Internal Revenue Bulletin:  2008-14 

April 7, 2008 


Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulation Time and Manner for Electing Capital Asset Treatment for Certain Self-Created Musical Works


Internal Revenue Service (IRS), Treasury.


Notice of proposed rulemaking by cross-reference to temporary regulation.


In this issue of the Bulletin, the IRS is issuing a temporary regulation (T.D. 9379) that provides the time and manner for making an election to treat the sale or exchange of musical compositions or copyrights in musical works created by the taxpayer (or received by the taxpayer from the works’ creator in a transferred basis transaction) as the sale or exchange of a capital asset. The temporary regulation reflects changes to the law made by the Tax Increase Prevention and Reconciliation Act of 2005 and the Tax Relief and Health Care Act of 2006. The temporary regulation affects taxpayers making the election under section 1221(b)(3) of the Internal Revenue Code (Code) to treat gain or loss from such a sale or exchange as capital gain or loss. The text of the temporary regulation also serves as the text of this proposed regulation.


Written or electronic comments and requests for a public hearing must be received by May 8, 2008.


Send submissions to: CC:PA:LPD:PR (REG-153589-06), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-153589-06), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C., or sent electronically via the Federal eRulemaking Portal at (IRS REG-153589-06).


Concerning the proposed regulation, Jamie Kim, (202) 622-4950; concerning submission of comments or requesting a hearing,, (202) 622-7180 (not toll-free numbers).


Background and Explanation of Provisions

Temporary regulation in this issue of the Bulletin amends the Income Tax Regulations (26 CFR Part 1) relating to section 1221(b)(3) of the Internal Revenue Code (Code). The temporary regulation provides rules regarding the time and manner for making an election under section 1221(b)(3) to treat the sale or exchange of certain musical compositions or copyrights in musical works as the sale or exchange of a capital asset. The text of the temporary regulation also serves as the text of this proposed regulation. The preamble to the temporary regulation explains the amendments.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to this regulation, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

Before this proposed regulation is adopted as a final regulation, consideration will be given to any written comments (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:


Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 1.1221-3 is added to read as follows:

§1.1221-3 Time and manner for electing capital asset treatment for certain self-created musical works.

[The text of proposed §1.1221-3 is the same as the text of §1.1221-3T(a) through (d)(1) published elsewhere in this issue of the Bulletin.]

Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.


(Filed by the Office of the Federal Register on February 7, 2008, 8:45 a.m., and published in the issue of the Federal Register for February 8, 2008, 73 F.R. 7503)

Drafting Information

The principal author of these regulations is Jamie Kim of the Office of Associate Chief Counsel (Income Tax & Accounting). However, other personnel from the IRS and Treasury Department participated in their development.

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