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July 2002 Plain Language Regulations

Electing Mark to Market
Electing Mark to Market for Marketable Stock; Prior to the enactment of the mark to market election for passive foreign investment companies (PFICs), U.S. holders of PFIC stock have been subject to two alternative sets of inclusion rules: the interest charge rules and the qualified electing fund (QEF) rules. Congress recognized that the interest charge rules are a substantial source of complexity for PFIC shareholders and that some shareholders would prefer the current inclusion method afforded by the QEF election, but are unable to make the election because they cannot obtain the necessary information from the PFIC. Accordingly, Congress enacted the mark to market election to provide shareholders with an alternative method to include income currently with respect to their interests in a PFIC by allowing PFIC shareholders to elect to mark to market their PFIC stock that qualifies as marketable stock. The mark to market election is available to United States persons and controlled foreign corporation (CFCs) that own, or are treated as owning, marketable stock in a PFIC. The proposed regulations provide shareholders with procedures in which they can elect to mark to market their marketable PFIC stock. REG-112306-00. Published July 31, 2002.
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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 proposed 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 clarify the coordination of the cost sharing rules with the arm’s length standard. REG-106359-02. Published July 29, 2002. Correction notice August 15, 2002.
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Regulations Governing Practice Before the IRS
These final regulations modify the regulations governing practice before the Internal Revenue Service (Circular 230). These regulations affect individuals who are eligible to practice before the IRS. The final regulations modify and provide guidance with respect to the standards of practice before the Internal Revenue Service. TD 9011. Published July 26, 2002.
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Information Reporting Requirements
These final regulations relate to the information reporting requirements under sections 6041 and 6045 of the Internal Revenue Code. The regulations, under section 6041, provide information reporting requirements for escrow agents and other persons making payments on behalf of another person, clarify who is the payee for information reporting purposes if a check or other instrument is made payable to joint payees, and clarify the amount to be reported. The regulations, under section 6045, remove investment advisors from the list of exempt recipients. TD 9010. Published July 26, 2002.
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Taxpayer Identifying Numbers on Submissions
These proposed regulations will require the use of taxpayer identifying numbers on submissions under sections 897 and 1445. The proposed regulations are necessary to properly identify foreign taxpayers for whom submissions are made for the reduction or elimination of tax under sections 897 and 1445. They also address miscellaneous items such as the amendment to section 1445(e)(3) under the Small Business Job Protection Act of 1996. REG-106876-00. Published July 26, 2002.
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Taxable Years of Partner and Partnership
Taxable Years of Partner and Partnership; Foreign Partners: These final regulations provide guidance addressing when a partnership must consider the taxable year of a foreign partner in determining its own taxable year. They also finalize temporary regulations relating to a partnership's taxable year. TD 9009. Published July 23, 2002.
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Guidance On Subpart F Relating to Partnerships
These proposed regulations provide guidance under subpart F relating to partnerships. The regulations are necessary in order to clarify the treatment of a controlled foreign corporation's (CFC) distributive share of partnership income under subpart F. They will affect United States shareholders of CFC's that have an interest in a partnership. TD 9008. Published July 23, 2002.
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Compromise of Tax Liabilities
The purpose of these final regulations is to provide procedures for the compromise of Internal Revenue tax and to provide expanded compromise authority for the IRS. The regulations will permit compromise of liabilities when there is doubt as to the amount of the liability owed, when there is doubt whether the full amount of the tax can be collected, and when compromise would promote effective tax administration. The IRS may compromise to promote effective tax administration when it determines that collection of the full amount of the tax liability would create economic hardship or that compelling public policy or equity considerations identified by the taxpayer provide a sufficient basis for compromise. TD 9007. Published July 23, 2002. Correction Notice August 20, 2002.
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Guaranteed Annuity and Lead Unitrust Interests
A charitable lead trust (also called a charitable income trust) is a trust in which an income (or lead) interest is paid to one or more charitable beneficiaries for a period of time and the remainder either goes to the person who created the trust or to one or more noncharitable (private) beneficiaries when the trust terminates. These proposed regulations eliminate the requirement that the charitable interest can not begin after a private interest that is in the form of a guaranteed annuity or unitrust interest. REG-115781-01. Published July 23, 2002.
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Returned or Recharacterized IRA Contributions
These proposed regulations provide a new method to be used for calculating the net income attributable to IRA (including Roth IRA) contributions that are distributed as returned contributions pursuant to Code section 408(d)(4) or recharacterized pursuant to section 408A(d)(6). When finalized, these regulations will affect individuals who maintain IRS's and businesses that are IRA trustees. REG-124256-02. Published July 23, 2002.
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Refund of Mistaken Contributions
Refunds of mistaken contributions and withdrawal liability payments; These final regulations explain the requirements for the return of employer contributions or withdrawal liability payments made to a multiemployer pension plan due to a mistake of fact or law. The regulations affect multiemployer pension plans and employers that make contributions to these plans, and apply for refunds made after July 22, 2002. TD 9005. Published July 22, 2002.
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Net Gift Treatment Under Section 2519
These proposed regulations provide guidance to determine the amount of a gift when a donee makes a gift, during his life, of qualified terminable interest property for which a deduction was previously taken under section 2056(b)(7) or section 2523(f). Under these proposed regulations, the amount of the gift is reduced by the amount of the gift tax that the donee may recover under section 2207A(b). They also provide that the donee makes an additional gift if the donee fails to exercise the right to recover the gift tax. REG-123345-01. Published July 22, 2002.
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Notice to Interested Parties
These final regulations sets forth new standards for providing the notice to interested parties in connection with an advance determination of the qualified status of a retirement plan. They apply to retirement plan sponsors, plan participate and other interested parties with respect to an application for a determination letter, and certain representatives of interested parties. TD 9006. Published July 19, 2002.
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Real Estate Mortgage Investment Conduits
These regulations provide rules for obtaining safe harbor treatment for the transfer of a noneconomic residual interest in a Real Estate Mortgage Investment Conduit (REMIC). In general, a transfer of a noneconomic residual interest is disregarded for tax purposes if a significant purpose (a wrongful purpose) of that transfer is to enable the transferor to impede the assessment or collection of tax. Under a safe harbor the transferor is presumed not to have a wrongful purpose if it meets an investment requirement, two representation requirements, and satisfies either the formula test or the asset test. TD 9004. Published July 19, 2002.
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Relief From Joint and Several Liability
These final regulations relate to married individuals filing joint returns who seek relief from joint and several liability. They provide guidance on the operation of section 6015 of the Internal Revenue Code, which was added by the IRS Restructuring and Reform Act of 1998 to replace former section 6013(e) by providing new and expanded means for a spouse to obtain relief from joint and several liability. TD 9003. Published July 18, 2002.
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Ten-or-More Employer Plans
An employer's deduction for contributions to a welfare benefit fund is generally subject to special rules and limitations. An exception is provided for contributions to a welfare benefit fund that is part of a qualifying ten-or-more employer plan. These proposed regulations explain the requirements a plan must meet to be considered a ten-or-more employer plan that qualifies for the exception. REG-165868-01. Published July 11, 2002.
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Split-Dollar Life Insurance Arrangements
These proposed regulations relate to the income, employment, and gift taxation of split-dollar life insurance arrangements. They provide needed guidance to persons who enter into split-dollar life insurance arrangements, by providing two mutually exclusive regimes, the economic benefit regime and the loan regime, to tax split-dollar life insurance arrangements for Federal income, employment, and gift tax purposes. REG-164754-01. Published July 9, 2002.
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Incorrect Taxpayer Identification Numbers
These proposed regulations clarify the method of determining whether a payer has received a second IRS notice that a payee's taxpayer identification number (TIN) is incorrect, for purposes of backup withholding. The proposed regulations provide that multiple incorrect TIN notices received with respect to the same tax year count as one notice, even if they are received in different calendar years. The proposed regulations similarly provide that an information return filer need not resolicit a payee's TIN in response to a penalty notice based on an incorrect payee TIN, if a notice was already received with respect to the same tax year. REG-116644-01. Published July 3, 2002.
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Page Last Reviewed or Updated: 17-Aug-2012