Internal Revenue Bulletin: 2006-21
May 22, 2006
Table of Contents
Down payment assistance; home buyers. This ruling sets forth the applicable rules and standards for determining whether organizations that provide down payment assistance to home buyers qualify as tax-exempt charities. In addition, the ruling addresses whether assistance received for a down payment is treated as a gift and included in a home buyer’s basis.
Final regulations under section 1502 of the Code relate to intercompany transactions. Section 1.1502-13(c)(7)(ii), Example 13, illustrates the treatment of manufacturer incentive payments. This example relies, in part, upon the premise that manufacturer incentive payment is an ordinary and necessary business expense deductible under section 162. Because this treatment is now under reconsideration (see Rev. Rul. 2005-28, 2005-19 I.R.B. 997), these final regulations remove and reserve this example.
This notice announces that the Treasury Department and the Service will amend the regulations under section 883 of the Code. The regulations exclude from gross income the income derived from the international operation of a ship or ships or aircraft by a corporation organized in a foreign country that grants an equivalent exemption to U.S. corporations. To receive this benefit, a foreign corporation must also satisfy one of three ownership tests. One such test applies to a controlled foreign corporation (CFC), as defined in section 957(a). To satisfy the CFC ownership test, section 1.883-3(a) requires a CFC to meet an “income inclusion test,” as defined in section 1.883-3(b). After the repeal of section 954(a)(4) and (f) (foreign base company shipping income provisions) by the American Jobs Creation Act (AJCA), it is unclear how to apply the income inclusion test. This notice announces that Treasury and the IRS will amend section 1.883-3(b) in light of the repeal of section 954(a) and (f) and provide a new “qualified U.S. person ownership test” that is clear and simple to apply and on which taxpayers may rely until the regulations are amended.
This notice provides guidance relating to amendments made by section 415 of the American Jobs Creation Act of 2004 (AJCA), which affect the treatment of certain income and assets related to the leasing of aircraft or vessels in foreign commerce. The Treasury Department and the Service intend to amend the regulations under sections 367(a), 954, and 956 to address the amendments made by section 415 of the AJCA and this notice. Until regulations reflecting these changes are issued, taxpayers may rely upon this notice. This notice also solicits comments on whether any other changes to the regulations under sections 367, 954, and 956 are necessary to implement the purposes of section 415 of the AJCA.
Specifications are set forth for the private printing of paper and laser-printed substitutes for the January 2006 revisions of Form 941, Employer’s QUARTERLY Federal Tax Return, and Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors. This procedure will be reproduced as the next revision of Publication 4436, General Rules and Specifications for Substitute Form 941 and Schedule B (Form 941). Rev. Proc. 2005-21 superseded.
This document withdraws proposed regulations (REG-131264-04, 2004-2 C.B. 506) under section 1502 of the Code regarding intercompany transactions. The regulations provided additional examples in section 1.1502-13(c)(7)(ii), Example 13, to clarify the proper treatment of manufacturer incentive payments. One of these examples relied, in part, upon the premise that the manufacturer incentive payment is an ordinary and necessary business expense deductible under section 162. Because this treatment is now under reconsideration (see Rev. Rul. 2005-28, 2005-19 I.R.B. 997), the proposed regulations are withdrawn.
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