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August 2003 Plain Language Regulations

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The following is a list of tax regulations published in August 2003:

Treatment of Certain Contingent Payment Debt Instruments
Regulations were previously issued that determine the calculation of interest income or expense for a holder and issuer of (U.S. dollar denominated) contingent payment debt instruments, e.g. debt instruments in which the amount of one or more payments are determined based on fluctuations in the price of a commodity.  This proposed regulation determines the treatment of debt instruments in which one or more payments are denominated in a currency other than the taxpayer's functional currency, i.e., generally, currencies other than the U.S. dollar, and which contain a contingency (other than the fact that the debt instrument is denominated in foreign currency).  In addition, this regulation applies to debt instruments in which payments are denominated in, or determined by reference to, more than one currency. 
REG-106486-98.  Published August 29, 2003.
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Compensatory Stock Options
Controlled participants in qualified cost sharing arrangements are required to share all costs related to the development of intangibles in the same proportion as they share the reasonably anticipated benefits attributable to the intangible development.  These final regulations clarify that stock based compensation is taken into account in determining a controlled participant's costs under the qualified cost sharing arrangement.  They also provide rules for measuring the cost associated with stock based compensation; clarify that stock based compensation is appropriately taken into account as a comparability factor for purposes of the comparable profits method; and provide rules that coordinate the cost sharing rules with the arm's length standard. TD 9088.  Published August 26,2003.
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Exclusions From Gross Income of Foreign Corporations
These final regulations contain rules concerning when a foreign corporation engaged in the international operation of ships or aircraft may exempt its U.S. source income from Federal income tax.  The rules apply to a corporation organized in a foreign country that grants a reciprocal exemption to U.S. corporations, if the foreign corporation satisfies certain ownership requirements.  TD 9087.  Published August 26, 2003.
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Property Exempt From Levy
This proposed regulation revises the current Treasury Regulation 301.6334-1 to include a discussion of the specific procedures required for bringing suit seeking judicial approval of a principal residence levy.  This was a statutory approval requirement added by the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98).  It also revises the current regulation to incorporate other changes from RRA 98, such as new approval requirements for the seizure of certain business assets.  REG-140378-01.  Published August 19, 2003.
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User Fees for Processing Offers to Compromise
These final regulations impose a $150.00 user fee for the processing of offers to compromise effective November 1, 2003.  The charging of use fees implements the Independent Offices Appropriations Act, (31 U.S.C. section 9701).  The user fee does not apply to offers based on doubt as to liability or offers made by low income taxpayers.  The fee will be applied against the amount of the offer or refunded to the taxpayer if the offer is accepted to promote effective tax administration or accepted based on doubt as to collectibility where there has been a determination that, although an amount greater than the amount offered could be collected, collection of more than the amount offered would create economic hardship within the meaning of Treas. Reg. section 301.6343-1.  TD 9086.  Published August 15, 2003.
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Partnership Transactions Involving Long Term Contracts
These proposed regulations describe the tax consequences of contributions of contracts accounted for under a long term contract method of accounting to partnerships.  The regulations also describe the tax consequences of transfers of interest in, and distribution from, partnerships holding these contracts.  As discussed in Notice 2002-37 (2002-23 I.R.B.), these proposed regulations set forth the special rules that apply to these partnership transactions and will be effective for contributions, transfers, and distributions occurring on or after May 15, 2002.  REG-128203-02.
Published August 6, 2003.
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Taxpayer Identification Numbers(TINs) for Foreign Taxpayers
A foreign person is generally taxed on the disposition of a U.S. real property interest and must file a U.S. income tax return reporting the gain on such disposition.  These final regulations require the foreign person to obtain a taxpayer identification number (TIN) for placement on the withholding tax return and other documentation required to be exempt from or reduce the withholding tax on a disposition of a U.S. real property interest.  The regulations are necessary to properly identify foreign taxpayers for which submissions are made for the reduction or elimination of tax under sections 897 and 1445 of the Internal Revenue Code.  TD 9082.  Published August 5, 2003.
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Golden Parachute Payments
The IRS is issuing final regulations concerning parachute payments.  These regulations provide guidance to taxpayers about the denial of a deduction and the imposition of an excise tax on an individual for certain compensatory payments made in connection with a change in control of a corporation.  The regulations are effective for a parachute payment that is contingent on a change in control if the change occurs on or after January 1, 2004.  TD 9083.  Published August 4, 2003.
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Arbitrage and Private Activity Restrictions
Arbitrage and Private Activity Restrictions Applicable to Tax-exempt Bonds Issued by State and local government:  These final regulations amend the arbitrage and private activity restrictions applicable to tax-exempt bonds issued by State and local governments.  The amendments affect issuers of tax-exempt bonds and provide guidance on the definitions of investment-type property and private loan to help issuers comply with the arbitrage and private activity restrictions.  These amendments address certain natural gas and electricity prepayment transactions.  TD 9085.  Published
August 4, 2003.
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