates of applicability.
For definitions that apply for purposes of
this section, see §1.721(c)-1(b).
(b) General rule for contributions of
section 721(c) property. Except as provid-
ed in this paragraph (b), paragraph (c) of
this section, and §1.721(c)-3 (describing
the gain deferral method), nonrecognition
under section 721(a) will not apply to gain
realized by the contributing partner upon
a contribution of section 721(c) property
to a section 721(c) partnership. This para-
graph (b) does not apply to a direct con-
tribution by a U.S. transferor if the U.S.
transferor and related persons with respect
to the U.S. transferor do not own 80 per-
cent or more of the interests in partnership
capital, profits, deductions, or losses.
(c) De minimis exception. Paragraph
(b) of this section will not apply with re-
spect to contributions to a section 721(c)
partnership during a taxable year of the
section 721(c) partnership for which the
sum of the built-in gain with respect to all
section 721(c) property contributed in that
taxable year does not exceed $1 million.
If, pursuant to the last sentence of para-
graph (b) of this section, a direct contribu-
tion of property to the section 721(c) part-
nership by a U.S. transferor is not subject
to paragraph (b) of this section, then such
contribution is not taken into account for
purposes of this paragraph (c).
(d) Rules for identifying a section
721(c) partnership when a partnership
contributes property to another partner-
ship—(1) Partnership look-through rule.
If a U.S. transferor is a direct or indirect
partner in a partnership (upper-tier part-
nership) and the upper-tier partnership
contributes all or a portion of its property
to another partnership (lower-tier partner-
ship), then, for purposes of determining
if the lower-tier partnership is a section
721(c) partnership, the U.S. transferor is
treated as contributing to the lower-tier
partnership its share of the property actu-
ally contributed by the upper-tier partner-
ship to the lower-tier partnership.
(2) Exception for a technical termi-
nation of a partnership. Paragraph (d)(1)
of this section will not apply to a deemed
contribution that occurs as a result of a ter-
mination of a partnership described in sec-
tion 708(b)(1)(B) (technical termination).
If a partnership is a section 721(c) partner-
ship immediately before a technical termi-
nation, see §1.721(c)-5(c)(4) (which treats
technical terminations as successor events
in certain circumstances).
(e) Applicability dates—(1) In gener-
al. Except as provided in paragraphs (e)
(2) and (3) of this section, this section ap-
plies to contributions occurring on or after
August 6, 2015, and to contributions that
occurred before August 6, 2015 resulting
from an entity classification election made
under §301.7701-3 of this chapter that
was effective on or before August 6, 2015
but was filed on or after August 6, 2015.
(2) Certain provisions. Except as pro-
vided in paragraph (e)(3) of this section,
the final sentence of paragraph (b) of this
section, the final sentence of paragraph
(c) of this section, and paragraph (d)(2) of
this section apply to contributions occur-
ring on or after January 18, 2017, and to
contributions that occurred before January
18, 2017 resulting from an entity classi-
fication election made under §301.7701-3
of this chapter that was effective on or be-
fore January 18, 2017 but was filed on or
after January 18, 2017.
(3) Election to apply the provisions
described in paragraph (e)(2) of this
section retroactively. The final sentence
of paragraph (b) of this section, the final
sentence of paragraph (c) of this section,
and paragraph (d)(2) of this section may,
by election, be applied to a contribution
that occurred on or after August 6, 2015
but before January 18, 2017, and to a con-
tribution that occurred before August 6,
2015 resulting from an entity classifica-
tion election made under §301.7701-3 of
this chapter that was effective on or before
August 6, 2015 but was filed on or after
August 6, 2015. The election must have
been made by applying the final sentence
of paragraph (b) of this section, the final
sentence of paragraph (c) of this section,
or paragraph (d)(2) of this section, as ap-
plicable, to the contribution on a timely
filed original return (including extensions)
or an amended return filed no later than
July 18, 2017.
§1.721(c)-2T [Removed]
Par. 11. Section 1.721(c)-2T is re-
moved.
Par. 12. Section 1.721(c)-3 is added to
read as follows:
§1.721(c)-3 Gain deferral method.
(a) Scope. This section describes the
gain deferral method to avoid the imme-
diate recognition of gain upon a contribu-
tion of section 721(c) property to a section
721(c) partnership. Paragraph (b) of this
section provides the requirements of the
gain deferral method, including the re-
quirement to apply the consistent alloca-
tion method. Paragraph (c) of this section
describes the consistent allocation meth-
od. Paragraph (d) of this section provides
rules for tiered partnerships. Paragraph (e)
of this section provides the dates of appli-
cability. For definitions that apply for pur-
poses of this section, see §1.721(c)-1(b).
(b) Requirements of the gain deferral
method. A contribution of section 721(c)
property to a section 721(c) partnership
that would be subject to §1.721(c)-2(b)
will not be subject to §1.721(c)-2(b) if the
conditions in paragraphs (b)(1) through
(5) of this section are satisfied with respect
to that property.
(1) Either—
(i) Both—
(A) The section 721(c) partnership
adopts the remedial allocation method de-
scribed in §1.704-3(d) with respect to the
section 721(c) property; and
(B) The section 721(c) partnership ap-
plies the consistent allocation method pro-
vided in paragraph (c) of this section; or
(ii) For the period beginning on the
date of the contribution of the section
721(c) property and ending on the date on
which there is no remaining built-in gain
with respect to that property, all distrib-
utive shares of income and gain with re-
spect to the section 721(c) property for all
direct and indirect partners that are related
foreign persons with respect to the U.S.
transferor will be subject to taxation as in-
come effectively connected with a trade or
business within the United States (under
either section 871 or 882), and neither the
section 721(c) partnership nor a related
foreign person that is a direct or indirect
partner in the section 721(c) partnership
claims benefits under an income tax con-
vention that would exempt the income or
gain from tax or reduce the rate of taxation
to which the income or gain is subject.
(2) Upon an acceleration event, the
U.S. transferor recognizes an amount of
gain equal to the remaining built-in gain
with respect to the section 721(c) prop-
erty or an amount of gain required to be

Bulletin No. 2020–8 429 February 18, 2020
recognized under §1.721(c)-5(d) or (e), as
applicable.
(3) The procedural and reporting re-
quirements provided in §1.721(c)-6(b) are
satisfied.
(4) The U.S. transferor consents to ex-
tend the period of limitations on assess-
ment of tax as required by §1.721(c)-6(b)
(5).
(5) If the section 721(c) property is a
partnership interest or property described
in the partnership look-through rule pro-
vided in §1.721(c)-2(d), the applicable
tiered-partnership rules provided in para-
graph (d) of this section are applied.
(c) Consistent allocation method—(1)
In general. For each taxable year of a
section 721(c) partnership in which there
is remaining built-in gain in the section
721(c) property, the section 721(c) part-
nership must allocate each book item of
income, gain, deduction, and loss with
respect to the section 721(c) property to
the U.S. transferor in the same percent-
age. For purposes of this paragraph (c)(1),
upon a variation (as defined in §1.706-
4(a)(1)) of a U.S. transferor’s interest in a
section 721(c) partnership, a book item of
income, gain, deduction, and loss with re-
spect to a section 721(c) property is treated
as allocated in the same percentage if the
item is allocated under the interim closing
method (as described in §1.706-4), unless
the variation results from a transaction
undertaken with a principal purpose of
avoiding the tax consequences of the gain
deferral method. For exceptions to the first
sentence in this paragraph (c)(1), see para-
graph (c)(4) of this section.
(2) Determining income or gain with
respect to section 721(c) property. For
purposes of applying paragraph (c)(1) of
this section, a section 721(c) partnership
must attribute book income and gain to
each item of section 721(c) property in a
consistent manner using any reasonable
method taking into account all the facts
and circumstances. All items of book in-
come and gain attributable to an item of
section 721(c) property will comprise a
single class of gross income for purposes
of applying paragraph (c)(3) of this sec-
tion.
(3) Determining deduction or loss with
respect to section 721(c) property. For
purposes of applying paragraph (c)(1)
of this section, a section 721(c) partner-
ship must use the principles of §§1.861-
8 and 1.861-8T to allocate and apportion
its items of deduction, except for interest
expense and research and experimen-
tal expenditures, and loss to the class of
gross income with respect to each item of
section 721(c) property as determined in
paragraph (c)(2) of this section. Accord-
ingly, a deduction or loss will be consid-
ered to be definitely related and therefore
allocable to a class of gross income with
respect to particular section 721(c) prop-
erty whether or not there is any item of
gross income in that class that is received
or accrued during the taxable year and
whether or not the amount of deduction or
loss exceeds the amount of gross income
in that class during the taxable year. If a
deduction or loss is definitely related and
therefore allocable to gross income at-
tributable to more than one class of gross
income of the section 721(c) partnership
or if a deduction or loss is not definitely
related to any class of gross income of
the section 721(c) partnership, the section
721(c) partnership must apportion that de-
duction or loss among its classes of gross
income using a reasonable method that
reflects to a reasonably close extent the
factual relationship between the deduction
or loss and the classes of gross income.
The section 721(c) partnership may allo-
cate and apportion its interest expense and
research and experimental expenditures
under any reasonable method, including,
but not limited to, the methods prescribed
in §§1.861-9 and 1.861-9T (interest ex-
pense) and §1.861-17 (research and ex-
perimental expenditures). For purposes of
this paragraph (c)(3), the section 721(c)
partnership must allocate and apportion
its deductions and losses without regard
to the partners’ percentage interests in the
partnership.
(4) Exceptions to the consistent alloca-
tion method—(i) Regulatory allocations.
A regulatory allocation (as defined in
§1.721(c)-1(b)(10)) of book income, gain,
deduction, or loss with respect to section
721(c) property that otherwise would fail
to satisfy paragraph (c)(1) of this section is
nevertheless deemed to satisfy paragraph
(c)(1) of this section if the allocation is—
(A) An allocation of income or gain
to the U.S. transferor (or a member of its
consolidated group as defined in §1.1502-
1(h));
(B) An allocation of deduction or loss
to a partner other than the U.S. transferor
(or a member of its consolidated group);
or
(C) Treated as a partial acceleration
event pursuant to §1.721(c)-5(d)(2).
(ii) Allocation of creditable foreign tax
expenditures. An allocation of a credit-
able foreign tax expenditure (as defined in
§1.704-1(b)(4)(viii)(b)) is not subject to
the consistent allocation method.
(d) Tiered partnership rules. This para-
graph (d) provides the tiered partnership
rules referred to in paragraph (b)(5) of this
section.
(1) Section 721(c) property is a part-
nership interest. If the section 721(c)
property that is contributed to a section
721(c) partnership is an interest in a part-
nership (lower-tier partnership), then the
lower-tier partnership, if it is a controlled
partnership with respect to the U.S. trans-
feror, and each partnership in which an
interest is owned (directly or indirectly
through one or more partnerships) by the
lower-tier partnership and that is a con-
trolled partnership with respect to the U.S.
transferor, must satisfy the requirements
of paragraphs (d)(1)(i), (ii), and (iii) of
this section.
(i) The partnership must revalue all its
property under §1.704-1(b)(2)(iv)(f)(6) if
the revaluation would result in a separate
positive difference between book value
and adjusted tax basis in at least one prop-
erty that is not excluded property.
(ii) The partnership must apply the
gain deferral method for each property
(other than excluded property) for which
there is a separate positive difference be-
tween book value and adjusted tax basis
resulting from the revaluation described
in paragraph (d)(1) of this section (new
positive reverse section 704(c) layer). If
the partnership has previously adopted a
section 704(c) method other than the re-
medial allocation method for the property,
the partnership satisfies the requirement of
paragraph (b)(1)(i)(A) of this section by
adopting the remedial allocation method
for the new positive reverse section 704(c)
layer.
(iii) The partnership must treat a part-
ner that is a partnership in which the U.S.
transferor is a direct or indirect partner as
if it were the U.S. transferor with respect
to the section 721(c) property solely for

February 18, 2020 430 Bulletin No. 2020–8
purposes of applying the consistent allo-
cation method.
(2) Section 721(c) property is indirectly
contributed by a U.S. transferor under the
partnership look-through rule. If the U.S.
transferor is a direct or indirect partner
in the upper-tier partnership described in
§1.721(c)-2(d)(1), and under §1.721(c)-
2(d)(1), the U.S. transferor is treated as
contributing the section 721(c) property
(including an interest in a partnership de-
scribed in paragraph (d)(1) of this section)
to a section 721(c) partnership, then the
requirements of paragraphs (d)(2)(i), (ii),
and (iii) of this section must be satisfied.
(i) The section 721(c) partnership must
treat the upper-tier partnership as the U.S.
transferor of the section 721(c) property
solely for purposes of applying the consis-
tent allocation method;
(ii) The upper-tier partnership, if it is a
controlled partnership with respect to the
U.S. transferor, must apply the gain de-
ferral method to its interest in the section
721(c) partnership; and
(iii) If the U.S. transferor is an indi-
rect partner in the upper-tier partnership
through one or more partnerships, the
principles of paragraphs (d)(2)(i) and (ii)
of this section must be applied with re-
spect to those partnerships that are con-
trolled partnerships with respect to the
U.S. transferor.
(e) Applicability dates—(1) In gener-
al. Except as provided in paragraphs (e)
(2) and (3) of this section, this section ap-
plies to contributions occurring on or after
August 6, 2015, and to contributions that
occurred before August 6, 2015 resulting
from an entity classification election made
under §301.7701-3 of this chapter that
was effective on or before August 6, 2015
but was filed on or after August 6, 2015.
(2) Certain provisions. Except as pro-
vided in paragraph (e)(3) of this section,
paragraphs (b)(1)(ii), (c)(2) and (3), (c)
(4)(i) and (ii), and (d)(1) and (2) of this
section apply to contributions occurring
on or after January 18, 2017, and to con-
tributions that occurred before January 18,
2017 resulting from an entity classifica-
tion election made under §301.7701-3 of
this chapter that was effective on or before
January 18, 2017 but was filed on or after
January 18, 2017. Except as provided in
paragraph (e)(3) of this section, the sec-
ond sentence of paragraph (c)(1) of this
section applies to contributions occurring
on or after January 17, 2020.
(3) Election to apply the provisions de-
scribed in paragraph (e)(2) of this section
retroactively. Paragraphs (b)(1)(ii), (c)
(2) and (3), (c)(4)(i) and (ii), and (d)(1)
and (2) of this section may, by election,
be applied to a contribution that occurred
on or after August 6, 2015 but before Jan-
uary 18, 2017, and to a contribution that
occurred before August 6, 2015 resulting
from an entity classification election made
under §301.7701-3 of this chapter that was
effective on or before August 6, 2015 but
was filed on or after August 6, 2015. The
election described in the preceding sen-
tence must have been made by applying
paragraph (b)(1)(ii), (c)(2) or (3), (c)(4)(i)
or (ii), or (d)(1) or (2) of this section, as
applicable, to the contribution on a timely
filed original return (including extensions)
or an amended return filed no later than
July 18, 2017. In order to elect to apply
paragraph (c)(2) or (3) of this section to
a contribution described in this paragraph
(e)(3), an election must also have been
made to apply paragraph (c)(3) or (2) of
this section, respectively, to the contribu-
tion. The second sentence of paragraph
(c)(1) of this section, may, by election, be
applied to a contribution that occurred on
or after August 6, 2015 but before Janu-
ary 17, 2020, and to a contribution that
occurred before August 6, 2015 resulting
from an entity classification election made
under §301.7701-3 of this chapter that
was effective on or before August 6, 2015
but was filed on or after August 6, 2015.
The election described in the preceding
sentence must be made by applying the
second sentence of paragraph (c)(1) of
this section to the contribution on a timely
filed original return (including extensions)
or an amended return filed no later than
July 17, 2020.
(4) Transitional rules. If a contribu-
tion is described in paragraph (e)(2) of
this section and no election described in
paragraph (e)(3) of this section is made
to apply one or more of paragraphs (c)(2)
and (3) and (c)(4)(i) and (ii) of this sec-
tion, as applicable, to the contribution,
then, for purposes of paragraph (c)(1) of
this section, the section 721(c) partner-
ship must attribute book income, gain,
loss, and deduction to the section 721(c)
property in a consistent manner under any
reasonable method taking into account all
the facts and circumstances. If a contribu-
tion is described in paragraph (e)(2) of this
section and no election described in para-
graph (e)(3) of this section is made to ap-
ply paragraph (d)(1) or (2) of this section,
as applicable, to the contribution, then,
this section must be applied in a manner
consistent with the purpose of the section
721(c) regulations. Thus, for example, if a
U.S. transferor is a direct or indirect part-
ner in a partnership and that partnership
contributes section 721(c) property to a
lower-tier partnership, or, if a U.S. trans-
feror contributes an interest in a partner-
ship that owns section 721(c) property to a
lower-tier partnership, then paragraph (b)
of this section applies as though the U.S.
transferor contributed its share of the sec-
tion 721(c) property directly.
§1.721(c)-3T [Removed]
Par. 13. Section 1.721(c)-3T is re-
moved.
Par. 14. Section 1.721(c)-4 is added to
read as follows:
§1.721(c)-4 Acceleration events.
(a) Scope. This section provides rules
regarding acceleration events for purpos-
es of applying the gain deferral method.
Paragraph (b) of this section defines an
acceleration event. Paragraph (c) of this
section provides the consequences of an
acceleration event. Paragraph (d) of this
section provides the dates of applicability.
For definitions that apply for purposes of
this section, see §1.721(c)-1(b).
(b) Definition of an acceleration
event—(1) General rules. Except as pro-
vided in this paragraph (b) and §1.721(c)-
5 (acceleration event exceptions), an ac-
celeration event with respect to section
721(c) property is any event that either
would reduce the amount of remaining
built-in gain that a U.S. transferor would
recognize under the gain deferral method
if the event had not occurred or could de-
fer the recognition of the remaining built-
in gain. An acceleration event includes a
contribution of section 721(c) property to
another partnership by a section 721(c)
partnership and a contribution of an in-
terest in a section 721(c) partnership to
another partnership. This paragraph (b)
applies on a property-by-property basis.
(2) Failure to comply with a require-
ment of the gain deferral method—(i)
General rule. An acceleration event with

Bulletin No. 2020–8 431 February 18, 2020
respect to section 721(c) property occurs
when any party fails to comply with a con-
dition of the gain deferral method with re-
spect to the section 721(c) property.
(ii) Certain failures to comply with
procedural and reporting requirements.
Notwithstanding paragraph (b)(2)(i) of
this section, an acceleration event will not
occur solely as a result of a failure to com-
ply with a requirement of §1.721(c)-3(b)
(3) that is not willful. See §§1.721(c)-6(f)
and 1.6038B-2(h)(3).
(3) Lower-tier partnership allocations.
Notwithstanding paragraph (b)(1) of this
section, an acceleration event will not oc-
cur because of a reduction in remaining
built-in gain in an interest in a partnership
that is section 721(c) property that occurs
as a result of allocations of book items of
deduction and loss, or tax items of income
and gain.
(4) Deemed acceleration event. A U.S.
transferor may treat an acceleration event
as having occurred with respect to section
721(c) property by both recognizing gain
in an amount equal to the remaining built-
in gain that would have been allocated to
the U.S. transferor if the section 721(c)
partnership had sold the section 721(c)
property immediately before the deemed
acceleration event for fair market value
and satisfying the reporting required by
§1.721(c)-6(b)(3)(i)(D). In this case, see
paragraph (c) of this section regarding ba-
sis adjustments.
(c) Consequences of an acceleration
event. Paragraphs (c)(1) and (2) of this
section provide the consequences of an
acceleration event with respect to section
721(c) property, a partial acceleration
event with respect to section 721(c) prop-
erty to the extent provided in §1.721(c)-
5(d)(1), and a transfer described in section
367 of section 721(c) property to the ex-
tent provided in §1.721(c)-5(e).
(1) U.S. transferor. The U.S. transferor
must recognize gain in an amount equal
to the remaining built-in gain that would
have been allocated to the U.S. transferor
if the section 721(c) partnership had sold
the section 721(c) property immediate-
ly before the acceleration event for fair
market value. The U.S. transferor will in-
crease its basis in its partnership interest
by the amount of gain recognized. If the
U.S. transferor is an indirect partner in the
section 721(c) partnership through one or
more tiered partnerships, appropriate ba-
sis adjustments will be made to the inter-
ests in the tiered partnerships.
(2) Section 721(c) partnership. The
section 721(c) partnership will increase
its basis in the section 721(c) property by
the amount of built-in gain recognized by
the U.S. transferor under paragraph (c)
(1) of this section. Any tax consequences
of the acceleration event will be deter-
mined taking into account the increase
in the partnership’s adjusted tax basis in
the section 721(c) property. If the section
721(c) property remains in the partnership
after the acceleration event, the increase in
basis of the section 721(c) property may
be recovered using any applicable recov-
ery period and depreciation (or other cost
recovery) method (including first-year
conventions) available to the partnership
for newly purchased property of the same
type placed in service on the date of the
acceleration event. The section 721(c)
property will no longer be subject to the
gain deferral method.
(d) Applicability dates. This section ap-
plies to contributions occurring on or after
August 6, 2015, and to contributions that
occurred before August 6, 2015 resulting
from an entity classification election made
under §301.7701-3 of this chapter that
was effective on or before August 6, 2015
but was filed on or after August 6, 2015.
§1.721(c)-4T [Removed]
Par. 15. Section 1.721(c)-4T is re-
moved.
Par. 16. Section 1.721(c)-5 is added to
read as follows:
§1.721(c)-5 Acceleration event excep-
tions.
(a) Scope. This section identifies ex-
ceptions to the acceleration events, which,
like the rules regarding acceleration events
provided in §1.721(c)-4(b), apply on a
property-by-property basis. Paragraph (b)
of this section identifies the events that
terminate the requirement to apply the
gain deferral method. Paragraph (c) of this
section identifies the successor events that
allow for the continued application of the
gain deferral method. Paragraph (d) of this
section identifies the partial acceleration
events. Paragraph (e) of this section pro-
vides special rules for transfers of section
721(c) property to a foreign corporation
described in section 367. Paragraph (f) of
this section allows for the continued appli-
cation of the gain deferral method if there
is a fully taxable disposition of a portion
of an interest in a partnership. Paragraph
(g) of this section provides the dates of
applicability. For definitions that apply for
purposes of this section, see §1.721(c)-
1(b).
(b) Termination events—(1) In gener-
al. Notwithstanding §1.721(c)-4(b)(1), a
termination event with respect to section
721(c) property will not constitute an ac-
celeration event. In these cases, the sec-
tion 721(c) property will no longer be sub-
ject to the gain deferral method.
(2) Transfers of section 721(c) proper-
ty (other than a partnership interest) to a
domestic corporation described in section
351. A termination event occurs if a sec-
tion 721(c) partnership transfers section
721(c) property (other than an interest in
a partnership) to a domestic corporation in
a transaction to which section 351 applies.
(3) Certain incorporations of a section
721(c) partnership. A termination event
occurs upon an incorporation of a section
721(c) partnership into a domestic cor-
poration by any method of incorporation
(other than a method involving an actual
distribution of partnership property to the
partners, followed by a contribution of
that property to a corporation), provided
that the section 721(c) partnership is liq-
uidated as part of the incorporation trans-
action.
(4) Certain distributions of section 721(c)
property. A termination event occurs if
a section 721(c) partnership distributes
section 721(c) property either to the U.S.
transferor or, if the U.S. transferor is a
member of a consolidated group (as de-
fined in §1.1502-1(h)) at the time of the
distribution and the distribution occurs
outside the seven-year period described in
section 704(c)(1)(B), to a member of the
consolidated group.
(5) Partnership ceases to have a part-
ner that is a related foreign person. A
termination event occurs when a section
721(c) partnership ceases to have any di-
rect or indirect partners that are related
foreign persons with respect to the U.S.
transferor, provided there is no plan for
a related foreign person to subsequently
become a direct or indirect partner in the
partnership (or a successor). This para-
graph (b)(5) does not apply to a distribu-
tion of section 721(c) property in redemp-

February 18, 2020 432 Bulletin No. 2020–8
tion of a related foreign person’s interest
in a section 721(c) partnership.
(6) Fully taxable dispositions of sec-
tion 721(c) property. A termination event
occurs if a section 721(c) partnership dis-
poses of section 721(c) property in a trans-
action in which all gain or loss, if any, is
recognized.
(7) Fully taxable dispositions of an
entire interest in a section 721(c) partner-
ship. A termination event occurs if a U.S.
transferor or a partnership in which a U.S.
transferor is a direct or indirect partner
disposes of its entire interest in a section
721(c) partnership that owns the section
721(c) property in a transaction in which
all gain or loss, if any, is recognized. This
paragraph (b)(7) does not apply if a U.S.
transferor is a member of a consolidated
group (as defined in §1.1502-1(h)) and the
interest in the section 721(c) partnership is
transferred in an intercompany transaction
(as defined in §1.1502-13(b)(1)); see para-
graph (c)(3) of this section for a successor
event rule applicable to these intercompa-
ny transactions.
(c) Successor events—(1) In gener-
al. Notwithstanding §1.721(c)-4(b)(1),
a successor event with respect to section
721(c) property will not constitute an ac-
celeration event. If a portion of an interest
in a partnership is transferred in a succes-
sor event described in this paragraph (c),
the principles of §1.704-3(a)(7) apply to
determine the remaining built-in gain in
section 721(c) property that is attributable
to the portion of the interest that is trans-
ferred and the portion of the interest that
is retained.
(2) Transfers of an interest in a section
721(c) partnership by a U.S. transferor or
upper-tier partnership to a domestic cor-
poration in certain nonrecognition trans-
actions. A successor event occurs if a U.S.
transferor or a partnership in which a U.S.
transferor is a direct or indirect partner
transfers (directly or indirectly through
one or more partnerships) an interest in
a section 721(c) partnership to a domes-
tic corporation in a transaction to which
section 351 or 381 applies, and the gain
deferral method is continued by treating
the transferee domestic corporation as
the U.S. transferor for purposes of the
section 721(c) regulations. If the transfer
described in this paragraph (c)(2) also re-
sults in a termination under section 708(b)
(1)(B) of the section 721(c) partnership,
see paragraph (c)(4) of this section.
(3) Transfers of an interest in a sec-
tion 721(c) partnership in an intercom-
pany transaction. A successor event oc-
curs if a U.S. transferor that is a member
of a consolidated group (as defined in
§1.1502-1(h)) transfers (directly or indi-
rectly through one or more partnerships)
an interest in a section 721(c) partnership
in an intercompany transaction (as defined
in §1.1502-13(b)(1)), and the gain deferral
method is continued by treating the trans-
feree member as the U.S. transferor for
purposes of the section 721(c) regulations.
If the transfer described in this paragraph
(c)(3) also results in a termination under
section 708(b)(1)(B) of the section 721(c)
partnership, see paragraph (c)(4) of this
section.
(4) Termination under section 708(b)
(1)(B) of a section 721(c) partnership. A
successor event occurs if there is a ter-
mination under section 708(b)(1)(B) of a
section 721(c) partnership, and the gain
deferral method is continued by treating
the new partnership as the section 721(c)
partnership for purposes of the section
721(c) regulations.
(5) Transactions involving tiered part-
nerships—(i) Contributions of section
721(c) property to a lower-tier partner-
ship. A successor event occurs if a section
721(c) partnership contributes the section
721(c) property to a partnership that is a
controlled partnership with respect to the
U.S. transferor (lower-tier section 721(c)
partnership) and the requirements of para-
graphs (c)(5)(i)(A) through (C) of this
section are satisfied.
(A) The lower-tier section 721(c) part-
nership is a section 721(c) partnership or
is treated as a section 721(c) partnership.
(B) The gain deferral method is applied
with respect to the section 721(c) proper-
ty in the hands of the lower-tier section
721(c) partnership.
(C) The gain deferral method is applied
with respect to the section 721(c) part-
nership’s interest in the lower-tier section
721(c) partnership. See §1.721(c)-3(b)(5)
and (d)(2).
(ii) Contributions of an interest in a
section 721(c) partnership to an upper-ti-
er partnership. A successor event occurs
if a U.S. transferor or a partnership in
which a U.S. transferor is a direct or indi-
rect partner contributes (directly or indi-
rectly through one or more partnerships)
an interest in a section 721(c) partnership
to a partnership that is a controlled part-
nership with respect to the U.S. transfer-
or (upper-tier section 721(c) partnership)
and the requirements of paragraphs (c)(5)
(ii)(A) through (D) of this section are sat-
isfied.
(A) The gain deferral method is con-
tinued with respect to the section 721(c)
property in the hands of the section 721(c)
partnership.
(B) The upper-tier section 721(c) part-
nership is, or is treated as, a section 721(c)
partnership.
(C) If the upper-tier section 721(c)
partnership directly owns its interest in
the section 721(c) partnership, the gain
deferral method is applied with respect to
the upper-tier section 721(c) partnership’s
interest in the section 721(c) partnership.
See §1.721(c)-3(b)(5) and (d)(1).
(D) If the upper-tier section 721(c)
partnership indirectly owns its interest
in the section 721(c) partnership through
one or more partnerships, the principles
of paragraphs (c)(5)(ii)(B) and (C) of this
section are applied with respect to each
partnership through which the upper-tier
section 721(c) partnership indirectly owns
an interest in the section 721(c) partner-
ship.
(d) Partial acceleration events—(1) In
general. Notwithstanding §1.721(c)-4, a
partial acceleration event with respect to
section 721(c) property does not consti-
tute an acceleration event. In these cases,
except as provided in paragraph (d)(3) of
this section, the rules in §1.721(c)-4(c)
(concerning the consequences of an ac-
celeration event) for making basis adjust-
ments apply to the extent that the U.S.
transferor is required to recognize gain
under paragraph (d)(2) or (3) of this sec-
tion. Furthermore, if there is remaining
built-in gain with respect to the section
721(c) property after the application of
this paragraph (d), the application of the
gain deferral method with respect to the
section 721(c) property must be continued
in the same manner.
(2) Regulatory allocations. If a
regulatory allocation is described in
§1.721(c)-3(c)(4)(i) but not in §1.721(c)-
3(c)(4)(i)(A) or (B), a partial acceleration
event occurs with respect to section 721(c)

Bulletin No. 2020–8 433 February 18, 2020
property if the U.S. transferor recognizes
an amount of gain (but not in excess of re-
maining built-in gain) equal to the amount
of the allocation that, under the consistent
allocation method, had the regulatory al-
location not occurred, would have been
allocated to the U.S. transferor in the case
of income or gain, or would not have been
allocated to the U.S. transferor in the case
of deduction or loss.
(3) Certain distributions of other part-
nership property to a partner that result in
an adjustment under section 734. A partial
acceleration event occurs with respect to
section 721(c) property if there is a dis-
tribution of other property by the section
721(c) partnership that results in a posi-
tive basis adjustment to the section 721(c)
property under section 734. In these cas-
es, the U.S. transferor must recognize an
amount of gain (but not in excess of the
remaining built-in gain) equal to the posi-
tive basis adjustment to the section 721(c)
property under section 734, reduced (but
not below zero) by the amount of gain rec-
ognized by the U.S. transferor (or a mem-
ber of its consolidated group (as defined
in §1.1502-1(h))) under section 731(a).
In these cases, the partnership will not in-
crease its basis under §1.721(c)-4(c)(2) by
the amount of gain recognized by the U.S.
transferor.
(e) Transfers described in section 367
of section 721(c) property to a foreign cor-
poration. If a section 721(c) partnership
transfers section 721(c) property, or a U.S.
transferor or a partnership in which a U.S.
transferor is a direct or indirect partner
transfers (directly or indirectly through
one or more partnerships) all or a portion
of an interest in a section 721(c) partner-
ship that owns section 721(c) property, to
a foreign corporation in a transaction de-
scribed in section 367, then the property
will no longer be subject to the gain defer-
ral method. To the extent any U.S. trans-
feror is treated as transferring the section
721(c) property to the foreign corporation
for purposes of section 367, the tax con-
sequences will be determined under sec-
tion 367. In this regard, see §§1.367(a)-
1T(c)(3)(i) and (ii), 1.367(d)-1T(d)(1),
and 1.367(e)-2(b)(1)(iii) (providing for
the aggregate treatment of partnerships).
However, for the remaining portion of
the property (if any), the U.S. transferor
must recognize an amount of gain equal
to the remaining built-in gain that would
have been allocated to the U.S. transferor
if the section 721(c) partnership had sold
that portion of the section 721(c) proper-
ty immediately before the transfer for fair
market value. The stock in the transferee
foreign corporation received will not be
subject to the gain deferral method. The
rules in §1.721(c)-4(c) (concerning the
consequences of an acceleration event) for
making basis adjustments will apply to the
extent that the U.S. transferor recognizes
gain under this paragraph (e).
(f) Fully taxable dispositions of a por-
tion of an interest in a partnership. If a
U.S. transferor or a partnership in which
a U.S. transferor is a direct or indirect
partner disposes of (directly or indirectly
through one or more partnerships) a por-
tion of an interest in a section 721(c) part-
nership in a transaction in which all gain
or loss, if any, is recognized, an acceler-
ation event will not occur with respect
to the portion of the interest transferred.
The gain deferral method will continue to
apply with respect to the section 721(c)
property of the section 721(c) partner-
ship. The principles of §1.704-3(a)(7) will
apply to determine the remaining built-
in gain in section 721(c) property that is
attributable to the portion of the interest
in a section 721(c) partnership that is re-
tained. This paragraph (f) will not apply to
an intercompany transaction (as defined in
§1.1502-13(b)(1)).
(g) Applicability dates—(1) In general.
Except as provided in paragraph (g)(2) of
this section, this section applies to contri-
butions occurring on or after January 18,
2017, and to contributions that occurred
before January 18, 2017 resulting from an
entity classification election made under
§301.7701-3 of this chapter that was ef-
fective on or before January 18, 2017 but
was filed on or after January 18, 2017.
(2) Election to apply this section ret-
roactively. This section may, by election,
be applied to a contribution that occurred
on or after August 6, 2015 but before Jan-
uary 18, 2017, and to a contribution that
occurred before August 6, 2015 resulting
from an entity classification election made
under §301.7701-3 of this chapter that
was effective on or before August 6, 2015
but was filed on or after August 6, 2015.
The election must have been made by ap-
plying this section to the contribution on
a timely filed original return (including
extensions) or an amended return filed no
later than July 18, 2017. §1.721(c)-5T
[Removed]
Par. 17. Section 1.721(c)-5T is re-
moved.
Par. 18. Section 1.721(c)-6 is added to
read as follows
§1.721(c)-6 Procedural and reporting
requirements.
(a) Scope. This section provides proce-
dural and reporting requirements that must
be satisfied under §1.721(c)-3(b)(3) of the
gain deferral method. Paragraph (b) of
this section describes the procedural and
reporting requirements of a U.S. transfer-
or. Paragraph (c) of this section describes
information required to be reported with
respect to related foreign persons and
partnerships. Paragraph (d) of this section
describes the procedural and reporting
requirements of a section 721(c) partner-
ship with a section 6031 filing obligation.
Paragraph (e) of this section provides the
proper signatory for the information pro-
vided under this section. Paragraph (f) of
this section provides relief for certain fail-
ures to comply that are not willful. Para-
graph (g) of this section provides the dates
of applicability. For definitions that apply
for purposes of this section, see §1.721(c)-
1(b).
(b) Procedural and reporting require-
ments of a U.S. transferor—(1) In gener-
al. This paragraph (b) describes the pro-
cedural and reporting requirements that a
U.S. transferor (as defined §1.721(c)-1(b)
(18)(i)) must satisfy in applying the gain
deferral method. The information required
under this paragraph (b) must be includ-
ed with the U.S. transferor’s timely filed
return on (or attached to) the appropriate
forms or schedules (or their successors)
and must be submitted in the form and
manner and to the extent prescribed by the
forms and schedules (and their accompa-
nying instructions).
(2) Reporting of a gain deferral contri-
bution. A U.S. transferor must report the
following information with respect to a
gain deferral contribution:
(i) On Schedule A-1, Certain Foreign
Partners, Schedule A-2, Foreign Partners
of Section 721(c) Partnership, Schedule
G, Statement of Application of the Gain
Deferral Method Under Section 721(c),
and Schedule H, Acceleration Events and

February 18, 2020 434 Bulletin No. 2020–8
Exceptions Reporting Relating to Gain
Deferral Method Under Section 721(c)
(for each such Schedule, with respect to
Form 8865, Return of U.S. Persons With
Respect to Certain Foreign Partnerships),
as applicable, the following information
with respect to the section 721(c) proper-
ty—
(A) A description of the property and
recovery period (or periods) for the prop-
erty;
(B) Whether the property is an intangi-
ble described in section 197(f)(9);
(C) A calculation of the built-in gain,
the basis, and fair market value on the
date of the contribution, including the
amount of gain recognized by the U.S.
transferor, if any, on the gain deferral
contribution;
(D) The name, U.S. taxpayer identifi-
cation number (if any), address, and coun-
try of organization (if any) of each direct
or indirect partner in the section 721(c)
partnership that is a related person with
respect to the U.S. transferor, and a de-
scription of each partner’s interest in cap-
ital and profits immediately after the gain
deferral contribution; and
(E) When the section 721(c) property is
a partnership interest, the information de-
scribed in paragraphs (b)(2)(i)(A) through
(D) of this section with respect to each
property of a lower-tier partnership to
which the gain deferral method is applied
under §1.721(c)-3(d)(1);
(ii) On Form 8838-P, Consent To Ex-
tend the Time To Assess Tax Pursuant
to the Gain Deferral Method (Section
721(c)), an extension of the period of
limitations on the assessment of tax as de-
scribed in paragraph (b)(5) of this section;
(iii) A copy of the waiver of treaty ben-
efits described in paragraph (c)(1) of this
section (if any);
(iv) On Schedule A-1, Schedule A-2,
and Schedule G (for each such Schedule,
with respect to Form 8865), as applicable,
information relating to the section 721(c)
partnership described in paragraph (c)(2)
of this section (if any);
(v) On, Schedule O, Transfer of Prop-
erty to a Foreign Partnership (Form 8865)
with respect to any foreign partnership,
(or partnership treated as foreign under
paragraph (b)(4) of this section), the infor-
mation required under §1.6038B-2(c)(1)
through (7); and
(vi) The information required under
paragraph (b)(3) of this section.
(3) Annual reporting relating to gain
deferral method. A U.S. transferor must
annually report information for each gain
deferral contribution. The information re-
ported must be with respect to the partner-
ship taxable year that ends with, or with-
in, the taxable year of the U.S. transferor,
beginning with the partnership’s taxable
year that includes the date of the gain de-
ferral contribution and ending with the
last taxable year in which the gain defer-
ral method is applied to the section 721(c)
property. The information reported must
include:
(i) For each deferral contribution, the
U.S. transferor must report the following
information on Schedule G and Sched-
ule H (for each Schedule, with respect to
Form 8865), as applicable:
(A) The amount of book income, gain,
deduction, and loss and tax items allocat-
ed to the U.S. transferor with respect to
the section 721(c) property, including a
description of any regulatory allocations;
(B) The proportion (expressed as a
percentage) in which the book income,
gain, deduction, and loss with respect to
the section 721(c) property was allocated
among the U.S. transferor and related per-
sons that are partners in the section 721(c)
partnership under the consistent allocation
method;
(C) The amount of remaining built-in
gain at the beginning of the taxable year,
the remedial income allocated to the U.S.
transferor under the remedial allocation
method, the amount of built-in gain taken
into account by reason of an acceleration
event or partial acceleration event (if any),
the partnership’s adjustment to its tax ba-
sis in the section 721(c) property, and the
remaining built-in gain at the end of the
taxable year;
(D) A declaration stating whether an
acceleration event or partial acceleration
event occurred during the taxable year, the
date of the event, and a description of the
event (including a citation to the relevant
paragraph of §1.721(c)-5(d) in the case of
a partial acceleration event, and wheth-
er the acceleration event is described in
§1.721(c)-4(b)(4));
(E) A description of a termination
event or any successor event that occurred
during the taxable year with a citation to
the relevant paragraph of §1.721(c)-5(b)
or (c), the date of the event, and, in the case
of a successor event, the name, address,
and U.S. taxpayer identification number
(if any) of any successor partnership, low-
er-tier partnership, upper-tier partnership,
or U.S. corporation (as applicable);
(F) A description of all transfers of
section 721(c) property to a foreign cor-
poration described in §1.721(c)-5(e) that
occurred during the taxable year, and for
each transfer, the date of the transfer, the
section 721(c) property transferred, and
the name, address, and U.S. taxpayer
identification number (if any) of the for-
eign transferee corporation; and
(G) With respect to section 721(c)
property for which a waiver of treaty ben-
efits was filed under paragraph (b)(2)(iii)
of this section, a declaration that, after ex-
ercising reasonable diligence, to the best
of the U.S. transferor’s knowledge and
belief, all income from the section 721(c)
property allocated to the partners during
the taxable year remained subject to taxa-
tion as income effectively connected with
the conduct of a trade or business within
the United States (under either section 871
or 882) for all direct or indirect partners
that are related foreign persons with re-
spect to the U.S. transferor (regardless of
whether any such partner was a partner at
the time of the gain deferral contribution),
and, that neither the partnership nor any
such partner has made any claim under
any income tax convention to an exemp-
tion from U.S. income tax or a reduced
rate of U.S. income taxation on income
derived from the use of the section 721(c)
property;
(ii) On Form 8838-P, an extension of
the period of limitations on the assessment
of tax, in the case of a gain deferral contri-
bution, as described in paragraph (b)(5)(ii)
of this section, and, in the case of certain
contributions on which gain is recognized,
as described in paragraph (b)(5)(iii) of this
section;
(iii) If the section 721(c) partnership is
a partnership that does not have a filing ob-
ligation under section 6031, the informa-
tion described in §1.6038-3(g) (contents
of information returns required of certain
United States persons with respect to con-
trolled foreign partnerships), if not already
reported elsewhere, without regard to
whether the section 721(c) partnership is

Bulletin No. 2020–8 435 February 18, 2020
a controlled foreign partnership within the
meaning of section 6038. If the U.S. trans-
feror is not a controlling fifty-percent part-
ner (as defined in §1.6038-3(a)), the U.S.
transferor complies with the requirement
of this paragraph (b)(3)(iii) by providing
the information described in §1.6038-3(g)
(1);
(iv) On Schedule O (Form 8865), a
description of all section 721(c) proper-
ty contributed by the U.S. transferor to
the section 721(c) partnership (including
pursuant to a contribution described in
§1.721(c)-2(d)(1)) during the taxable year
to which the gain deferral method is not
applied; and
(v) The information required in para-
graphs (c)(2) and (3) of this section for
related foreign persons that are direct or
indirect partners in the section 721(c)
partnership and the section 721(c) part-
nership itself (if any).
(4) Domestic partnerships treated as
foreign. Solely for purposes of this sec-
tion, a U.S. transferor must treat a domes-
tic section 721(c) partnership as a foreign
partnership if the partnership was formed
on or after January 18, 2017. If the section
721(c) partnership has an information re-
turn filing obligation under section 6031,
that requirement is not affected by the re-
quirement of this paragraph (b)(4) that the
U.S. transferor treat the partnership as a
foreign partnership.
(5) Extension of period of limitations on
assessment of tax. In order to comply with
the gain deferral method, a U.S. transferor
must extend the period of limitations on
the assessment of tax using Form 8838-P:
(i) With respect to the gain realized but
not recognized on a gain deferral contri-
bution, through the date that is 96 months
after the close of the U.S. transferor’s tax-
able year that includes the date of the gain
deferral contribution;
(ii) With respect to all book and tax
items with respect to the section 721(c)
property allocated to the U.S. transferor
in the partnership’s taxable year that in-
cludes the date of the gain deferral con-
tribution and the subsequent two years,
through the date that is 72 months after
the close of such taxable year with which,
or within which, the partnership’s taxable
year ends; and
(iii) With respect to the gain recog-
nized on a contribution of section 721(c)
property to a section 721(c) partnership
for which the gain deferral method is not
applied, if the contribution occurs within
five partnership taxable years following
a partnership taxable year that includes
the date of a gain deferral contribution,
through the date that is 60 months after the
close of the U.S. transferor’s taxable year
that includes the date of the contribution
on which gain is recognized.
(c) Information with respect to sec-
tion 721(c) partnerships and related for-
eign persons—(1) Effectively connected
income. If the gain deferral method is
applied with respect to a contribution of
section 721(c) property that satisfies the
condition in §1.721(c)-3(b)(1)(ii), the U.S.
transferor must obtain a statement from
the section 721(c) partnership and from
each related foreign person that is a direct
or indirect partner in the section 721(c)
partnership, titled “Statement of Waiver of
Treaty Benefits under §1.721(c)-6,” pur-
suant to which the partner and the partner-
ship waive any claim under any income
tax convention (whether or not currently
in force at the time of the contribution) to
an exemption from U.S. income tax or a
reduced rate of U.S. income taxation on
income derived from the use of the sec-
tion 721(c) property for the period during
which the section 721(c) property is sub-
ject to the gain deferral method.
(2) Partnerships in tiered-partner-
ship structures applying the gain deferral
method. If the gain deferral method is ap-
plied as a result of a transaction described
in §1.721(c)-3(d), the U.S. transferor must
supply all the information that a section
721(c) partnership would be required to
report under paragraph (b) of this section
if the section 721(c) partnership were a
U.S. transferor.
(3) Schedules K-1 for related foreign
partners. If a section 721(c) partnership
does not have a filing obligation under
section 6031, the U.S. transferor must
obtain a Schedule K-1 (Form 8865), Part-
ner’s Share of Income, Deduction, Cred-
its, etc., for all related foreign persons that
are direct or indirect partners in the sec-
tion 721(c) partnership.
(d) Reporting and procedural require-
ments of a section 721(c) partnership
with a section 6031 filing obligation—(1)
Waiver of treaty benefits. A section 721(c)
partnership with a return filing obligation
under section 6031 must include its waiv-
er of treaty benefits described in paragraph
(c)(1) of this section with its tax return for
the taxable year that includes the date of
the gain deferral contribution.
(2) Information on Schedule K-1. A
section 721(c) partnership with a return
filing obligation under section 6031 must
provide the relevant information neces-
sary for the U.S. transferor to comply with
the requirements in paragraphs (b)(2) and
(3) of this section (using the Forms and
Schedules specified in paragraphs (b)
(2) and (3) of this section) with the U.S.
transferor’s Schedule K-1 (Form 1065),
Partner’s Share of Income, Deductions,
Credits, etc. The partnership must also
attach a Schedule K-1 (Form 1065) to its
Form 1065 for each direct or indirect part-
ner that is a related foreign person with
respect to the U.S. transferor.
(e) Signatory. Any statements required
in this section must be signed under pen-
alties of perjury by an agent of the U.S.
transferor, the related foreign person that
is a direct or indirect partner in the sec-
tion 721(c) partnership, or the section
721(c) partnership, as applicable, that is
authorized to sign under a general or spe-
cific power of attorney, or by an appro-
priate party. For the U.S. transferor, an
appropriate party is a person described in
§1.367(a)-8(e)(1). For a partnership with
a section 6031 filing obligation, an appro-
priate party is any party authorized to sign
Form 1065.
(f) Relief for certain failures to file or
failures to comply that are not willful—(1)
In general. This paragraph (f)(1) provides
relief from the failure to comply with the
procedural and reporting requirements of
the gain deferral method prescribed by
§1.721(c)-3(b)(3) and provided in para-
graph (b) of this section if there is a failure
to file or to include information required
by this section (failure to comply). A fail-
ure to comply will be deemed not to have
occurred for purposes of §1.721(c)-3(b)
(3) if the U.S. transferor demonstrates that
the failure was not willful using the pro-
cedure provided in this paragraph (f). For
purposes of this paragraph (f), willful is to
be interpreted consistent with the meaning
of that term in the context of other civil
penalties, which would include a failure
due to gross negligence, reckless disre-
gard, or willful neglect. Whether a failure

February 18, 2020 436 Bulletin No. 2020–8
to comply was willful will be determined
by the Director of Field Operations, Cross
Border Activities Practice Area of Large
Business & International (or any succes-
sor to the roles and responsibilities of
such position, as appropriate) (Director)
based on all the facts and circumstances.
The U.S. transferor must submit a request
for relief and an explanation as provided
in paragraph (f)(2) of this section. A U.S.
transferor whose failure to comply is de-
termined not to be willful under this para-
graph (f) will be subject to a penalty under
section 6038B if it fails to satisfy the ap-
plicable reporting requirements under that
section and does not demonstrate that the
failure was due to reasonable cause and
not willful neglect. See §1.6038B-2(h).
The determination of whether the failure
to comply was willful under this section
has no effect on any request for relief
made under §1.6038B-2(h).
(2) Procedures for establishing that
a failure to comply was not willful—(i)
Time and manner of submission. A U.S.
transferor’s statement that a failure to
comply was not willful will be considered
only if, promptly after the U.S. transferor
becomes aware of the failure, an amend-
ed return is filed for the taxable year to
which the failure relates that includes the
information that should have been in-
cluded with the original return for such
taxable year or that otherwise complies
with the rules of this section as well as a
written statement explaining the reasons
for the failure to comply. The U.S. trans-
feror also must file, with the amended re-
turn, a Schedule O (Form 8865) and Form
8838-P (as described in paragraph (b)(5)
of this section), completed and executed
as prescribed in forms and instructions,
consenting to extend the period of lim-
itations on assessment of tax with respect
to the gain realized but not recognized on
the gain deferral contribution to the lat-
er of the date that is 96 months after the
close of the U.S. transferor’s taxable year
that includes the date of the gain deferral
contribution (date one), or the date that
is 36 months after the date on which the
required information is provided to the
Director (date two). However, the U.S.
transferor is not required to file a Sched-
ule O (Form 8865), with the amended
return if both date one is later than date
two and a consent to extend the period
of limitations on assessment of tax with
respect to the gain realized but not rec-
ognized on the gain deferral contribution
for the U.S. transferor’s taxable year that
includes the date of the contribution was
previously submitted with a Schedule O
(Form 8865). The amended return and ei-
ther a Schedule O (Form 8865) or a copy
of the previously filed Schedule O (Form
8865), as the case may be, must be filed
with the Internal Revenue Service at the
location where the U.S. transferor filed
its original return. The U.S. transferor
may submit a request for relief from the
penalty under section 6038B as part of
the same submission. See §1.6038B-2(h)
(3).
(ii) Notice requirement. In addition to
the requirements of paragraph (f)(2)(i) of
this section, the U.S. transferor must com-
ply with the notice requirements of this
paragraph (f)(2)(ii). If any taxable year of
the U.S. transferor is under examination
when the amended return is filed, a copy
of the amended return must be delivered
to the Internal Revenue Service personnel
conducting the examination. If no taxable
year of the U.S. transferor is under exam-
ination when the amended return is filed, a
copy of the amended return must be deliv-
ered to the Director.
(g) Applicability dates—(1) In general.
Except as provided in paragraphs (g)(2)
and (3) of this section, this section applies
with respect to contributions occurring on
or after January 18, 2017, and with respect
to contributions that occurred before Janu-
ary 18, 2017 resulting from an entity clas-
sification election made under §301.7701-
3 of this chapter that was effective on or
before January 18, 2017 but was filed on
or after January 18, 2017.
(2) Reporting relating to effectively
connected income. Paragraphs (b)(2)(iii),
(b)(3)(i)(G), and (d)(1) of this section ap-
ply to a contribution occurring on or after
August 6, 2015, and to a contribution that
occurred before August 6, 2015 resulting
from an entity classification election made
under §301.7701-3 of this chapter that was
effective on or before August 6, 2015 but
was filed on or after August 6, 2015, and,
in either case, provided §1.721(c)-3(b)(1)
(ii) applies to the contribution. To the ex-
tent that a previously filed return did not
comply with paragraph (b)(2)(iii), (b)(3)
(i)(G), or (d)(1) of this section, an amend-
ed return complying with such paragraphs
must have been filed no later than July 18,
2017.
(3) Transition rules—(i) Reporting
under sections 6038, 6038B, and 6046A.
For transfers occurring on or after August
6, 2015, and for transfers that occurred
before August 6, 2015 resulting from an
entity classification election made under
§301.7701-3 of this chapter that was ef-
fective on or before August 6, 2015 but
was filed on or after August 6, 2015, a
U.S. transferor (or a domestic partnership
in which a U.S. transferor is a direct or
indirect partner) must fulfill any report-
ing requirements imposed under sections
6038, 6038B, and 6046A with respect
to the contribution of the section 721(c)
property to the section 721(c) partnership.
(ii) Reporting using statements in-
stead of prescribed forms and schedules.
For tax returns filed before July 17, 2020,
reporting that met the requirements of
§1.721(c)-6T (see 26 CFR part 1, revised
as of April 1, 2019) as in effect before
January 1, 2020, will be deemed to satis-
fy the corresponding requirements of this
section.
§1.721(c)-6T [Removed]
Par. 19. Section 1.721(c)-6T is re-
moved.
Par. 20. Section 1.721(c)-7 is added to
read as follows:
§1.721(c)-7 Examples.
(a) Presumed facts. For purposes of the
examples in paragraph (b) of this section,
assume that there are no other transac-
tions that are related to the transactions
described in the examples and that all
partnership allocations have substantial
economic effect under section 704(b). For
definitions that apply for purposes of this
section, see §1.721(c)-1(b). Except where
otherwise indicated, the following facts
are presumed—
(1) USP and USX are domestic corpo-
rations that each use a calendar taxable
year. USX is not a related person with re-
spect to USP.
(2) CFC1, CFC2, FX, and FY are for-
eign corporations.
(3) USP wholly owns CFC1 and CFC2.
Neither FX nor FY is a related person with
respect to USP or with respect to each oth-
er.
(4) PRS1, PRS2, and PRS3 are foreign
entities classified as partnerships for U.S.

Bulletin No. 2020–8 437 February 18, 2020
tax purposes. A partnership interest in
PRS1, PRS2, and PRS3 is not described
in section 475(c)(2).
(5) A taxable year is referred to, for ex-
ample, as year 1.
(6) A partner in a partnership has the
same percentage interest in income, gain,
loss, deduction, and capital of the partner-
ship.
(7) No property is described in section
197(f)(9) in the hands of a contributing
partner.
(8) No partnership is a controlled part-
nership solely under the facts and circum-
stances test in §1.721(c)-1(b)(4).
(b) Examples. The application of the
rules stated in §§1.721(c)-1 through
1.721(c)-6 may be illustrated by the fol-
lowing examples:
(1) Example 1: Determining if a partnership is
a section 721(c) partnership— (i) Facts. In year 1,
USP and CFC1 form PRS1 as equal partners. CFC1
contributes cash of $1.5 million to PRS1, and USP
contributes three properties to PRS1: a patent with
a book value of $1.2 million and an adjusted tax ba-
sis of zero, a security (within the meaning of section
475(c)(2)) with a book value of $100,000 and an
adjusted tax basis of $20,000, and a machine with
a book value of $200,000 and an adjusted tax basis
of $600,000.
(ii) Results. (A) Under §1.721(c)-1(b)(18)(i),
USP is a U.S. transferor because USP is a U.S. per-
son and not a domestic partnership. Under §1.721(c)-
1(b)(2), the patent has built-in gain of $1.2 million.
The patent is not excluded property under §1.721(c)-
1(b)(6). Therefore, under §1.721(c)-1(b)(15)(i), the
patent is section 721(c) property because it is prop-
erty, other than excluded property, with built-in gain
that is contributed by a U.S. transferor, USP.
(B) Under §1.721(c)-1(b)(2), the security has
built-in gain of $80,000. Under §1.721(c)-1(b)(6)
(ii), the security is excluded property because it is
described in section 475(c)(2). Therefore, the securi-
ty is not section 721(c) property.
(C) The tax basis of the machine exceeds its book
value. Under §1.721(c)-1(b)(6)(iii), the machine is
excluded property and therefore is not section 721(c)
property.
(D) Under §1.721(c)-1(b)(12), CFC1 is a related
person with respect to USP, and under §1.721(c)-
1(b)(11), CFC1 is a related foreign person. Because
USP and CFC1 collectively own at least 80 percent
of the interests in the capital, profits, deductions, or
losses of PRS1, under §1.721(c)-1(b)(14)(i), PRS1 is
a section 721(c) partnership upon the contribution by
USP of the patent.
(E) The de minimis exception described in
§1.721(c)-2(c) does not apply to the contribution
because during PRS1’s year 1 the sum of the built-
in gain with respect to all section 721(c) property
contributed in year 1 to PRS1 is $1.2 million, which
exceeds the de minimis threshold of $1 million. As a
result, under §1.721(c)-2(b), section 721(a) does not
apply to USP’s contribution of the patent to PRS1,
unless the requirements of the gain deferral method
are satisfied.
(2) Example 2: Determining if partnership in-
terest is section 721(c) property—(i) Facts. In year
1, USP and FX form PRS2. USP contributes a secu-
rity (within the meaning of section 475(c)(2)) with
a book value of $100,000 and an adjusted tax basis
of $20,000 and a building located in country X with
a book value of $30,000 and an adjusted tax basis
of $8,000 in exchange for a 40-percent interest. FX
contributes a machine with a book value of $195,000
and an adjusted tax basis of $250,000 in exchange
for a 60-percent interest.
(ii) Results. PRS2 is not a section 721(c) partner-
ship because FX is not a related person with respect
to USP. USP’s contributions to PRS2 are not subject
to §1.721(c)-2(b).
(iii) Alternative facts and results. (A) The facts
are the same as in paragraph (b)(2)(i) of this section
(the facts in Example 2). In addition, USP and CFC1
form PRS1 as equal partners. CFC1 contributes
cash of $130,000 to PRS1, and USP contributes its
40-percent interest in PRS2.
(B) PRS2’s property consists of a security and
a machine that are excluded property, and a build-
ing with built-in gain in excess of $20,000. Under
§1.721(c)-1(b)(6)(iv), because more than 90 per-
cent of the value of the property of PRS2 consists
of excluded property described in §1.721(c)-1(b)(6)
(i) through (iii) (the security and the machine), any
interest in PRS2 is excluded property. Therefore, the
40-percent interest in PRS2 contributed by USP to
PRS1 is not section 721(c) property. Accordingly,
USP’s contribution of its interest in PRS2 to PRS1 is
not subject to §1.721(c)-2(b).
(3) Example 3: Assets-over tiered partnerships—
(i) Facts. In year 1, USP and CFC1 form PRS1 as
equal partners. USP contributes a patent with a book
value of $300 million and an adjusted tax basis of
$30 million (USP contribution). CFC1 contributes
cash of $300 million. Immediately thereafter, PRS1
contributes the patent to PRS2 in exchange for a
two-thirds interest (PRS1 contribution), and CFC2
contributes cash of $150 million in exchange for a
one-third interest. The patent has a remaining recov-
ery period of 5 years out of a total of 15 years. With
respect to all contributions described in §1.721(c)-
2(b), the de minimis exception does not apply, and
the gain deferral method is applied. Thus, the part-
nership agreements of PRS1 and PRS2 provide that
the partnership will make allocations under section
704(c) using the remedial allocation method under
§1.704-3(d).
(ii) Results: USP contribution. PRS1 is a section
721(c) partnership as a result of the USP contribu-
tion.
(iii) Results: PRS1 contribution. (A) For purpos-
es of determining whether PRS2 is a section 721(c)
partnership as a result of the PRS1 contribution, un-
der §1.721(c)-2(d)(1), USP is treated as contributing
to PRS2 its share of the patent that PRS1 actually
contributes to PRS2. USP and CFC1 are each one-
third indirect partners in PRS2. Taking into account
the one-third interest in PRS2 directly owned by
CFC2, USP, CFC1, and CFC2 collectively own at
least 80 percent of the interests in PRS2. Thus, PRS2
is a section 721(c) partnership as a result of the PRS1
contribution.
(B) Under §1.721(c)-2(b), section 721(a) does
not apply to PRS1’s contribution of the patent to
PRS2, unless the requirements of the gain deferral
method are satisfied. Under §1.721(c)-3(b), the gain
deferral method must be applied with respect to the
patent. In addition, under §1.721(c)-3(d)(2), because
PRS1 is a controlled partnership with respect to USP,
the gain deferral method must be applied with respect
to PRS1’s interest in PRS2, and, solely for purposes
of applying the consistent allocation method, PRS2
must treat PRS1 as the U.S. transferor. As stated in
paragraph (b)(3)(i) of this section (the facts in Exam-
ple 3), the gain deferral method is applied. PRS2 is
a controlled partnership with respect to USP. Under
§1.721(c)-5(c)(5)(i), the PRS1 contribution is a suc-
cessor event with respect to the USP contribution.
(iv) Results: application of remedial allocation
method. (A) Under §1.704-3(d)(2), in year 1, PRS2
has $24 million of book amortization with respect
to the patent ($6 million ($30 million of book val-
ue equal to adjusted tax basis divided by the 5-year
remaining recovery period) plus $18 million ($270
million excess of book value over tax basis divided
by the new 15-year recovery period)). PRS2 has $6
million of tax amortization. Under the PRS2 partner-
ship agreement, PRS2 allocates $8 million of book
amortization to CFC2 and $16 million of book amor-
tization to PRS1. Because of the application of the
ceiling rule, PRS2 allocates $6 million of tax amorti-
zation to CFC2 and $0 of tax amortization to PRS1.
Because the ceiling rule would cause a disparity of
$2 million between CFC2’s book and tax amortiza-
tion, PRS2 must make a remedial allocation of $2
million of tax amortization to CFC2 and an offsetting
remedial allocation of $2 million of taxable income
to PRS1.
(B) PRS1’s distributive share of each of PRS2’s
items with respect to the patent is $16 million of
book amortization, $0 of tax amortization, and $2
million of taxable income from the remedial alloca-
tion from PRS1. Under §1.704-3(a)(9), PRS1 must
allocate its distributive share of each of PRS2’s items
with respect to the patent in a manner that takes into
account USP’s remaining built-in gain in the patent.
Therefore, PRS1 allocates $2 million of taxable in-
come to USP. Under §1.704-3(a)(13)(ii), PRS1 treats
its distributive share of each of PRS2’s items of
amortization with respect to PRS2’s patent as items
of amortization with respect to PRS1’s interest in
PRS2. Under the PRS1 partnership agreement, PRS1
allocates $8 million of book amortization and $0 of
tax amortization to CFC1, and $8 million of book
amortization and $0 of tax amortization to USP. Be-
cause the ceiling rule would cause a disparity of $8
million between CFC1’s book and tax amortization,
PRS1 must make a remedial allocation of $8 mil-
lion of tax amortization to CFC1. PRS1 must also
make an offsetting remedial allocation of $8 million
of taxable income to USP. USP reports $10 million
of taxable income ($2 million of remedial income
from PRS2 and $8 million of remedial income from
PRS1).
(4) Example 4: Section 721(c) partnership ceas-
es to have a related foreign person as a partner—(i)
Facts. In year 1, USP and CFC1 form PRS1. USP
contributes a trademark with a built-in gain of $5
million in exchange for a 60-percent interest, and
CFC1 contributes other property in exchange for

February 18, 2020 438 Bulletin No. 2020–8
the remaining 40-percent interest. With respect to all
contributions described in §1.721(c)-2(b), the de mi-
nimis exception does not apply, and the gain deferral
method is applied. On day 1 of year 4, CFC1 sells its
entire interest in PRS1 to FX. There is no plan for a
related foreign person with respect to USP to subse-
quently become a partner in PRS1 (or a successor).
(ii) Results. (A) PRS1 is a section 721(c) part-
nership.
(B) With respect to year 4, under §1.721(c)-5(b)
(5), the sale is a termination event because, as a result
of CFC1’s sale of its interest, PRS1 will no longer
have a partner that is a related foreign person, and
there is no plan for a related foreign person to subse-
quently become a partner in PRS1 (or a successor).
Thus, under §1.721(c)-5(b)(1), the trademark is no
longer subject to the gain deferral method.
(5) Example 5: Transfer described in section
367 of section 721(c) property to a foreign corpo-
ration—(i) Facts. In year 1, USP, CFC1, and USX
form PRS1. USP contributes a patent with a built-in
gain of $5 million in exchange for a 60-percent in-
terest, CFC1 contributes other property in exchange
for a 30-percent interest, and USX contributes cash
in exchange for a 10-percent interest. With respect
to all contributions described in §1.721(c)-2(b), the
de minimis exception does not apply, and the gain
deferral method is applied. In year 3, when the patent
has remaining built-in gain, PRS1 transfers the pat-
ent to FX in a transaction described in section 351.
(ii) Results. (A) PRS1 is a section 721(c) part-
nership.
(B) With respect to year 3, the transfer of the
patent to FX is a transaction described in section
367(d). Therefore, under §1.721(c)-5(e), the patent
is no longer subject to the gain deferral method. Un-
der §§1.367(d)-1T(d)(1) and 1.367(a)-1T(c)(3)(i),
for purposes of section 367(d), USP and USX are
treated as transferring their proportionate share of
the patent actually transferred by PRS1 to FX. Un-
der §1.721(c)-5(e), to the extent USP and USX are
treated as transferring the patent to FX, the tax con-
sequences are determined under section 367(d) and
the regulations under section 367(d). With respect
to the remaining portion of the patent, if any, which
is attributable to CFC1, USP must recognize an
amount of gain equal to the remaining built-in gain
that would have been allocated to USP if PRS1 had
sold that portion of the patent immediately before the
transfer for fair market value. Under §1.721(c)-4(c)
(1), USP must increase the basis in its partnership
interest in PRS1 by the amount of gain recognized by
USP and under §1.721(c)-4(c)(2), immediately be-
fore the transfer, PRS1 must increase its basis in the
patent by the same amount. The stock in FX received
by PRS1 is not subject to the gain deferral method.
(6) Example 6: Limited remedial allocation
method for anti-churning property with respect to
related partners—(i) Facts. USP, CFC1, and FX
form PRS1. On January 1 of year 1, USP contributes
intellectual property (IP) with a book value of $600
million and an adjusted tax basis of $0 in exchange
for a 60-percent interest. The IP is a section 197(f)
(9) intangible (within the meaning of §1.197-2(h)
(1)(i)) that was not an amortizable section 197 in-
tangible in USP’s hands. CFC1 contributes cash of
$300 million in exchange for a 30-percent interest,
and FX contributes cash of $100 million in exchange
for a 10-percent interest. The IP is section 721(c)
property, and PRS1 is a section 721(c) partnership.
The gain deferral method is applied. The partnership
agreement provides that PRS1 will make allocations
under section 704(c) with respect to the IP using the
remedial allocation method under §1.704-3(d)(5)
(iii). All of PRS1’s allocations with respect to the IP
satisfy the requirements of the gain deferral method.
On January 1 of year 16, PRS1 sells the IP for cash of
$900 million to a person that is not a related person.
During years 1 through 16, PRS1 earns no income
other than gain from the sale of the IP in year 16, has
no expenses or deductions other than from amortiza-
tion of the IP, and makes no distributions.
(ii) Results: year 1. Under §1.704-3(d)(5)(iii)(B),
PRS1 must recover the excess of the book value of
the IP over its adjusted tax basis at the time of the
contribution ($600 million) using any recovery pe-
riod and amortization method that would have been
available to PRS1 if the property had been newly
purchased property from an unrelated party. Thus,
under section 197(a), PRS1 must amortize $600 mil-
lion of the IP’s book value ratably over 15 years for
book purposes, and PRS1 will have $40 million of
book amortization per year without any tax amorti-
zation. Under the partnership agreement, in year 1,
PRS1 allocates book amortization of $24 million to
USP, $12 million to CFC1, and $4 million to FX. Be-
cause in year 1 the ceiling rule would cause a dispar-
ity between FX’s allocations of book and tax amor-
tization, PRS1 makes a remedial allocation of tax
amortization of $4 million to FX and an offsetting
remedial allocation of $4 million of taxable income
to USP. In year 1, the ceiling rule would also cause
a disparity between CFC1’s allocations of book and
tax amortization. However, §1.197-2(h)(12)(vii)(B)
precludes PRS1 from making a remedial allocation
of tax amortization to CFC1. Instead, pursuant to
§1.704-3(d)(5)(iii)(C), PRS1 increases the adjusted
tax basis in the IP by $12 million, and pursuant to
§1.704-3(d)(5)(iii)(D), that basis adjustment is solely
with respect to CFC1. Pursuant to §1.704-3(d)(5)(iii)
(C), PRS1 also makes an offsetting remedial alloca-
tion of $12 million of taxable income to USP.
(iii) Results: years 2-15. At the end of year 15,
PRS1 has book basis and adjusted tax basis of $0 in
the IP. PRS1 has amortized $600 million for book
purposes by allocating total book amortization de-
ductions of $360 million to USP, $180 million to
CFC1, and $60 million to FX. For U.S. tax purpos-
es, by the end of year 15, PRS1 has made remedial
allocations of $60 million of tax amortization to FX
and increased the adjusted tax basis in the IP by $180
million solely with respect to CFC1. PRS1 has also
made total remedial allocations of $240 million of
taxable income to USP (attributable to $60 million
of remedial tax amortization to FX and $180 million
of tax basis adjustments with respect to CFC1). With
respect to their partnership interests in PRS1, USP
has a capital account and an adjusted tax basis of
$240 million, CFC1 has a capital account of $120
million and an adjusted tax basis of $300 million,
and FX has a capital account and an adjusted tax ba-
sis of $40 million.
(iv) Results: sale of property in year 16. PRS1’s
sale of the IP for cash of $900 million on January 1
of year 16 results in $900 million of book and tax
gain ($900 million - $0). PRS1 allocates the book
and tax gain 60 percent to USP ($540 million),
10 percent to FX ($90 million), and 30 percent to
CFC1 ($270 million). However, under §1.704-3(d)
(5)(iii)(D)(3), CFC1’s tax gain is $90 million, equal
to its share of PRS1’s gain ($270 million), minus
the amount of the tax basis adjustment ($180 mil-
lion). After the sale, PRS1’s only property is cash of
$1.3 billion. With respect to their partnership inter-
ests in PRS1, USP has a capital account and an ad-
justed tax basis of $780 million, CFC1 has a capital
account and an adjusted tax basis of $390 million,
and FX has a capital account and an adjusted tax
basis of $130 million.
§ 1.721(c)-7T [Removed]
Par. 21. Section 1.721(c)-7T is re-
moved.
Par. 22. Section 1.6038B-2 is amended
by:
1. Revising paragraphs (a)(1)(iii), (a)
(3), and (c)(8) and (9).
2. In paragraph (h)(1) introductory text,
removing “§1.721(c)-6T” and adding
“§1.721(c)-6” in its place.
3. Revising paragraphs (h)(3) and (j)(4)
and (5).
The revisions read as follows:
§1.6038B-2 Reporting of certain trans-
fers to foreign partnerships.
(a) * * *
(1) * * *
(iii) The United States person is a U.S.
transferor (as defined in §1.721(c)-1(b)
(18)) that makes a gain deferral contri-
bution and is required to report under
§1.721(c)-6(b)(2). The reporting required
under this paragraph (a) includes the an-
nual reporting required by §1.721(c)-6(b)
(3). For purposes of applying this para-
graph (a)(1)(iii) to partnerships formed on
or after January 18, 2017, a domestic part-
nership is treated as a foreign partnership
pursuant to section 7701(a)(4).
* * * * *
(3) Indirect transfer through a foreign
partnership. Solely for purposes of this
section, if a foreign partnership trans-
fers section 721(c) property (as defined
in §1.721(c)-1(b)(15)) to another foreign
partnership in a transfer described in
§1.721(c)-3(d) (tiered-partnership rules),
then the transferor foreign partnership’s
partners will be considered to have trans-
ferred a proportionate share of the proper-
ty to the foreign partnership.
* * * * *
(c) * * *
(8) With respect to reporting required
under §1.721(c)-6(b)(2) and paragraph (a)
(1)(iii) of this section with regard to a gain
deferral contribution, the information re-
quired by §1.721(c)-6(b)(2); and

Bulletin No. 2020–8 439 February 18, 2020
(9) With respect to section 721(c) prop-
erty for which reporting is required under
§1.721(c)-6(b)(3) and paragraph (a)(1)
(iii) of this section, the information re-
quired by §1.721(c)-6(b)(3).
* * * * *
(h) * * *
(3) Reasonable cause exception. Un-
der section 6038B(c)(2) and this section,
the provisions of paragraph (h)(1) of this
section will not apply if the United States
person shows, in a timely manner, that a
failure to comply was due to reasonable
cause and not willful neglect. A United
States person’s statement that the failure
to comply was due to reasonable cause
and not willful neglect will be considered
timely only if, promptly after the Unit-
ed States person becomes aware of the
failure, an amended return is filed for the
taxable year to which the failure relates
that includes the information that should
have been included with the original re-
turn for such taxable year or that other-
wise complies with the rules of this sec-
tion, and that includes a written statement
explaining the reasons for the failure to
comply. If any taxable year of the Unit-
ed States person is under examination
when the amended return is filed, a copy
of the amended return must be delivered
to the Internal Revenue Service person-
nel conducting the examination when
the amended return is filed. If no taxable
year of the United States person is under
examination when the amended return is
filed, a copy of the amended return must
be delivered to the Director of Field Op-
erations, Cross Border Activities Practice
Area of Large Business & International
(or any successor to the roles and respon-
sibilities of such position, as appropriate)
(Director). Whether a failure to comply
was due to reasonable cause and not
willful neglect will be determined by the
Director under all the facts and circum-
stances.
* * * * *
(j) * * *
(4) Transfers of section 721(c) proper-
ty. Paragraph (c)(8) of this section applies
to transfers occurring on or after August
6, 2015, and to transfers that occurred
before August 6, 2015 resulting from an
entity classification election made under
§301.7701-3 of this chapter that was ef-
fective on or before August 6, 2015 but
was filed on or after August 6, 2015. Para-
graphs (a)(1)(iii), (a)(3), and (c)(9) of this
section apply to transfers occurring on or
after January 18, 2017, and to transfers
that occurred before January 18, 2017 re-
sulting from entity classification elections
made under §301.7701-3 of this chapter
that were effective on or before January
18, 2017 but were filed on or after January
18, 2017.
(5) Reasonable cause exception. Para-
graph (h)(3) of this section applies to all
requests for relief for transfers of property
to partnerships filed on or after January
18, 2017.
§1.6038-2T [Removed]
Par. 23. Section 1.6038B-2T is re-
moved.
Sunita Lough
Deputy Commissioner for Services
and Enforcement.
Approved: December 11, 2019
David J. Kautter
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on Jan-
uary 17, 2020, 4:15 p.m., and published in the issue
of the Federal Register for January 23, 2020, 85 F.R.
3833)
26 CFR Parts 1 and 31
T.D. 9892
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 31
Return Due Date and
Extended Due Date
Changes
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations that update the due dates
and available extensions of time to file
certain tax returns and information re-
turns. The dates are updated to reflect the
statutory requirements set by section 2006
of the Surface Transportation and Veter-
ans Health Care Choice Improvement Act
of 2015 and section 201 of the Protecting
Americans from Tax Hikes Act of 2015.
Additionally, the regulations remove a
provision for electing large partnerships
that was made obsolete by section 1101(b)
(1) of the Bipartisan Budget Act of 2015.
These regulations affect taxpayers who file
Form W-2 (series, except Form W-2G),
Form W-3, Form 990 (series), Form 1099-
MISC, Form 1041, Form 1041-A, Form
1065, Form 1065-B, Form 1120 (series),
Form 4720, Form 5227, Form 6069, Form
8804, or Form 8870.
DATES: Effective Date: These regulations
are effective January 30, 2020.
Applicability Date: For dates of applica-
bility, see §§1.1446-3(g), 1.6012-6(c),
1.6031(a)-1(f), 1.6032-1(b), 1.6033-2(k),
1.6041-2(d), 1.6041-6(c), 1.6072-2(g),
1.6081-1(c), 1.6081-2(h), 1.6081-3(g),
1.6081-5(f), 1.6081-6(g), 1.6081-9(f), and
31.6071(a)-1(g).
FOR FURTHER INFORMATION CON-
TACT: Isaac Brooks Fishman, (202) 317-
6845 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regula-
tions that reflect changes in tax return due
dates enacted by section 2006 of the Sur-
face Transportation and Veterans Health
Care Choice Improvement Act of 2015,
Public Law 114-41, 129 Stat. 443 (2015),
as well as changes to information return
due dates enacted by section 201 of the
Protecting Americans from Tax Hikes Act
of 2015, Public Law 114-113, Div. Q, 129
Stat. 2242 (2015). On July 20, 2017, the
IRS published in the Federal Register
temporary regulations (TD 9821 (82 FR
33441)) that conformed the due dates and
the available extensions of time to file var-
ious tax returns and information returns to
those provided by statute. The temporary
regulations were applicable for tax returns
and information returns filed after July 20,

February 18, 2020 440 Bulletin No. 2020–8
2017, with an expiration date of July 17,
2020.
The IRS published a notice of proposed
rulemaking (REG-128483-15 (82 FR
33467)) cross-referencing the temporary
regulations in the Federal Register the
same day it published the temporary regu-
lations. The IRS received no comments on
the notice of proposed rulemaking, and no
public hearing was requested or held.
This Treasury Decision removes the
temporary regulations and adopts the pro-
posed regulations as final regulations with
only nonsubstantive revisions. The revi-
sions are discussed in the Explanation of
Provisions.
Explanation of Provisions
A detailed explanation of these reg-
ulations can be found in the preamble to
the temporary regulations. One additional
provision of these regulations that is not
discussed in the preamble to the tempo-
rary regulations is explained below.
Section 1.6081-2(a)(1) of the proposed
regulations addresses the extension of
time for a partnership to file Form 1065,
‘‘U.S. Partnership Return of Income,’’
or Form 8804, ‘‘Annual Return for Part-
nership Withholding Tax.’’ Similarly,
§1.6081-2(a)(2) of the final regulations in
place prior to the publication of this Trea-
sury Decision addressed the extension of
time to file Form 1065-B, “U.S. Return of
Income for Electing Large Partnerships.”
Section 1101(b)(1) of the Bipartisan Bud-
get Act of 2015, Public Law 114-74, 129
Stat. 625 (2015), repealed part IV of sub-
chapter K of chapter 1 of subtitle A of the
Internal Revenue Code (Code), which,
prior to repeal, provided in former sec-
tions 771 through 777 for the treatment of
certain partnerships as electing large part-
nerships. The amendment was effective
for returns filed for partnership taxable
years beginning after December 31, 2017.
As a consequence, electing large partner-
ships do not exist and Forms 1065-B will
not be filed for taxable years beginning
after December 31, 2017.
Because §1.6081-2(a)(2) is therefore
obsolete, and the only remaining effective
provision in §1.6081-2(a) was §1.6081-
2(a)(1), this Treasury Decision removes
§1.6081-2(a)(2) and redesignates pro-
posed §1.6081-2(a)(1) as §1.6081-2(a).
This change is purely ministerial and has
no substantive effect. Accordingly, the
IRS finds good cause for dispensing with
notice and public comment pursuant to 5
U.S.C. 553(b) and (c) and with a delayed
effective date pursuant to 5 U.S.C. 553(d)
for this change.
Special Analyses
These regulations are not subject to re-
view under section 6(b) of Executive Or-
der 12866 pursuant to the Memorandum
of Agreement (April 11, 2018) between
the Department of the Treasury and the
Office of Management and Budget regard-
ing review of tax regulations.
Pursuant to the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) it is hereby
certified that this final rule will not have a
significant economic impact on a substan-
tial number of small entities. These regu-
lations only update the due dates and ex-
tensions of time to file certain collections
of information and include some existing
regulatory language concerning collec-
tions of information that affect small enti-
ties for the convenience of the reader.
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 com-
ment on their impact on small business.
No comments were received from the
Small Business Administration.
Drafting Information
The principal author of these regu-
lations is Jonathan R. Black formerly of
the Office of the Associate Chief Counsel
(Procedure and Administration).
List of Subjects
26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
26 CFR Part 31
Employment taxes, Income taxes, Penal-
ties, Pensions, Railroad retirement, Report-
ing and recordkeeping requirements, Social
security, Unemployment compensation.
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 31 are
amended as follows:
PA RT 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Revise paragraphs (b)(2)(v)(C)
and (g) of §1.1446-3 to read as follows:
§1.1446-3 Time and manner of calcu-
lating and paying over the 1446 tax.
* * * * *
(b) * * *
(2) * * *
(v) * * *
(C) Period of underpayment. The pe-
riod of the underpayment set forth in sec-
tion 6655(b)(2) shall end on the earlier
of the date the partnership is required to
file Form 8804 (as provided in paragraph
(d)(1)(iii) of this section and without re-
gard to extensions), or with respect to any
portion of the underpayment, the date on
which such portion is paid.
* * * * *
(g) Applicability date. This section ap-
plies to returns filed on or after January 30,
2020. Section 1.1446-3T (as contained in
26 CFR part 1, revised April 2019) applies
to returns filed before January 30, 2020.
§1.1446-3T [Removed]
Par. 3. Section 1.1446-3T is removed.
Par. 4. Revise paragraph (a)(1) and add
paragraph (c) to §1.6012-6 to read as fol-
lows:
§1.6012-6 Returns by political organi-
zations.
(a) * * * (1) In general. For taxable years
beginning after December 31, 1974, every
political organization described in section
527(e)(1), and every fund described in sec-
tion 527(f)(3) or section 527(g), and every
organization described in section 501(c)
and exempt from taxation under section
501(a) shall, if a tax is imposed on such
an organization or fund by section 527(b),
make a return of income on or before the
fifteenth day of the fourth month following
the close of the taxable year.
* * * * *
(c) Applicability date. This section ap-
plies to returns filed on or after January 30,

Bulletin No. 2020–8 441 February 18, 2020
2020. Section 1.6012-6T (as contained in
26 CFR part 1, revised April 2019) applies
to returns filed before January 30, 2020.
§1.6012-6T [Removed]
Par. 5. Section 1.6012-6T is removed.
Par. 6. Revise paragraphs (e)(2) and (f)
of §1.6031(a)-1 to read as follows:
§1.6031(a)-1 Return of partnership in-
come.
* * * * *
(e) * * *
(2) Time for filing. The return of a part-
nership must be filed on or before the date
prescribed by section 6072(b).
* * * * *
(f) Applicability date. This section ap-
plies to returns filed on or after January
30, 2020. Section 1.6031(a)-1T (as con-
tained in 26 CFR part 1, revised April
2019) applies to returns filed before Jan-
uary 30, 2020.
§1.6031(a)-1T [Removed]
Par. 7. Section 1.6031(a)-1T is re-
moved.
Par. 8. Revise §1.6032-1 to read as fol-
lows:
§1.6032-1 Returns of banks with re-
spect to common trust funds.
(a) Every bank (as defined in section
581) maintaining a common trust fund
shall make a return of income of the com-
mon trust fund, regardless of the amount
of its taxable income. Member banks of
an affiliated group that serve as co-trust-
ees with respect to a common trust fund
must act jointly in making a return for the
fund. If a bank maintains more than one
common trust fund, a separate return shall
be made for each. No particular form is
prescribed for making the return under
this section, but Form 1065 may be used
if it is designated by the bank as the re-
turn of a common trust fund. The return
shall be made for the taxable year of the
common trust fund and shall be filed on
or before the date prescribed by section
6072(b) with the service center prescribed
in the relevant Internal Revenue Service
revenue procedure, publication, form, or
instructions to the form (see §601.601(d)
(2) of this chapter). Such return shall state
specifically with respect to the fund the
items of gross income and the deductions
allowed by subtitle A of the Internal Reve-
nue Code, shall include each participant’s
name and address, the participant’s propor-
tionate share of taxable income or net loss
(exclusive of gains and losses from sales
or exchanges of capital assets), the partic-
ipant’s proportionate share of gains and
losses from sales or exchanges of capital
assets, and the participant’s share of items
which enter into the determination of the
tax imposed by section 56. See §§1.584-
2 and 1.58-5. If the common trust fund is
maintained by two or more banks that are
members of the same affiliated group, the
return must also identify the member bank
in the group that has contributed each par-
ticipant’s property or money to the fund. A
copy of the plan of the common trust fund
must be filed with the return. If, however,
a copy of such plan has once been filed
with a return, it need not again be filed if
the return contains a statement showing
when and where it was filed. If the plan is
amended in any way after such copy has
been filed, a copy of the amendment must
be filed with the return for the taxable year
in which the amendment was made. For
the signing of a return of a bank with re-
spect to common trust funds, see §1.6062-
1, relating to the manner prescribed for the
signing of a return of a corporation.
(b) This section applies to returns filed
on or after January 30, 2020. Section
1.6032-1T (as contained in 26 CFR part
1, revised April 2019) applies to taxable
years beginning before January 30, 2020.
§1.6032-1T [Removed]
Par. 9. Section 1.6032-1T is removed.
Par. 10. Revise paragraphs (e) and (k)
of §1.6033-2 to read as follows:
§1.6033-2 Returns by exempt organi-
zations (taxable years beginning after De-
cember 31, 1969) and returns by certain
nonexempt organizations (taxable years
beginning after December 31, 1980).
* * * * *
(e) Time and place for filing. The annu-
al return required by this section shall be
filed on or before the 15th day of the fifth
month following the close of the period
for which the return is required to be filed.
The annual return on Form 1065 required
to be filed by a religious or apostolic as-
sociation or corporation shall be filed on
or before the date prescribed by section
6072(b). Each such return shall be filed in
accordance with the instructions applica-
ble thereto.
* * * * *
(k) Applicability date. This section ap-
plies to returns filed on or after January 30,
2020. Section 1.6033-2T (as contained in
26 CFR part 1, revised April 2019) applies
to returns filed before January 30, 2020.
§1.6033-2T [Removed]
Par. 11. Section 1.6033-2T is removed.
Par. 12. Revise paragraph (a)(3)(ii) and
add paragraph (d) to §1.6041-2 to read as
follows:
§1.6041-2 Return of information as to
payments to employees.
(a) * * *
(3) * * *
(ii) Exception. In a case where an
employer is not required to file Forms
W-3 and W-2 under §31.6011(a)-4 or
§31.6011(a)-5 of this chapter, returns on
Forms W-3 and W-2 required under this
paragraph (a) for any calendar year shall
be filed on or before January 31 of the fol-
lowing year.
* * * * *
(d) Applicability date. This section ap-
plies to returns filed on or after January 30,
2020. Section 1.6041-2T (as contained in
26 CFR part 1, revised April 2019) applies
to returns filed before January 30, 2020.
§1.6041-2T [Removed]
Par. 13. Section 1.6041-2T is removed.
Par. 14. Revise §1.6041-6 to read as
follows:
§1.6041-6 Returns made on Forms
1096 and 1099 under section 6041; con-
tents and time and place for filing.
(a) In general. Except as provided in
paragraph (b) of this section, returns made
under section 6041 on Forms 1096 and
1099 for any calendar year shall be filed
on or before February 28 (March 31 if
filed electronically) of the following year
with any of the Internal Revenue Service
Centers, the addresses of which are list-
ed in the instructions for such forms. The
name and address of the person making
the payment and the name and address of
the recipient of the payment shall be stat-
ed on Form 1099. If the present address
of the recipient is not available, the last

February 18, 2020 442 Bulletin No. 2020–8
known post office address must be given.
See section 6109 and the regulations in
part 301 of this title under section 6109 for
rules requiring the inclusion of identifying
numbers in Form 1099.
(b) Exception. Returns made on Form
1099 reporting nonemployee compensa-
tion shall be filed on or before January 31
of the year following the calendar year to
which such returns relate.
(c) Applicability date. This section ap-
plies to returns filed on or after January 30,
2020. Section 1.6041-6T (as contained in
26 CFR part 1, revised April 2019) applies
to returns filed before January 30, 2020.
§1.6041-6T [Removed]
Par. 15. Section 1.6041-6T is removed.
Par. 16. Revise paragraphs (a) and
(d)(1) and (2) and add paragraph (g) to
§1.6072-2 to read as follows:
§1.6072-2 Time for filing returns of
corporations.
(a) Domestic and certain foreign cor-
porations—(1) In general—(i) C cor-
porations. Except as provided in para-
graph (a)(2) of this section, the income
tax return required under section 6012
of a domestic C corporation (as defined
in section 1361(a)(2)) or of a foreign C
corporation having an office or place of
business in the United States shall be
filed on or before the fifteenth day of the
fourth month following the close of the
taxable year.
(ii) S corporations. The income tax
return required under sections 6012 and
6037 of an S corporation (as defined
in section 1361(a)(1)) shall be filed on
or before the fifteenth day of the third
month following the close of the taxable
year.
(2) Exception. For taxable years begin-
ning before January 1, 2026, the income
tax return of a C corporation described in
paragraph (a)(1)(i) of this section that has
a taxable year that ends on June 30 shall
be filed on or before the fifteenth day of
the third month following the close of the
taxable year. For purposes of this para-
graph (a)(2), the return for a short period
(within the meaning of section 443) that
ends on any day in June shall be treated
as the return for a taxable year that ends
on June 30.
* * * * *
(d) * * *
(1) Section 521 associations. A farm-
ers’, fruit growers’, or like association,
organized and operated in compliance
with the requirements of section 521 and
§1.521-1; and
(2) Section 1381 corporations. For a
taxable year beginning after December
31, 1962, a corporation described in sec-
tion 1381(a)(2), which is under a valid
enforceable written obligation to pay pa-
tronage dividends (as defined in section
1388(a) and §1.1388-1(a)) in an amount
equal to at least 50 percent of its net earn-
ings from business done with or for its pa-
trons, or which paid patronage dividends
in such an amount out of the net earnings
from business done with or for patrons
during the most recent taxable year for
which it had such net earnings. Net earn-
ings for purposes of this paragraph (d)(2)
shall not be reduced by any taxes imposed
by subtitle A of the Internal Revenue Code
and shall not be reduced by dividends paid
on capital stock or other proprietary inter-
est.
* * * * *
(g) Applicability date. This section ap-
plies to returns filed on or after January
30, 2020. Section 1.6072-2T (as contained
in 26 CFR part 1, revised April 2019) ap-
plies to returns before January 30, 2020.
§1.6072-2T [Removed]
Par. 17. Section 1.6072-2T is removed.
Par. 18. Revise paragraphs (a) and (c)
of §1.6081-1 to read as follows:
§1.6081-1 Extension of time for filing
returns.
(a) In general. The Commissioner is
authorized to grant a reasonable extension
of time for filing any return, declaration,
statement, or other document that relates
to any tax imposed by subtitle A of the
Internal Revenue Code (Code) and that is
required under the provisions of subtitle A
or F of the Code. However, other than in
the case of taxpayers who are abroad or as
specified in section 6081(b), such exten-
sions of time shall not be granted for more
than six months, and the extension of time
for filing the return of a DISC (as defined
in section 992(a)), as specified in section
6072(b), shall not be granted. Except in
the case of an extension of time pursuant
to §1.6081-5, an extension of time for fil-
ing an income tax return shall not operate
to extend the time for the payment of the
tax unless specified to the contrary in the
extension. For rules relating to extensions
of time for paying tax, see §1.6161-1.
* * * * *
(c) Applicability date. This section ap-
plies to requests for extension of time to
file returns on or after January 30, 2020.
Section 1.6081-1T (as contained in 26
CFR part 1, revised April 2019) applies to
requests for extension of time to file re-
turns before January 30, 2020.
§1.6081-1T [Removed]
Par. 19. Section 1.6081-1T is removed.
Par. 20. Revise paragraphs (a) and (h)
of §1.6081-2 to read as follows:
§1.6081-2 Automatic extension of time
to file certain returns filed by partnerships.
(a) In general. A partnership required
to file Form 1065, “U.S. Partnership Re-
turn of Income,” or Form 8804, “Annual
Return for Partnership Withholding Tax,”
for any taxable year will be allowed an
automatic six-month extension of time
to file the return after the date prescribed
for filing the return if the partnership files
an application under this section in accor-
dance with paragraph (b) of this section.
No additional extension will be allowed
pursuant to §1.6081-1(b) beyond the au-
tomatic six-month extension provided by
this section. In the case of a partnership
described in §1.6081-5(a)(1), the automat-
ic extension of time to file allowed under
this section runs concurrently with an ex-
tension of time to file granted pursuant to
§1.6081-5.
* * * * *
(h) Applicability date. This section
applies to applications for an automatic
extension of time to file the partnership
returns listed in paragraph (a) of this sec-
tion on or after January 30, 2020. Section
1.6081-2T (as contained in 26 CFR part 1,
revised April 2019) applies to applications
for an automatic extension of time to file
before January 30, 2020.
§1.6081-2T [Removed]
Par. 21. Section 1.6081-2T is removed.
Par. 22. Revise paragraphs (a) introduc-
tory text and (e) through (g) of §1.6081-3
to read as follows:
§1.6081-3 Automatic extension of time
for filing corporation income tax returns.

Bulletin No. 2020–8 443 February 18, 2020
(a) In general. Except as provided in
paragraphs (e) and (f) of this section, a
corporation or an affiliated group of cor-
porations filing a consolidated return will
be allowed an automatic 6-month exten-
sion of time to file its income tax return
after the date prescribed for filing the re-
turn if the following requirements are met.
* * * * *
(e) Exception. In the case of any return
for a taxable year of a C corporation that
ends on June 30 and begins before Janu-
ary 1, 2026, the first sentence of paragraph
(a) of this section shall be applied by sub-
stituting “7-month” for “6-month.” For
purposes of this paragraph (e), the return
for a short period (within the meaning of
section 443) that ends on any day in June
shall be treated as the return for a taxable
year that ends on June 30.
(f) Cross reference. For provisions re-
lating to extensions of time to file Form
1120-POL, “U.S. Income Tax Return
for Certain Political Organizations,” see
§1.6081-9.
(g) Applicability date. This section ap-
plies to requests for extension of time to
file corporation income tax returns on or
after January 30, 2020. Section 1.6081-3T
(as contained in 26 CFR part 1, revised
April 2019) applies to applications for an
automatic extension of time to file before
January 30, 2020.
§1.6081-3T [Removed]
Par. 23. Section 1.6081-3T is removed.
Par. 24. Revise paragraphs (a)(1) and
(f) of §1.6081-5 to read as follows:
§1.6081-5 Extensions of time in the
case of certain partnerships, corporations
and U.S. citizens and residents.
(a) * * *
(1) Partnerships, which are required
under section 6072(b) to file returns on the
fifteenth day of the third month following
the close of the taxable year of the part-
nership, that keep their records and books
of account outside the United States and
Puerto Rico;
* * * * *
(f) This section applies to returns filed
on or after January 30, 2020. Section
1.6081-5T (as contained in 26 CFR part 1,
revised April 2019) applies to applications
for an automatic extension of time to file
returns before January 30, 2020.
§1.6081-5T [Removed]
Par. 25. Section 1.6081-5T is removed.
Par. 26. Revise paragraphs (a)(1) and
(g) of §1.6081-6 to read as follows:
§1.6081-6 Automatic extension of time
to file estate or trust income tax return.
(a) * * * (1) Except as provided in
paragraph (a)(2) of this section, any es-
tate, including but not limited to an estate
defined in section 2031, or trust required
to file an income tax return on Form 1041,
“U.S. Income Tax Return for Estates and
Trusts,” will be allowed an automatic five
and one-half month extension of time to
file the return after the date prescribed for
filing the return if the estate or trust files
an application under this section in accor-
dance with paragraph (b) of this section.
No additional extension will be allowed
pursuant to §1.6081-1(b) beyond the au-
tomatic five and one-half month extension
provided by this section.
* * * * *
(g) Applicability date. This section
applies to applications for an automatic
extension of time to file an estate or trust
income tax return on or after January 30,
2020. Section 1.6081-6T (as contained in
26 CFR part 1, revised April 2019) applies
to applications for an automatic extension
of time to file a return before January 30,
2020.
§1.6081-6T [Removed]
Par. 27. Section 1.6081-6T is removed.
Par. 28. Revise paragraphs (a), (b)(1)
and (3), and (c) through (f) of §1.6081-9
to read as follows:
§1.6081-9 Automatic extension of time
to file exempt or political organization re-
turns.
(a) In general. An entity required to file
a return on a form in the Form 990 series
(Form 990, “Return of Organization Ex-
empt From Income Tax,” Form 990-BL,
“Information and Initial Excise Tax Re-
turn for Black Lung Benefit Trusts and
Certain Related Persons,” Form 990-EZ,
“Short Form Return of Organization Ex-
empt From Income Tax,” Form 990-PF,
“Return of Private Foundation,” and Form
990-T, “Exempt Organization Business
Tax Return”), Form 1041-A, “U.S. In-
formation Return-Trust Accumulation of
Charitable Amounts,” Form 1120-POL,
“U.S. Income Tax Return for Certain Po-
litical Organizations,” Form 4720, “Re-
turn of Certain Excise Taxes Under Chap-
ters 41 and 42 of the Internal Revenue
Code,” Form 5227, “Split-Interest Trust
Information Return,” Form 6069, “Return
of Excise Tax on Excess Contributions to
Black Lung Benefit Trust Under Section
4953 and Computation of Section 192
Deduction,” and Form 8870, “Informa-
tion Return for Transfers Associated With
Certain Personal Benefit Contracts,” will
be allowed an automatic six-month exten-
sion of time to file the return after the date
prescribed for filing if the entity files an
application in accordance with paragraph
(b) of this section.
(b) * * *
(1) Be submitted on Form 7004, “Ap-
plication for Automatic Extension of
Time to File Certain Business Income
Tax, Information, and Other Returns”
(in the case of an extension of time to
file Form 1120-POL), Form 8868, “Ap-
plication for Automatic Extension of
Time to File an Exempt Organization
Return” (in the case of an extension of
time to file any other return listed in
paragraph (a) of this section), or in any
other manner as may be prescribed by
the Commissioner;
* * * * *
(3) Show the full amount properly esti-
mated as tentative tax for the entity for the
taxable year; and
* * * * *
(c) Termination of automatic extension.
The Commissioner may terminate an au-
tomatic extension at any time by mailing
to the entity a notice of termination. The
notice must be mailed at least 10 days
prior to the termination date designated
in such notice. The notice of termination
must be mailed to the address shown on
the application for extension or to the
entity’s last known address. For further
guidance regarding the definition of last
known address, see §301.6212-2 of this
chapter.
(d) Penalties. See sections 6651 and
6652(c) for failure to file a return or fail-
ure to pay the amount shown as tax on the
return.
(e) Coordination with §1.6081-1. No
extension of time will be granted under
§1.6081-1 for filing a return listed in para-
graph (a) of this section until an automatic

February 18, 2020 444 Bulletin No. 2020–8
extension has been allowed pursuant to
this section.
(f) Applicability date. This section ap-
plies to requests for extensions of time
to file returns listed in paragraph (a) of
this section on or after January 30, 2020.
Sections 1.6081-3T and 1.6081-9T (as
contained in 26 CFR part 1, revised April
2019) apply to requests for extensions be-
fore January 30, 2020.
§1.6081-9T [Removed]
Par. 29. Section 1.6081-9T is removed.
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME TAX
AT THE SOURCE
Par. 30. The authority citation for part
31 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 31. Revise paragraph (a)(3) and
add paragraph (g) to §31.6071(a)-1 to read
as follows:
§31.6071(a)-1 Time for filing returns
and other documents.
(a) * * *
(3) Information returns—(i) General
rule. Each information return in respect
of wages as defined in the Federal Insur-
ance Contributions Act or of income tax
withheld from wages as required under
§31.6051-2 must be filed on or before Jan-
uary 31 of the year following the calendar
year for which it is made, except that, if a
tax return under §31.6011(a)-5(a) is filed
as a final return for a period ending prior
to December 31, the information return
must be filed on or before the last day of
the first month following the period for
which the tax return is filed.
(ii) Expedited filing. If an employer who
is required to make a return pursuant to
§31.6011(a)-1 or §31.6011(a)-4 is required
to make a final return on Form 941, or a
variation thereof, under §31.6011(a)-6(a)
(1) (relating to the final return for Feder-
al Insurance Contributions Act taxes and
income tax withholding from wages), the
return which is required to be made under
§31.6051-2 must be filed on or before the
last day of the first month following the pe-
riod for which the final return is filed. The
requirements set forth in this paragraph (a)
(3)(ii) do not apply to employers with re-
spect to employees whose wages are for
domestic service in the private home of the
employer. See §31.6011(a)-1(a)(3).
* * * * *
(g) Applicability date. This section ap-
plies to returns filed on or after January
30, 2020. Section 31.6071(a)-1T (as con-
tained in 26 CFR part 31, revised April
2019) applies to returns filed before Jan-
uary 30, 2020.
§31.6071(a)-1T [Removed]
Par. 32. Section 31.6071(a)-1T is re-
moved.
Sunita Lough,
Deputy Commissioner for Services
and Enforcement.
Approved: November 25, 2019.
David J. Kautter,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on Jan-
uary 29, 2020, 8:45 a.m., and published in the issue
of the Federal Register for January 30, 2020, 85 FR
5323)
Section 42.—Low-Income
Housing Credit
(Also Section 7805; 301.7805-1)
Rev. Rul. 2020-4
ISSUE
For purposes of the low-income hous-
ing credit under § 42 of the Internal Reve-
nue Code (Code), how should the income
limits in the average income test under
§ 42(g)(1)(C) be computed?
L AW
The Tax Reform Act of 1986, Pub. L.
No. 99-514, 100 Stat. 2085 (1986 Act)
created the low-income housing credit un-
der § 42 of the Code.
Section 42(a) provides that the amount
of the low-income housing credit for any
taxable year in the credit period is an
amount equal to the applicable percent-
age of the qualified basis of each qualified
low-income building.
Section 42(c)(1)(A) provides that the
qualified basis of any qualified low-in-
come building for any taxable year is an
amount equal to (i) the applicable fraction
(determined as of the close of the taxable
year) of (ii) the eligible basis of the build-
ing (determined under § 42(d)). Sections
42(c) and 42(d) define applicable fraction
and eligible basis. Section 42(d)(1) and
(2) define the eligible basis of a new build-
ing and an existing building, respectively.
Generally, section 42(c)(2) defines
a qualified low-income building as any
building that is part of a qualified low-in-
come housing project at all times during
the compliance period (the period of 15
taxable years beginning with the first tax-
able year of the credit period). To qualify
as a low-income housing project, one of
the § 42(g) minimum set-aside tests, as
elected by the taxpayer, must be satisfied.
Prior to the enactment of the Consol-
idated Appropriations Act of 2018, Pub.
L. No. 115-141, 132 Stat. 348 (2018 Act),
§ 42(g) set forth two minimum set-aside
tests, known as the 20-50 test and the 40-
60 test. Under the 20-50 test, at least 20
percent of the residential units in the proj-
ect must be both rent-restricted and occu-
pied by tenants whose gross income is 50
percent or less of the area median gross
income (AMGI). Under the 40-60 test, at
least 40 percent of the residential units in
the project must be both rent-restricted
and occupied by tenants whose gross in-
come is 60 percent or less of AMGI.
Section 103 of Division T of the 2018
Act added a third minimum set-aside test,
the average income test, under § 42(g)(1)
(C). Section 42(g)(1)(C)(i) provides that, a
project meets the minimum requirements
of the average income test if 40 percent
or more (25 percent or more in the case
of a project located in a high cost housing
area) of the residential units in the project
are both rent-restricted and occupied by
tenants whose income does not exceed the
imputed income limitation designated by
the taxpayer with respect to the respective
unit.
Section 42(g)(1)(C)(ii) provides spe-
cial rules relating to the income limitation.
Specifically, the taxpayer must designate
the imputed income limitation for each
unit. The designated imputed income lim-
itation of any unit must be 20, 30, 40, 50,
60, 70, or 80 percent of AMGI. The av-

Bulletin No. 2020–8 445 February 18, 2020
erage of the designated imputed income
limitations must not exceed 60 percent of
AMGI.
Under § 42(g), once a taxpayer elects to
use a particular set-aside test, that election
is irrevocable. Section 42(g)(4) provides
generally that § 142(d)(2) applies for pur-
poses of determining whether any project
is a qualified low-income housing project
and whether any unit is a low-income unit.
Section 142(d)(2)(B) provides that
the income of individuals and AMGI is
determined in a manner consistent with
determinations of lower income families
and AMGI under Section 8 of the United
States Housing Act of 1937 (Section 8)
or, if the Section 8 program is terminated,
under the program as in effect immediate-
ly before the termination. Determinations
under the preceding sentence include ad-
justments for family size.
1
In determining eligibility for various
aspects of the Section 8 program, the De-
partment of Housing and Urban Develop-
ment (HUD) uses three different principal
income level calculation categories: (1)
low-income; (2) very low-income; and (3)
extremely low-income. Specifically, HUD
sets the low-income limits at 80 percent
of AMGI, the very low-income limits at
50 percent of AMGI, and the extreme-
ly low-income limits at the higher of 30
percent of AMGI or the “Federal Poverty
Level.” See HUD, FY2019 Income Lim-
its, Methodology for Determining
Section 8 Limits at 1 (2019) (hereinafter,
HUD Methodology).
2
In describing the unique role of the
very low-income limits, HUD explains,
“The very low-income limits (usually
based on 50 percent of median incomes)
are the basis of all other income limits,
as they are the best-defined income limits
and have been the subject of specific, lim-
ited legislative adjustments subsequent to
reviews of the HUD calculation method-
ology.” HUD Methodology at 2. Sever-
al of the HUD income limit standards are
intended to have progressive relationships
with respect to other limits and, to ensure
this, unless there is explicit statutory lan-
guage to the contrary, HUD uses the very
low-income limits as the basis for deriv-
ing these limits. Id.
The conference committee report for
the 1986 Act states that HUD’s AMGI
as adjusted by family size serves as the
base for computing the income limits of §
42(g). See H.R. Rep. No. 99-841, 1986-3
C.B. Vol. 2. The report provides further,
in part, that, for purposes of the then-ex-
isting set-aside tests (the 20-50 and 40-60
tests), for areas with unusually low fam-
ily income or high housing costs relative
to family income, adjustments should be
made in a manner consistent with determi-
nations of very low-income families and
AMGI under Section 8. Id.
Rev. Rul. 89-24, 1989-1 C.B. 24 (as
modified and superseded in part by Rev.
Rul. 94-57, 1994-2 C.B. 5 for the limited
purpose of permitting taxpayers to rely on
a list of income limits released by HUD),
provides the manner in which to properly
compute the income limits applicable un-
der § 42 with respect to the 20-50 and 40-
60 tests. The income limits are computed
based on the income limits of the very
low-income families under Section 8, as
adjusted by family size. This is consistent
with the legislative history’s reference to
HUD’s very low-income limits.
ANALYSIS AND HOLDING
Consistent with the holding in Rev.
Rul. 89-24, the Internal Revenue Service
(Service) has required that HUD’s deter-
minations for very low-income families
be used in calculating the low-income
housing credit income limits of 50 per-
cent and 60 percent of AMGI. In adding
the average income test, Congress did
not indicate that a different HUD income
level calculation category should be used,
and therefore, this revenue ruling contin-
ues to use HUD’s determinations for very
low-income families.
Moreover, for purposes of Section 8,
HUD makes numerous, additional ad-
justments to arrive at the low-income
(80 percent) and extremely low-income
(30 percent) determinations. See HUD
Methodology at 2. Those adjustments
may be irrelevant to the overall structure
of the low-income housing credit. Addi-
tionally, when HUD seeks for its income
limit determinations to have a progressive
relationship with respect to other limit
determinations, HUD bases its income
limit calculations on the very low-income
limits. Similarly, because § 42(g)(1)(C)
(ii)(II) requires computing an average of
the income limits, the relationship of all of
the limits under the average income set-
aside should be preserved and uniformly
incremental. Therefore, these income lim-
its should be determined by computing
them all from the same basis, that is, from
HUD’s very low-income limits.
For these reasons, this revenue ruling
holds that HUD’s very low-income cal-
culation, as adjusted by family size and
consistent with the methods provided
in Rev. Rul. 89-24, is to be used as the
basis for determining the full range of
income limits under the average-income
set-aside. As described in Rev. Rul. 89-
24, the income limits for the very low-in-
come families for purposes of Section
8 are computed and listed according to
family size by HUD. HUD computes and
lists these limits for metropolitan areas
(some Core Based Statistical Areas (CB-
SAs) as defined by the Office of Man-
agement and Budget (OMB) and some
HUD-defined components of OMB-de-
fined CBSAs)
3
and for nonmetropolitan
counties of the United States and Puerto
Rico. HUD also computes and releases
income limits for Guam, the Virgin Is-
lands, American Samoa, and the North-
ern Mariana Islands.
For the average income test under
§ 42(g)(1)(C), the 20, 30, 40, 50, 60, 70,
and 80 percent of AMGI income limita-
tions must be calculated as follows—
Twenty (20) percent limit: 40 percent
or less of the income limit for a very
low-income family of the same size.
Thirty (30) percent limit: 60 percent or
less of the income limit for a very low-in-
come family of the same size.
1
For descriptions of the Department of Housing and Urban Development’s (HUD’s) determinations of income limits, see HUD, FY2019 Income Limits, Frequently Asked Questions
(2019), https://www.huduser.gov/portal/datasets/il/il19/FAQs_19.pdf, and HUD, Assessment of Small Area Median Family Income Estimates (2018), https://www.huduser.gov/portal/
sites/default/files/pdf/Assessment-of-Small-Area-Median-Family-Income-Estimates.pdf.
2
https://www.huduser.gov/portal/datasets/il/il19/IncomeLimitsMethodology-FY19.pdf.
3
HUD identifies Core Based Statistical Areas (CBSAs) with the “Metropolitan Statistical Area (MSA)” designation, and HUD-defined metropolitan areas as “HUD Metropolitan Fair Market
Rent Areas (HMFAs).” The set of CBSAs and HMFAs together identify the complete list of OMB-defined metropolitan areas.

February 18, 2020 446 Bulletin No. 2020–8
Forty (40) percent: 80 percent or less
of the income limit for a very low-income
family of the same size.
Fifty (50) percent: equal to or less than
the income limit for a very low-income
family of the same size.
Sixty (60) percent: 120 percent or less
of the income limit for a very low-income
family of the same size.
Seventy (70) percent limit: 140 per-
cent or less of the income limit for a very
low-income family of the same size.
Eighty (80) percent limit: 160 per-
cent or less of the income limit for a very
low-income family of the same size.
As provided by Rev. Rul. 94-57, 1994-
2 C.B. 5, a list of income limits released
by HUD may be relied upon until 45 days
after HUD releases a new list of income
limits, or until HUD’s effective date for
this new list, whichever is later.
EFFECT ON OTHER REVENUE
RULINGS
Rev. Rul. 89-24, as modified and su-
perseded by Rev. Rul. 94-57 in part, is
amplified.
PROSPECTIVE APPLICATION
Pursuant to § 7805(b)(8), the applica-
tion of this revenue ruling is modified to
the extent provided below:
(1) If—
(A) The taxpayer submitted a docu-
ment to a State or local housing credit
agency (Agency) as part of, or in connec-
tion with, the taxpayer’s request for an al-
location of a housing credit dollar amount
for a project,
(B) The request unambiguously indi-
cated that the taxpayer intended to elect
the average-income set-aside, the request
unambiguously indicated that a specific
dollar amount was an expected designated
imputed income limitation for a unit in the
project, and that dollar amount is higher
than the amount determined under this
revenue ruling,
(C) The taxpayer’s treatment of that
amount in this manner was reasonable,
and
(D) Prior to February 18, 2019, the
Agency allocated a housing credit amount
in response to that request,
then, consistent with the second sentence
of § 42(g)(2)(A), for that taxpayer, for the
remaining compliance period of the build-
ing that contains the relevant unit, the dol-
lar amount for the income limits under this
revenue ruling for that unit is not less than
that reasonable amount.
(2) If—
(A) Paragraph (1) of this prospective
application section of this revenue ruling
applies to a project,
(B) When a tenant began occupancy of
a unit in the project, the tenant’s income
exceeded the amount that would otherwise
be required by this revenue ruling, but
(C) The tenant’s income at that time did
not exceed the amount that paragraph (1)
permits to be used for that unit,
then, for purposes of § 42(g)(2)(D), the
tenant is treated as having initially met the
income limitation for the unit.
Except as expressly provided in this
prospective application section of this
revenue ruling, both a low-income hous-
ing project that has elected the average
income test and tenants in such a project
must meet all other rules and requirements
of § 42.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Dillon Taylor of the Office of
Associate Chief Counsel (Passthroughs &
Special Industries). For further informa-
tion regarding this revenue ruling, contact
Mr. Taylor at (202) 317-4137 (not a toll-
free number).

Bulletin No. 2020–8 447 February 18, 2020
Part III
26 CFR 601.201: Rulings and determination letters.
Rev. Proc. 2020-8
SECTION 1. PURPOSE
This revenue procedure modifies Reve-
nue Procedure 2020-5, 2020-1 I.R.B. 241,
by updating the procedures for Exempt
Organizations determination letters with
respect to the electronically submitted
Form 1023, Application for Recognition
of Exemption Under Section 501(c)(3) of
the Internal Revenue Code, which is the
application used to apply for recognition
of exemption as an entity described in §
501(c)(3). The modifications to Rev. Proc.
2020-5 made by this revenue procedure
provide that the electronic submission
process is the exclusive means of submit-
ting a completed Form 1023, except for
submissions eligible for the 90-day tran-
sition relief provided in section 4 of this
revenue procedure.
SECTION 2. CHANGED
SUBMISSION PROCESS
The IRS has revised and updated Form
1023 and provided for it to be electroni-
cally submitted at www.pay.gov. The elec-
tronic submission process for Form 1023
replaces the paper submission process for
Form 1023 after January 31, 2020, subject
to the transition relief provided in section
4 of this revenue procedure. Section 3
of this revenue procedure modifies Rev.
Proc. 2020-5 to set forth procedures for is-
suing determination letters in response to
electronically submitted Form 1023 appli-
cations. Unless otherwise modified in this
revenue procedure, the provisions of Rev.
Proc. 2020-5 continue to apply.
SECTION 3. MODIFICATIONS TO
REVENUE PROCEDURE 2020-5
.01 Section 4.01 of Rev. Proc. 2020-5
is modified to read as follows:
.01 This section explains the general
instructions for requesting determination
letters. However, certain procedures do
not apply to requests submitted on Form
1023, Application for Recognition of Ex-
emption Under Section 501(c)(3) of the
Internal Revenue Code or Form 1023-EZ,
Streamlined Application for Recognition
of Exemption Under Section 501(c)(3) of
the Internal Revenue Code, as indicat-
ed in this revenue procedure or in forms
and their instructions. In addition to these
general instructions, specific procedures
apply to requests submitted by letter (as
described in section 5), applications for
recognition of exemption from Federal
income tax under § 501 or § 521 (as de-
scribed in section 6), and to requests for
determinations submitted on Form 8940,
Request for Miscellaneous Determination
(as described in section 7).
.02 Paragraph (1) of section 4.02 of
Rev. Proc. 2020-5 is modified to read as
follows:
(1) Form 1023 application. An orga-
nization seeking recognition of exemption
under § 501(c)(3) (including an organiza-
tion that is additionally seeking a deter-
mination that it is described in § 501(e),
(f), (k), (n), (q), or (r)) must electronically
submit a completed Form 1023 at www.
pay.gov. In the case of an organization
that provides credit counseling services,
see § 501(q). In the case of an organiza-
tion that is a hospital and is seeking ex-
emption under § 501(c)(3), see § 501(r).
Notwithstanding the foregoing, eligible
organizations may seek recognition of ex-
emption under § 501(c)(3) by submitting a
completed Form 1023-EZ, as described in
section 6.06(2) of this revenue procedure,
rather than by submitting Form 1023. For
additional information about the electron-
ic submission process, refer to Form 1023
and its Instructions.
.03 The first paragraph of section
4.09(1) of Rev. Proc. 2020-5 is modified
to read as follows:
(1) Procedures for requesting expe-
dited handling. Except for a request on
the electronically submitted Form 1023,
the request for expedited handling must
be made in writing, preferably in a sepa-
rate letter sent with, or soon after filing,
the request for the determination letter. If
the request is not made in a separate letter,
then the letter in which the determination
letter request is made should say, at the top
of the first page: “Expedited Handling Is
Requested. See page ___ of this letter.”
In the case of the electronically sub-
mitted Form 1023, a request for expedited
handling must be indicated on the form
and a supporting written statement must
be submitted as an attachment with the
completed application.
.04 Section 6.06(1)(a) of Rev. Proc.
2020-5 is modified to read as follows:
(1) A completed application (other than
a Form 1023-EZ), including a letter appli-
cation, is one that:
(a) is signed or, in the case of a Form
1023, is electronically signed by an autho-
rized individual under penalties of perjury
(see sections 4.04 and 4.06 of this revenue
procedure);
.05 Paragraph (4) of section 6.08 of
Rev. Proc. 2020-5 is modified to read as
follows:
(4) When an application is not sub-
mitted within 27 months of formation.
An organization that otherwise meets the
requirements for tax-exempt status and
the issuance of a determination letter that
does not meet the requirements for rec-
ognition from date of formation will be
recognized from the postmark date of its
application or the electronic submission
date of its Form 1023 or Form 1023-EZ,
as applicable.
.06 Paragraph (1) of section 14.06 of
Rev. Proc. 2020-5 is modified to read as
follows:
(1) Payment of user fees for appli-
cations of recognition of exemption on
Form 1023 or Form 1023-EZ. User fees
for applications for recognition of exemp-
tion on Form 1023 or Form 1023-EZ must
be paid through www.pay.gov.
.07 Section 15.01(1)(a) of Rev. Proc.
2020-5 is modified to read as follows:
(1) The following types of requests and
applications handled by the EO Determi-
nations Office should be sent to the Inter-
nal Revenue Service Center, at the address
in section 15.01(2):
(a) applications for recognition of tax
exemption on Form 1024, Form 1024-A,
and Form 1028;
.08 Section 15.02 of Rev. Proc. 2020-5
is modified to read as follows:
.02 Applications for recognition of ex-
emption on Form 1023 and Form 1023-
EZ are handled by the EO Determinations
Office but must be submitted electronical-

February 18, 2020 448 Bulletin No. 2020–8
ly online at www.pay.gov. Paper submis-
sions of Form 1023 or Form 1023-EZ will
not be accepted.
.09 Paragraph (4) of Appendix A of
Rev. Proc. 2020-5 is modified to read as
follows:
(4) Canadian registered charities
Note: In accordance with the income
tax treaty between the United States and
Canada, and pursuant to a mutual arrange-
ment between the competent authorities
of the two countries, Canadian registered
charities are automatically recognized as
exempt under § 501(c)(3) without filing
an application for exemption. For details,
see Notice 99-47, 1999-2 C.B. 391. There-
fore, no user fee is required when a Cana-
dian registered charity submits a written
request to be listed in Tax Exempt Orga-
nization Search database for organizations
eligible to receive tax-deductible chari-
table contributions (Pub. 78 data), or for
a determination on its private foundation
status. For additional information about
the submission process, refer to the Form
1023 Instructions.
SECTION 4. TRANSITION RELIEF
.01 Except as provided in section 4.02,
an organization seeking recognition of
tax exempt status under § 501(c)(3) using
Form 1023 must electronically submit the
form and user fee online at www.pay.gov.
.02 The Internal Revenue Service
will accept for processing a completed
paper Form 1023 accompanied by the
correct user fee, as described in Rev.
Proc. 2020-5, without applying the
modifications of this revenue procedure,
if the submission of the Form 1023 is
postmarked on or before the date that is
90 days after the effective date of this
revenue procedure.
SECTION 5. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2020-5 is modified.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective Jan-
uary 31, 2020, the date this revenue proce-
dure was announced by news release.
SECTION 7. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Patrick Sternal of the Office
of Associate Chief Counsel (Employee
Benefits, Exempt Organizations, and Em-
ployment Taxes). For further information
regarding this revenue procedure contact
Mr. Sternal at (202) 317-5800 (not a toll-
free number).

Bulletin No. 2020–8 i February 18, 2020
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:
Amplified describes 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).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is 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 and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings 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.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes 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
period 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
superseded describes 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 previous-
ly 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.
Supplemented is 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.
Suspended is 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 cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
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.

February 18, 2020 ii Bulletin No. 2020–8
Numerical Finding List
1
Bulletin 2020–8
Announcements:
2020-1, 2020-5 I.R.B. 552
Notices:
2020-1, 2020-2 I.R.B. 290
2020-2, 2020-3 I.R.B. 327
2020-3, 2020-3 I.R.B. 330
2020-4, 2020-4 I.R.B. 380
2020-5, 2020-4 I.R.B. 380
2020-6, 2020-7 I.R.B. 411
2020-7, 2020-7 I.R.B. 411
2020-8, 2020-7 I.R.B. 415
2020-9, 2020-7 I.R.B. 417
Proposed Regulations:
REG-107431-19, 2020-3 I.R.B. 332
REG-122180-18, 2020-3 I.R.B. 342
REG-100956-19, 2020-4 I.R.B. 383
REG-125710-18, 2020-5 I.R.B. 554
Treasury Decisions:
9886, 2020-2 I.R.B. 285
9887, 2020-3 I.R.B. 302
9888, 2020-3 I.R.B. 306
9891, 2020-8 I.R.B. 419
9892, 2020-8 I.R.B. 439
Revenue Procedures:
2020-1, 2020-01 I.R.B. 1
2020-2, 2020-01 I.R.B. 107
2020-3, 2020-01 I.R.B. 131
2020-4, 2020-01 I.R.B. 148
2020-5, 2020-01 I.R.B. 241
2020-7, 2020-01 I.R.B. 281
2020-9, 2020-02 I.R.B. 294
2020-10, 2020-02 I.R.B. 295
2020-11, 2020-06 I.R.B. 406
2020-8, 2020-08 I.R.B. 447
Revenue Rulings:
2020-1, 2020-3 I.R.B. 296
2020-2, 2020-3 I.R.B. 298
2020-3, 2020-3 I.R.B. 409
2020-4, 2020-4 I.R.B. 444
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

Bulletin No. 2020–8 iii February 18, 2020
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2020–8
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

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