November 2004 Plain Language Regulations


Proposed Regulations on Disguised Sales of Partnership Interests
These proposed regulations provide guidance relating to the treatment of transactions between a partnership and its partners as disguised sales of partnership interests between the partners. Under these regulations, a transfer of consideration (including the assumption of a liability) by a purchasing partner to a partnership and a transfer of consideration by the partnership to a selling partner constitute a sale, in whole or in part, of the selling partner's interest in the partnership to the purchasing partner if, based on all the facts and circumstances, the transfer by the partnership would not have been made but for the transfer to the partnership, and, in cases in which the transfers are not made simultaneously, the subsequent transfer is not dependent on the entrepreneurial risks of partnership operations.  In addition, the proposed rules require disclosure of certain transfers and assumptions of liabilities to the Internal Revenue Service.  These regulations affect partnerships and their partners, and are necessary to provide guidance needed to comply with the applicable law.
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Predecessors and Successors of a Distributing or Controlled Corporation
If the requirements of section 355 are met, a corporation may generally distribute the stock of a controlled corporation to its shareholders without recognizing gain or loss.  However, if such a distribution is part of a plan that includes certain acquisitions of stock of either the distributing or controlled corporation, the distributing corporation will generally be taxed on the distribution of stock under section 355(e).  This is generally also the case if certain acquisitions of a predecessor or successor of the distributing or controlled corporation are part of a plan that includes the distribution.  These proposed regulations provide guidance in determining whether a corporation is a predecessor or successor of a distributing or controlled corporation, as well as rules to assist taxpayers in determining whether an acquisition of an interest in a corporation would cause a distributing corporation to recognize gain under section 355(e). REG-145535-02.  Published November 22, 2004.
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Distributions from a Pension Plan under a Phased Retirement Program
These proposed regulations under section 401(a) of the Code, provide rules permitting distributions to be made from a pension plan under a phased retirement program and sets forth requirements for a bona fide phased retirement program. These proposed regulations will provide the public with guidance regarding distributions from qualified pension plans and will affect administrators of, and participants in, these plans.
REG-114726-04. Published November 10, 2004
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Revising Section 403(b) Tax-Sheltered Annuity Contracts
These proposed regulations provide updated guidance on tax-sheltered annuities, custodial accounts of public schools and section (503(c)(3) tax-exempt organizations and church retirement income account authorized under section 403(b) of the Internal Revenue Code.  These proposed regulations reflect numerous changes made to the tax laws since promulgation of the existing section 403(b) regulations in 1964.  These regulations will provide the public with guidance necessary to comply with the law and will affect sponsors of section 403(b) contracts, administrators, participants and beneficiaries.  REG-155608-02.  Published November 16, 2004.
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Payments Made by Reason of a Salary Reduction Agreement
These are temporary regulations defining the term "salary reduction agreement" within the meaning of section 3121(a)(5)(D) as a plan or arrangement whereby payment will be made by an employer to an annuity described in section 403(b) if an employee elects to reduce his compensation or if an employee agrees as a condition of employment to make a mandatory contribution that reduces his compensation.  Additionally, the temporary regulation clarifies the relationship between section 3121(a)(5)(D) and section 402(g)(3)(C) by explicitly treating cash or deferred elections and one-time irrevocable elections as contributions made pursuant to a salary reduction agreement.  TD 9159.  Published November 16, 2004
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