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May 2002 Plain Language Regulations

Cost Recovery Under Forecast Method
These proposed regulations set forth rules for using the income forecast method of depreciation. This method may be used to depreciate the cost of producing or acquiring an interest in motion pictures, television shows, sound recordings, books, theater productions, copyrights, and patents. Under the method, the deduction in a particular year is based upon the ration of the income from the property during that year to the total expected income from the property over a defined period. If the estimate of total income from the property is incorrect, the taxpayer may have to use a recalculation mechanism. REG-103823-99. Published May 31, 2002.
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Loss Limitation Rules
These temporary regulations clarify and amend certain aspects of the temporary regulations relating to the deductibility of losses recognized on dispositions of subsidiary stock by members of a consolidated group. The regulations apply to corporations filing consolidated returns, both during and after the period of affiliation, and also affect purchasers of the stock of members of a consolidated group. REG-123305-02. (Cross-reference to REG-102740-02). Published May 31, 2002.
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Loss Limitation Rules
These temporary regulations clarify and amend certain aspects of the temporary regulations relating to the deductibility of losses recognized on dispositions of subsidiary stock by members of a consolidated group. The regulations apply to corporations filing consolidated returns, both during and after the period of affiliation, and also affect purchasers of the stock of members of a consolidated group. TD 8998. Published May 31, 2002.
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Carryback of Consolidated Net Operating Losses
The Job Creation and Worker Assistance Act of 2002 extended to five years the net operating loss carryback for losses incurred in any taxable years ending in 2001 and 2002. These regulations provide taxpayers with an election to waive the 5-year carryback period with respect to certain acquired members. TD 8997. Published May 31, 2002. Correction Notice July 9, 2002.
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Carryback of Consolidated Net Operating Losses
The Job Creation and Worker Assistance Act of 2002 extended to five years the net operating loss carryback for losses incurred in any taxable years ending in 2001 and 2002. These regulations provide taxpayers with an election to waive the 5-year carryback period with respect to certain acquired members. REG-122564-02. Published May 31, 2002.
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Gross Proceeds Payments to Attorneys
The IRS is re-issuing proposed regulations relating to the reporting of payments of gross proceeds made to attorneys in connection with legal services. These proposed regulations reflect changes to the law made by the Taxpayer Relief Act of 1997. The regulations will affect attorneys who receive payments of gross proceeds on behalf of their clients, and certain payors (defendants in lawsuits and their insurance companies and agents) that in the course of their trades or businesses make payments to these attorneys. REG-126024-01. Published May 17, 2002.
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Changes in Accounting Periods
Taxable income must be computed on the basis of a taxpayer's taxable year. The term "taxable year" generally means the taxpayer's annual accounting period. These final regulations provide guidance as to the annual accounting period a taxpayer may adopt and use. They also provide guidance on how a taxpayer can obtain the approval of the Commissioner to change an annual accounting period. TD 8996. Published May 17, 2002.
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Diesel Fuel; Blended Taxable Fuel
An excise tax is imposed on certain transactions involving gasoline, diesel fuel, and kerosene. These proposed regulations modify the definition of diesel fuel. They also modify the rules for taxing blended gasoline, diesel fuel, and kerosene. REG-106457-00. Published May 16, 2002.
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Mid-contract Change in Taxpayer
Changes in Parties to a Long-term Contract: Generally, manufacturing and construction contracts not completed within the taxable year they are entered into are considered “long-term contracts.” Special rules are provided in the Internal Revenue Code and regulations for determining the Federal income tax consequences of long-term contracts. Several alternative methods of accounting for long-term contracts are set forth in the regulations, and the availability to a taxpayer of any particular method often depends upon the nature of the taxpayer's business and the nature of the contract. These regulations explain the Federal income tax treatment of a change in taxpayer prior to the completion of a long-term contract. TD 8995. Published May 15, 2002.
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Electing Small Business Trust
These final regulations regarding electing small business trusts and certain tax exempt trusts as S corporation shareholders, and provide guidance on the federal tax requirements for an Electing Small Business Trust (ESBT) including how to make an ESBT election. An ESBT is a permitted shareholder of an S corporation. The regulations also provide that an ESBT and certain tax exempt trusts that are shareholders in an S corporation will not be treated as deferral entitles and therefore an S corporation with such shareholders will be permitted to elect to use a taxable year other that the required taxable year. The regulations generally apply for taxable years of ESBTs beginning on or after May 14, 2002. However, portions of the regulations regarding the taxation of ESBTs apply for taxable years of ESBT that end on and after December 29, 2000. TD 8994. Published May 14, 2002.
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Definition of Foreign Personal Holding Co
Section 954(c)(1)(C) of the Internal Revenue Code provides that foreign personal holding company income (FHPCI) of a controlled foreign corporation (a CFC) generally includes net gains from commodities transactions. However, gains and losses from certain “bona fide hedging transactions” entered into by a producer, processor, merchant or handler of commodities (a PPMH) are not FHPCI. The proposed regulations would provide that a CFC that regularly uses commodities in a manufacturing, construction, utilities, or transportation business is a PPMH. Similarly, section 954(c)(1)(D) provides a general rule that the net currency gains for certain transactions are FPHCI. Currency gain or loss related to the CFC's business needs are excluded from this rule. Regulations currently provide that a transaction in dealer property by a CFC that is a dealer in such property is related to the CFC's business needs. The proposed regulations would provide that interest-bearing liabilities of a CFC are dealer property if the liabilities are denominated in a currency that manages the CFC's currency risk with respect to its dealer property. REG-154920-01. Published May 13, 2002.
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Eligible Deferred Compensation Plans
These proposed regulations provide guidance on compensation deferred under eligible section 457(b) deferred compensation plans state and local government and tax-exempt entities. The regulations reflect the changes made to section 457 by the Tax Reform Act of 1986, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the Economic Growth and Tax Relief Reconciliation Act of 2001, the Job Creation and Worker Assistance Act of 2002 and other legislation, as well as makes various technical changes and clarifications to the existing final regulations on many discrete issues. REG-105885-99. Published May 8, 2002.
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Debt Instruments with Original Issue Discount
Income earned on an annuity contract is generally not recognized by the holder until there is a distribution on the contract. If, however, the annuity contract is a debt instrument to which the original issue discount (OID) provisions apply, the holder generally must recognize income on the contract currently as OID. Annuity contracts issued by an insurance company subject to tax under subchapter L are excluded from the definition of a debt instrument if certain other requirements are met. These final regulations explain when a foreign insurance company would be considered subject to tax under subchapter L so as to be eligible for the exception from the OID rules. TD 8993. Published May 7, 2002.
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Page Last Reviewed or Updated: 17-Aug-2012