us-irs-notices-irb-2016-50-pdf•Internal Revenue Bulletin 2016-50 (PDF rendition): IRS Notices
Internal Revenue Bulletin 2016-50 (PDF rendition): IRS Notices
us-irs-notices-irb-2016-50-pdfInternal Revenue Bulletin 2016-50 (PDF rendition): IRS NoticesGuidance
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# INTERNAL REVENUE BULLETIN A IRS Bulletin No. 2016-50 December 12, 2016 ## HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. ## INCOME TAX Notice 2016-72, page 794. The notice provides guidance on the applicability of section 108(a)(1)(E)(ii) to the Federal Housing Finance Agency's PRMP or HAMP programs. The notice concludes that if a mortgage servicer sends a borrower-homeowner a notice in conjunction with a written trial period plan or opt-out letter under PRMP or HAMP prior to January 1, 2017; the borrower-homeowner satisfies the trial period terms and conditions; and a permanent modification of the qualified principal residence indebtedness occurs on or after January 1, 2017, the discharge of indebt- edness meets the requirements of section 108(a)(1)(E)(ii). ### REG-136978-12, page 796. Proposed regulations provide guidance regarding the applica- tion of section 514(c)(9)(E) of the Code to partnerships that hold debt-financed real property and have one or more (but not all) qualified tax-exempt organization partners within the mean- ing of section 514(c)(9)(C). <!-- PageFooter="Finding Lists begin on page ii." --> <!-- PageBreak --> ## The IRS Mission Provide America's taxpayers top-quality service by helping them understand and meet their tax responsibilities and en- force the law with integrity and fairness to all. ## Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conven- tions, legislation, court decisions, and other items of general interest. It is published weekly. It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless other- wise indicated. Procedures relating solely to matters of internal management are not published; however, statements of inter- nal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identify- ing details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: ### Part I .- 1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. ### Part II .- Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legisla- tion and Related Committee Reports. Part III .- Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rul- ings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury's Office of the Assistant Sec- retary (Enforcement). ### Part IV .- Items of General Interest. This part includes notices of proposed rulemakings, disbar- ment and suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. <!-- PageFooter="December 12, 2016" --> <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageBreak --> ## Part III. Administrative, Procedural, and Miscellaneous Application of Section 108(a)(1)(E)(ii) to the Federal Housing Finance Agency's (FHFA's) Principal Reduction Modification Program (PRMP) and the Home Affordable Modification Program®(HAMP®) Notice 2016-72 ### PURPOSE This notice provides guidance on whether qualified principal residence in- debtedness is discharged “subject to an arrangement that is entered into and evi- denced in writing before January 1, 2017" within the meaning of § 108(a)(1)(E)(ii) of the Internal Revenue Code if, before that date, a mortgage loan servicer sends a borrower-homeowner under the Federal Housing Finance Agency's (FHFA's) Principal Reduction Modification Pro- gram (PRMP) a notice in conjunction with a written Trial Period Plan (TPP) or, for a borrower-homeowner in an active TPP, a separate notice in a written opt-out letter outlining the terms and conditions of the permanent mortgage loan modification following completion of the active TPP. This guidance also applies to a TPP under the Home Affordable Modification Program® (HAMP®). ## BACKGROUND To help distressed borrower-home- owners lower their monthly mortgage pay- ments, FHFA directed the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to implement the PRMP, which offers mortgage loan modifications to certain seriously delinquent, underwater borrower-homeowners who are still strug- gling in the aftermath of the financial crisis, to help them avoid foreclosure and stay in their homes. The PRMP is a targeted, one- time offering for borrower-homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac and who meet specific eligibility criteria. For a borrower-homeowner to take ad- vantage of the PRMP, the mortgage loan servicer must solicit the borrower- homeowner's participation by sending the borrower-homeowner a notice of PRMP eligibility in conjunction with a written TPP or, for a borrower-homeowner in an active TPP, a separate notice of PRMP eligibility in a written opt-out letter. The TPP and the PRMP notice set forth Trial Period and PRMP Conditions that the borrower-homeowner must satisfy for there to be a permanent modification of the mortgage loan. In the case of an active TPP, the notice in the written opt-out letter outlines the terms and conditions of the principal reduction feature of the loan modification. If the Trial Period and PRMP Conditions are satisfied within a required time frame, then the borrower- homeowner is offered a permanent modi- fication of the terms of the mortgage loan. If the borrower-homeowner executes and returns the loan modification agreement, the mortgage loan is thereby modified. The modification includes monthly mort- gage payments that are lower than or equal to those under the old mortgage loan and, generally, a principal reduction. HAMP®, currently available through the end of 2016, offers a similar program to help distressed borrower-homeowners lower their monthly mortgage payments. See Rev. Proc. 2013-16, 2013-7 I.R.B. 488, which discusses the federal tax con- sequences of principal reduction of a mortgage loan under the HAMP® Princi- pal Reduction AlternativeSM. ## APPLICABLE PROVISIONS OF LAW AND ANALYSIS Under § 61, except as otherwise pro- vided in subtitle A, gross income means all income from whatever source derived, including income from discharge of in- debtedness. See § 61(a)(12). Under § 108(a)(1)(E), gross income does not include any amount that (but for § 108(a)) would be includible in gross income by reason of the discharge (in whole or in part) of a taxpayer's indebt- edness if the indebtedness discharged is qualified principal residence indebtedness that is discharged (i) before January 1, 2017, or (ii) subject to an arrangement that is entered into and evidenced in writing before January 1, 2017. Under §§ 108(h)(2) and 163(h)(3)(B), qualified principal residence indebtedness is any indebtedness that is incurred by a borrower to buy, build, or substantially improve the borrower's principal resi- dence and is secured by that residence. Qualified principal residence indebted- ness also includes a loan secured by the borrower's principal residence that refi- nances qualified principal residence in- debtedness, but only to the extent of the amount of the refinanced indebtedness. See §§ 108(h)(2) and 163(h)(3)(B)(i). The maximum amount of discharged indebtedness that a borrower may exclude from gross income under the qualified principal residence indebtedness exclu- sion is $2,000,000 ($1,000,000 for a mar- ried individual filing a separate return). See § 108(h)(2). Under § 108(h)(4), if only part of the discharged indebtedness is qualified principal residence indebted- ness, then the exclusion applies only to the amount of the discharged indebtedness that exceeds the amount of the loan (de- termined immediately before the dis- charge) that is not qualified principal res- idence indebtedness. If an amount is excluded from gross income as a discharge of qualified princi- pal residence indebtedness, the taxpayer must reduce the basis of the taxpayer's principal residence. See § 108(h)(1). Congress extended the relief under § 108(a)(1)(E) to arrangements entered into and evidenced in writing before Jan- uary 1, 2017, in the Protecting Americans from Tax Hikes Act of 2015, Pub. L. No. 114-113, 129 Stat 2242, 3065-66 (2015) (PATH Act). Congress added this pro- vision to protect a borrower-homeowner who is in the process of obtaining a permanent modification of the mortgage loan during 2016, although the perma- nent modification of the mortgage loan resulting in discharge of indebtedness would not occur until after 2016. For example, a borrower-homeowner who is in the process of obtaining a modified mortgage loan under the PRMP during 2016, because the borrower-homeowner is either in an active TPP or the mort- <!-- PageFooter="December 12, 2016" --> <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageBreak --> gage loan servicer sends the borrower- homeowner a notice in conjunction with a TPP, might not complete the modifi- cation process until after 2016. The ad- dition of § 108(a)(1)(E)(ii) by the PATH Act is designed to ensure that discharges of qualified principal residence indebt- edness in these situations qualify for exclusion from income under that section. A discharge of indebtedness that does not qualify for the qualified principal residence indebtedness exclusion in § 108(a)(1)(E) may qualify for another exclusion, such as the insolvency exclu- sion under § 108(a)(1)(B) or the deduct- ible debt exclusion under § 108(e)(2). For example, a cash basis homeowner generally would exclude from income under § 108(e)(2) the discharge of any accrued but unpaid interest on the mort- gage for his or her principal residence to the extent the interest would have been deductible if paid. See Johnson v. Com- missioner, T.C. Memo 1999-162, and Lawinger v. Commissioner, 103 T.C. 428 (1994). For more information about income from discharge of indebtedness, the qualified principal residence indebt- edness exclusion, the insolvency exclu- sion, the deductible debt exclusion, and other exclusions from gross income that may apply, see Publication 4681, Can- celed Debts, Foreclosures, Reposses- sions, and Abandonments (for Individu- als). ## FEDERAL INCOME TAX CONSEQUENCE Qualified principal residence indebted- ness is discharged "subject to an arrange- ment that is entered into and evidenced in writing before January 1, 2017" within the meaning of § 108(a)(1)(E)(ii) if: (1) be- fore that date, a mortgage servicer sends a borrower-homeowner under the FHFA's PRMP a notice in conjunction with a writ- ten TPP or, for a borrower-homeowner in an active TPP, a separate notice in a writ- ten opt-out letter outlining the terms and conditions of the permanent mortgage loan modification following completion of the active TPP; (2) the borrower- homeowner satisfies all of the Trial Period and PRMP Conditions; and (3) the borrower-homeowner and servicer enter into a permanent modification of the mort- gage loan on or after January 1, 2017. A similar conclusion applies to a TPP under HAMP®. ## DRAFTING INFORMATION The principal author of this notice is Sheldon Iskow of the Office of Associate Chief Counsel (Income Tax & Account- ing). For further information about this notice, contact Mr. Iskow at (202) 317- 4718 (not a toll-free number). <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageFooter="December 12, 2016" --> <!-- PageBreak --> ## Part IV. Items of General Interest ### Fractions Rule REG-136978-12 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: This document contains pro- posed regulations relating to the application of section 514(c)(9)(E) of the Internal Rev- enue Code (Code) to partnerships that hold debt-financed real property and have one or more (but not all) qualified tax-exempt or- ganization partners within the meaning of section 514(c)(9)(C). The proposed regula- tions amend the current regulations under section 514(c)(9)(E) to allow certain alloca- tions resulting from specified common busi- ness practices to comply with the rules un- der section 514(c)(9)(E). These regulations affect partnerships with qualified tax- exempt organization partners and their partners. DATES: Written and electronic com- ments and requests for a public hearing must be received by February 21, 2017. ADDRESSES: Send submissions to: CC: PA:LPD:PR (REG-136978-12), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 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-136978-12), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC, or sent elec- tronically, via the Federal eRulemaking Portal site at http://www.regulations.gov (indicate IRS and REG-136978-12). FOR FURTHER INFORMATION CON- TACT: Concerning the proposed regula- tions, Caroline E. Hay at (202) 317-5279; concerning the submissions of comments and requests for a public hearing, Regina L. Johnson at (202) 317-6901 (not toll- free numbers). #### SUPPLEMENTARY INFORMATION: ##### Background This document proposes amendments to the Income Tax Regulations (26 CFR part 1) under section 514(c)(9)(E) regard- ing the application of the fractions rule (as defined in the Background section of this preamble) to partnerships that hold debt- financed real property and have one or more (but not all) qualified tax-exempt organization partners. In general, section 511 imposes a tax on the unrelated business taxable income (UBTI) of tax-exempt organizations. Sec- tion 514(a) defines UBTI to include a spec- ified percentage of the gross income derived from debt-financed property described in section 514(b). Section 514(c)(9)(A) gener- ally excepts from UBTI income derived from debt-financed real property acquired or improved by certain qualified organizations (QOs) described in section 514(c)(9)(C). Under section 514(c)(9)(C), a QO includes an educational organization described in section 170(b)(1)(A)(ii) and its affiliated support organizations described in section 509(a)(3), any trust which constitutes a qualified trust under section 401, an organi- zation described in section 501(c)(25), and a retirement income account described in sec- tion 403(b)(9). Section 514(c)(9)(B)(vi) provides that the exception from UBTI in section 514(c)(9)(A) does not apply if a QO owns an interest in a partnership that holds debt- financed real property (the partnership limitation), unless the partnership meets one of the following requirements: (1) all of the partners of the partnership are QOs, (2) each allocation to a QO is a qualified allocation (within the meaning of section 168(h)(6)), or (3) each partnership alloca- tion has substantial economic effect under section 704(b)(2) and satisfies section 514(c)(9)(E)(i)(I) (the fractions rule). A partnership allocation satisfies the fractions rule if the allocation of items to any partner that is a QO does not result in that partner having a share of overall part- nership income for any taxable year greater than that partner's fractions rule percentage (the partner's share of overall partnership loss for the taxable year for which the partner's loss share is the small- est). Section 1.514(c)-2(c)(1) describes overall partnership income as the amount by which the aggregate items of partner- ship income and gain for the taxable year exceed the aggregate items of partnership loss and deduction for the year. Overall partnership loss is the amount by which the aggregate items of partnership loss and deduction for the taxable year exceed the aggregate items of partnership income and gain for the year. Generally, under § 1.514(c)-2(b)(2)(i), a partnership must satisfy the fractions rule both on a prospective basis and on an actual basis for each taxable year of the partnership, beginning with the first tax- able year of the partnership in which the partnership holds debt-financed real prop- erty and has a QO partner. However, cer- tain allocations are taken into account for purposes of determining overall partner- ship income or loss only when actually made, and do not create an immediate violation of the fractions rule. See § 1.514(c)-2(b)(2)(i). Certain other allo- cations are disregarded for purposes of making fractions rule calculations. See, for example, § 1.514(c)-2(d) (reasonable preferred returns and reasonable guaran- teed payments), § 1.514(c)-2(e) (certain chargebacks and offsets), § 1.514(c)-2(f) (reasonable partner-specific items of de- duction and loss), § 1.514(c)-2(g) (un- likely losses and deductions), and § 1.514(c)-2(k)(3) (certain de minimis al- locations of losses and deductions). In ad- dition, § 1.514(c)-2(k)(1) provides that changes in partnership allocations that re- sult from transfers or shifts of partnership interests (other than transfers from a QO to another QO) will be closely scrutinized, but generally will be taken into account only in determining whether the partner- ship satisfies the fractions rule in the tax- able year of the change and subsequent taxable years. Section 1.514(c)-2(m) pro- vides special rules for applying the frac- tions rule to tiered partnerships. The Treasury Department and the IRS have received comments requesting tar- geted changes to the existing regulations under section 514(c)(9)(E) to allow cer- tain allocations resulting from specified common business practices to comply with the rules under section 514(c)(9)(E). Section 514(c)(9)(E)(iii) grants the Secre- tary authority to prescribe regulations as may be necessary to carry out the pur- poses of section 514(c)(9)(E), including regulations that may provide for the ex- <!-- PageFooter="December 12, 2016" --> <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageBreak --> clusion or segregation of items. In re- sponse to comments and under the regu- latory authority in section 514(c)(9)(E), these proposed regulations provide guid- ance in determining a partner's share of overall partnership income or loss for pur- poses of the fractions rule, including al- lowing allocations consistent with com- mon arrangements involving preferred returns, partner-specific expenditures, un- likely losses, and chargebacks of partner- specific expenditures and unlikely losses. The proposed regulations also simplify one of the examples involving tiered part- nerships and provide rules regarding changes to partnership allocations as a result of capital commitment defaults and later acquisitions of partnership interests. These proposed regulations except from applying the fractions rule certain partner- ships in which all partners other than QOs own five percent or less of the capital or profits interests in the partnership. Finally, these proposed regulations increase the threshold for de minimis allocations away from QO partners. ##### Explanation of Provisions ###### 1. Preferred Returns Section 1.514(c)-2(d)(1) and (2) of the existing regulations disregard in comput- ing overall partnership income for pur- poses of the fractions rule items of income (including gross income) and gain that may be allocated to a partner with respect to a current or cumulative reasonable pre- ferred return for capital (including alloca- tions of minimum gain attributable to non- recourse liability (or partner nonrecourse debt) proceeds distributed to the partner as a reasonable preferred return) if that pre- ferred return is set forth in a binding, written partnership agreement. Section 1.514(c)-2(d)(2) of the existing regula- tions also provides that if a partnership agreement provides for a reasonable pre- ferred return with an allocation of what would otherwise be overall partnership in- come, items comprising that allocation are disregarded in computing overall partner- ship income for purposes of the fractions rule. Section 1.514(c)-2(d)(6)(i) of the ex- isting regulations limits the amount of in- come and gain allocated with respect to a preferred return that can be disregarded for purposes of the fractions rule to: (A) the aggregate of the amount that has been distributed to the partner as a reasonable preferred return for the taxable year of the allocation and prior taxable years, on or before the due date (not including exten- sions) for filing the partnership's return for the taxable year of the allocation; minus (B) the aggregate amount of cor- responding income and gain (and what would otherwise be overall partnership income) allocated to the partner in all prior years. Thus, this rule requires a current distribution of preferred returns for the allocations of income with re- spect to those preferred returns to be disregarded. The Treasury Department and the IRS have received comments requesting that the current distribution requirement be eliminated from the regulations because it interferes with normal market practice, creates unnecessary complication, and, in some cases, causes economic distortions for partnerships with QO partners. The preamble to the existing final regulations under section 514(c)(9)(E) responded to objections regarding the current distribu- tion requirement by explaining that if the requirement were eliminated, partner- ships might attempt to optimize their overall economics by allocating signifi- cant amounts of partnership income and gain to QOs in the form of preferred returns. The preamble explained that these allocations "would be a departure from the normal commercial practice followed by partnerships in which the money partners are generally subject to income tax." TD 8539, 59 FR 24924. A recent commenter explained that the vast majority of partnerships holding debt-financed real property (real estate partnerships) with preferred returns to investing partners (either the QO or the taxable partner) make allocations that match the preferred return as it accrues, without regard to whether cash has been distributed with respect to the preferred return. Instead of requiring distributions equal to the full amount of their pre- ferred returns, taxable partners gener- ally negotiate for tax distributions to pay any tax liabilities associated with their partnership interest. The Treasury Department and the IRS have reconsidered the necessity of the cur- rent distribution requirement to prevent abuses of the fractions rule. So long as the preferred return is required to be distrib- uted prior to other distributions (with an exception for certain distributions in- tended to facilitate the payment of taxes) and any undistributed amount com- pounds, the likelihood of abuse is mini- mized. Therefore, the proposed regula- tions remove the current distribution requirement and instead disregard alloca- tions of items of income and gain with respect to a preferred return for purposes of the fractions rule, but only if the part- nership agreement requires that the part- nership make distributions first to pay any accrued, cumulative, and compounding unpaid preferred return to the extent such accrued but unpaid preferred return has not otherwise been reversed by an alloca- tion of loss prior to such distribution (pre- ferred return distribution requirement). The preferred return distribution require- ment, however, is subject to an exception under the proposed regulations that allows distributions intended to facilitate partner payment of taxes imposed on the partner's allocable share of partnership income or gain, if the distributions are made pursu- ant to a provision in the partnership agree- ment, are treated as an advance against distributions to which the distributee part- ner would otherwise be entitled under the partnership agreement, and do not exceed the distributee partner's allocable share of net partnership income and gain multi- plied by the sum of the highest statutory federal, state, and local tax rates applica- ble to that partner. ###### 2. Partner-Specific Expenditures and Management Fees Section 1.514(c)-2(f) of the existing regulations provides a list of certain partner-specific expenditures that are dis- regarded in computing overall partnership income or loss for purposes of the frac- tions rule. These expenditures include ex- penditures attributable to a partner for ad- ditional record-keeping and accounting costs including in connection with the transfer of a partnership interest, addi- tional administrative costs from having a foreign partner, and state and local taxes. The Treasury Department and the IRS are aware that some real estate partnerships <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageFooter="December 12, 2016" --> <!-- PageBreak --> allow investing partners to negotiate for management and similar fees paid to the general partner that differ from fees paid with respect to investments by other part- ners. These fees include the general part- ner's fees for managing the partnership and may include fees paid in connection with the acquisition, disposition, or refi- nancing of an investment. Compliance with the fractions rule may preclude a real estate partnership with QO partners from allocating deductions attributable to these management expenses in a manner that follows the economic fee arrangement be- cause the fractions rule limits the ability of the partnership to make disproportion- ate allocations. The Treasury Department and the IRS have determined that real estate partnerships with QO partners should be permitted to allocate management and similar fees among partners to reflect the manner in which the partners agreed to bear the expense without causing a frac- tions rule violation. Accordingly, the proposed regulations add management (and similar) fees to the current list of excluded partner-specific expenditures in § 1.514(c)-2(f) of the existing regu- lations to the extent such fees do not, in the aggregate, exceed two percent of the partner's aggregate committed capital. It has been suggested to the Treasury Department and the IRS that similar partner-specific expenditure issues may arise under the new partnership audit rules in section 1101 of the Bipartisan Budget Act of 2015, Public Law No. 114-74 (the BBA), which was enacted into law on November 2, 2015. Section 1101 of the BBA repeals the current rules governing partnership audits and replaces them with a new centralized partnership audit regime that, in general, assesses and collects tax at the partnership level as an imputed un- derpayment. Some have suggested that the manner in which an imputed underpay- ment is borne by partners potentially could implicate similar concerns as spe- cial allocations of partner-specific items. As the Treasury Department and the IRS continue to consider how to implement the BBA, the Treasury Department and the IRS request comments regarding whether an imputed underpayment should be included among the list of partner- specific expenditures. ###### 3. Unlikely Losses Similar to § 1.514(c)-2(f), § 1.514(c)- 2(g) of the existing regulations generally disregards specially allocated unlikely losses or deductions (other than items of nonrecourse deduction) in computing over- all partnership income or loss for purposes of the fractions rule. To be disregarded un- der § 1.514(c)-2(g), a loss or deduction must have a low likelihood of occurring, taking into account all relevant facts, cir- cumstances, and information available to the partners (including bona fide financial projections). Section 1.514(c)-2(g) de- scribes types of events that give rise to un- likely losses or deductions. The Treasury Department and the IRS have received comments suggesting that a "more likely than not" standard is appropriate for determining when a loss or deduction is unlikely to occur. Notice 90-41 (1990-1 CB 350) (see § 601.601(d)(2)(ii)(b)), which preceded the initial proposed regulations under sec- tion 514(c)(9)(E), outlined this standard. The commenter explained that the "low likelihood of occurring" standard in the existing regulations is vague and gives little comfort to QOs and their taxable partners when drafting allocations to re- flect legitimate business arrangements (such as, drafting allocations to account for cost overruns). The Treasury Depart- ment and the IRS are considering chang- ing the standard in § 1.514(c)-2(g) and request further comments explaining why "more likely than not" is a more appropri- ate standard than the standard contained in the existing regulations, or whether an- other standard turning upon a level of risk that is between "more likely than not" and "low likelihood of occurring" might be more appropriate and what such other standard could be. ###### 4. Chargebacks of Partner-Specific Expenditures and Unlikely Losses Because allocations of partner-specific expenditures in § 1.514(c)-2(f) and un- likely losses in § 1.514(c)-2(g) are disre- garded in computing overall partnership income or loss, allocations of items of income or gain or net income to reverse the prior partner-specific expenditure or unlikely loss could cause a violation of the fractions rule. For example, a QO may contribute capital to a partnership to pay a specific expenditure with the understand- ing that it will receive a special allocation of income to reverse the prior expenditure once the partnership earns certain profits. If the allocation of income is greater than the QO's fractions rule percentage, the allocation will cause a fractions rule vio- lation. Section 1.514(c)-2(e)(1) of the exist- ing regulations generally disregards cer- tain allocations of income or loss made to chargeback previous allocations of in- come or loss in computing overall part- nership income or loss for purposes of the fractions rule. Specifically, § 1.514(c)- 2(e)(1)(i) disregards allocations of what would otherwise be overall partnership in- come that chargeback (that is, reverse) prior disproportionately large allocations of overall partnership loss (or part of the overall partnership loss) to a QO (the chargeback exception). The chargeback exception applies to a chargeback of an allocation of part of the overall partner- ship income or loss only if that part con- sists of a pro rata portion of each item of partnership income, gain, loss, and deduc- tion (other than nonrecourse deductions, as well as partner nonrecourse deductions and compensating allocations) that is in- cluded in computing overall partnership income or loss. The Treasury Department and the IRS understand that often a real estate partner- ship with QO partners may seek to reverse a special allocation of unlikely losses or partner-specific items with net profits of the partnership, which could result in al- locations that would violate the fractions rule. Such allocations of net income to reverse special allocations of unlikely losses or partner-specific items that were disregarded in computing overall partner- ship income or loss for purposes of the fractions rule under § 1.514(c)-2(f) or (g), respectively, do not violate the purpose of the fractions rule. Accordingly, the pro- posed regulations modify the chargeback exception to disregard in computing over- all partnership income or loss for purposes of the fractions rule an allocation of what would otherwise have been an allocation of overall partnership income to charge- back (that is, reverse) a special allocation of a partner-specific expenditure under <!-- PageFooter="December 12, 2016" --> <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageBreak --> § 1.514(c)-2(f) or a special allocation of an unlikely loss under § 1.514(c)-2(g). Notwithstanding the rule in the proposed regulations, an allocation of an unlikely loss or a partner-specific expenditure that is disregarded when allocated, but is taken into account for purposes of determining the partners' economic entitlement to a chargeback of such loss or expense may, in certain circumstances, give rise to com- plexities in determining applicable per- centages for purposes of fractions rule compliance. Accordingly, the Treasury Department and the IRS request com- ments regarding the interaction of disre- garded partner-specific expenditures and unlikely losses with chargebacks of such items with overall partnership income. ###### 5. Acquisition of Partnership Interests after Initial Formation of Partnership Section 1.514(c)-2(k)(1) of the exist- ing regulations provides special rules re- garding changes in partnership allocations arising from a change in partners' inter- ests. Specifically, § 1.514(c)-2(k)(1) pro- vides that changes in partnership alloca- tions that result from transfers or shifts of partnership interests (other than transfers from a QO to another QO) will be closely scrutinized (to determine whether the trans- fer or shift stems from a prior agreement, understanding, or plan or could otherwise be expected given the structure of the transac- tion), but generally will be taken into ac- count only in determining whether the part- nership satisfies the fractions rule in the taxable year of the change and subsequent taxable years. Section 1.514(c)-2(k)(4) of the existing regulations provides that § 1.514(c)-2 may not be applied in a man- ner inconsistent with the purpose of the frac- tions rule, which is to prevent tax avoidance by limiting the permanent or temporary transfer of tax benefits from tax-exempt partners to taxable partners. The Treasury Department and the IRS have received comments requesting guid- ance in applying the fractions rule when additional partners are admitted to a partner- ship after the initial formation of the part- nership. The commenter explained that many real estate partnerships with QO part- ners admit new partners in a number of rounds of closings, but treat the partners as having entered at the same time for pur- poses of sharing in profits and losses (staged closings). A number of commercial arrange- ments are used to effect staged closings. For example, the initial operations of the part- nership may be funded entirely through debt financing, with all partners contributing their committed capital at a later date. Al- ternatively, later entering partners may con- tribute capital and an interest factor, some or both of which is then distributed to the ear- lier admitted partners to compensate them for the time value of their earlier contribu- tions. Under existing regulations, staged closings could cause violations of the fractions rule in two ways. First, when new partners are admitted to a partnership, shifts of partnership interests occur. Changes in allocations that result from shifts of partnership interests are closely scrutinized under § 1.514(c)-2(k)(1) of the existing regulations if pursuant to a prior agreement and could be determined to violate the fractions rule. Second, after admitting new partners, partnerships may disproportionately allocate income or loss to the partners to adjust the partners' cap- ital accounts as a result of the staged clos- ings. These disproportionate allocations could cause fractions rule violations if one of the partners is a QO. The Treasury Department and the IRS have determined that changes in alloca- tions and disproportionate allocations re- sulting from common commercial staged closings should not violate the fractions rule if they are not inconsistent with the purpose of the fractions rule under § 1.514(c)-2(k)(4) and certain conditions are satisfied. The conditions include the following: (A) the new partner acquires the partnership interest no later than 18 months following the formation of the partnership (applicable period); (B) the partnership agreement and other relevant documents anticipate the new partners ac- quiring the partnership interests during the applicable period, set forth the time frame in which the new partners will acquire the partnership interests, and provide for the amount of capital the partnership in- tends to raise; (C) the partnership agree- ment and any other relevant documents specifically set forth the method of deter- mining any applicable interest factor and for allocating income, loss, or deduction to the partners to adjust partners' capital accounts after the new partner acquires the partnership interest; and (D) the inter- est rate for any applicable interest factor is not greater than 150 percent of the highest applicable Federal rate, at the appropriate compounding period or periods, at the time the partnership was formed. Under the proposed regulations, if those conditions are satisfied, the IRS will not closely scrutinize changes in allocations resulting from staged closings under § 1.514(c)-2(k)(1) and will disregard in computing overall partnership income or loss for purposes of the fractions rule dis- proportionate allocations of income, loss, or deduction made to adjust the capital ac- counts when a new partner acquires its part- nership interest after the partnership's for- mation. ###### 6. Capital Commitment Defaults or Reductions The Treasury Department and the IRS received comments requesting guidance with respect to calculations of overall partnership income and loss when alloca- tions change as a result of capital commit- ment defaults or reductions. The com- menter indicated that, in the typical real estate partnership, a limited partner gen- erally will not contribute its entire invest- ment upon being admitted as a partner. Rather, that limited partner will commit to contribute a certain dollar amount over a fixed period of time, and the general part- ner will then "call" on that committed, but uncontributed, capital as needed. These calls will be made in proportion to the partners' commitments to the partnership. The commenter identified certain rem- edies that partnership agreements provide if a partner fails to contribute a portion (or all) of its committed capital. These reme- dies commonly include: (i) allowing the non-defaulting partner(s) to contribute ad- ditional capital in return for a preferred return on that additional capital; (ii) caus- ing the defaulting partner to forfeit all or a portion of its interest in the partnership; (iii) forcing the defaulting partner to sell its interest in the partnership, or (iv) ex- cluding the defaulting partner from mak- ing future capital contributions. Alterna- tively, the agreement may allow partners to reduce their commitment amounts, re- ducing allocations of income and loss as <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageFooter="December 12, 2016" --> <!-- PageBreak --> well. The commenter noted that, depend- ing on the facts, any of these partnership agreement provisions could raise fractions rule concerns. There is little guidance in the existing regulations regarding changes to alloca- tions of a partner's share of income and losses from defaulted capital calls and re- ductions in capital commitments. Section 1.514(c)-2(k)(1) applies to changes in al- locations resulting from a default if there is a "transfer or shift" of partnership in- terests. The Treasury Department and the IRS have determined that changes in allo- cations resulting from unanticipated de- faults or reductions do not run afoul of the purpose of the fractions rule if such changes are provided for in the partner- ship agreement. Therefore, the proposed regulations provide that, if the partnership agreement provides for changes to alloca- tions due to an unanticipated partner de- fault on a capital contribution commit- ment or an unanticipated reduction in a partner's capital contribution commit- ment, and those changes in allocations are not inconsistent with the purpose of the fractions rule under § 1.514(c)-2(k)(4), then: (A) changes to partnership alloca- tions provided in the agreement will not be closely scrutinized under § 1.514(c)- 2(k)(1) and (B) partnership allocations of income, loss, or deduction (including al- locations to adjust partners' capital ac- counts to be consistent with the partners' adjusted capital commitments) to partners to adjust the partners' capital accounts as a result of unanticipated capital contribu- tion defaults or reductions will be disre- garded in computing overall partnership income or loss for purposes of the frac- tions rule. ###### 7. Applying the Fractions Rule to Tiered Partnerships Section 1.514(c)-2(m)(1) of the exist- ing regulations provides that if a QO holds an indirect interest in real property through one or more tiers of partnerships (a chain), the fractions rule is satisfied if: (i) the avoidance of tax is not a principal purpose for using the tiered-ownership structure; and (ii) the relevant partnerships can demonstrate under "any reasonable method" that the relevant chains satisfy the requirements of § 1.514(c)-2(b)(2) through (k). Section 1.514(c)-2(m)(2) of the existing regulations provides exam- ples that illustrate three different "reason- able methods:" the collapsing approach, the entity-by-entity approach, and the in- dependent chain approach. The Treasury Department and the IRS have received comments requesting guid- ance with respect to tiered partnerships and the application of the independent chain approach. Under the independent chain approach in § 1.514(c)-2(m)(2) Ex- ample 3 of the existing regulations, differ- ent lower-tiered partnership chains (one or more tiers of partnerships) are examined independently of each other, even if these lower-tiered partnerships are owned by a common upper-tier partnership. The ex- ample provides, however, that chains are examined independently only if the upper- tier partnership allocates the items of each lower-tier partnership separately from the items of another lower-tier partnership. The comment noted that in practice, a real estate partnership generally invests in a significant number of properties, often through joint ventures with other partners. A typical real estate partnership will not make separate allocations to its partners of lower-tier partnership items. Accord- ingly, the proposed regulations amend § 1.514(c)-2(m)(2) Example 3 to remove the requirement that a partnership allocate items from lower-tier partnerships sepa- rately from one another. Partnership pro- visions require that partnership items such as items that would give rise to UBTI be separately stated. See § 1.702-1(a)(8)(ii). That requirement suffices to separate the tiers of partnerships, and, thus, the pro- posed regulations do not require the upper-tier partnership to separately allo- cate partnership items from separate lower-tier partnerships. The proposed reg- ulations also revise § 1.514(c)-2(m)(1)(ii) to remove the discussion of minimum gain chargebacks that refers to language that has been deleted from the example. ###### 8. De Minimis Exceptions from Application of the Fractions Rule Section 1.514(c)-2(k)(2) of the exist- ing regulations provides that the partner- ship limitation in section 514(c)(9)(B)(vi) does not apply to a partnership if all QOs hold a de minimis interest in the partner- ship, defined as no more than five percent in the capital or profits of the partnership, and taxable partners own substantial inter- ests in the partnership through which they participate in the partnership on substan- tially the same terms as the QO partners. If the partnership limitation in section 514(c)(9)(B)(vi) does not apply to the partnership, the fractions rule does not apply to the partnership. Because the frac- tions rule does not apply to a partnership if all QOs are de minimis interest holders in the partnership, the Treasury Depart- ment and the IRS considered whether the inverse fact pattern, in which all non-QO partners are de minimis partners, impli- cates the purpose of the fractions rule. See § 1.514(c)-2(k)(4) (providing that the pur- pose of the fractions rule is to "prevent tax avoidance by limiting the permanent or temporary transfer of tax benefits from tax-exempt partners to taxable partners, whether by directing income or gain to tax-exempt partners, by directing losses, deductions or credits to taxable partners, or by some similar manner."). The Treasury Department and the IRS have determined that the purpose of the fractions rule is similarly not violated if all non-QO partners hold a de minimis interest. Therefore, the proposed regula- tions provide that the fractions rule does not apply to a partnership in which non-QO partners do not hold (directly or indirectly through a partnership), in the aggregate, interests of greater than five percent in the capital or profits of the partnership, so long as the partnership's allocations have substantial economic ef- fect. For purposes of the proposed rule, the determination of whether an allocation has substantial economic effect is made without application of the special rules in § 1.704-1(b)(2)(iii)(c)(2) (regarding the presumption that there is a reasonable possibility that allocations will affect sub- stantially the dollar amounts to be re- ceived by the partners from the partner- ship if there is a strong likelihood that offsetting allocations will not be made in five years, and the presumption that the adjusted tax basis (or book value) of part- nership property is equal to the fair market value of such property). The existing regulations also provide for a de minimis exception for alloca- tions away from QO partners. Section <!-- PageFooter="December 12, 2016" --> <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageBreak --> 1.514(c)-2(k)(3) of the existing regula- tions provides that a QO's fractions rule percentage of the partnership's items of loss and deduction, other than nonre- course and partner nonrecourse deduc- tions, that are allocated away from the QO and to other partners in any taxable year, are treated as having been allo- cated to the QO for purposes of the fractions rule if: (i) the allocation was neither planned nor motivated by tax avoidance; and (ii) the total amount of those items of partnership loss or deduc- tion is less than both one percent of the partnership's aggregate items of gross loss and deduction for the taxable year and $50,000. The preamble to the exist- ing final regulations under section 514(c)(9)(E) explained that the de mini- mis allocation exception was "to pro- vide relief for what would otherwise be minor inadvertent violations of the frac- tions rule." TD 8539, 59 FR 24924. The exception was "not intended ... [to] be used routinely by partnerships to allo- cate some of the partnership's losses and deductions." Id. To that end, the final regulations limited the exception to $50,000. As an example of a de minimis allocation intended to meet this excep- tion, the preamble described a scenario in which a plumber's bill is paid by the partnership but overlooked until after the partner's allocations have been com- puted and then is allocated entirely to the taxable partner. Id. In current business practices, a $50,000 threshold does not provide sufficient relief for de minimis allocations away from the QO partner. The proposed regulations still require that allocations not exceed one percent of the partnership's aggregate items of gross loss and deduction for the taxable year, but raise the threshold from $50,000 to $1,000,000. ##### Proposed Applicability Date The regulations under section 514(c)(9)(E) are proposed to apply to taxable years ending on or after the date these regula- tions are published as final regulations in the Federal Register. However, a part- nership and its partners may apply all the rules in these proposed regulations for taxable years ending on or after Novem- ber 23, 2016. ##### Special Analyses Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. It also has been deter- mined that section 553(b) of the Admin- istrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. Because these proposed regulations do 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 Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Admin- istration for comment on its impact on small business. ### Comments and Requests for a Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the IRS as prescribed in this preamble under the "Addresses" heading. The Treasury Department and the IRS request comments on all aspects of the proposed rules. All comments will be available at www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person that timely submits written com- ments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register. ### Drafting Information The principal author of these proposed regulations is Caroline E. Hay, Office of the Associate Chief Counsel (Pass- throughs and Special Industries). How- ever, other personnel from the Treasury Department and the IRS participated in their development. * * * * * ### Proposed Amendments to the Regulations Accordingly, 26 CFR part 1 is pro- posed to be amended as follows: <!-- PageHeader="PART 1-INCOME TAXES" --> Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * Section 1.514(c)-2 also issued under 26 U.S.C. 514(c)(9)(E)(iii). Par. 2. Section 1.514(c)-2 is amended by: 1\. In paragraph (a), adding entries for (d)(2)(i) through (iii), adding entries for (d)(3)(i) and (ii), revising the entry for (d)(6), removing entries for (d)(6)(i) and (ii), and (d)(7), adding entries for (k)(1)(i) through (iv), revising the entries for (k)(2)(i) and (ii), adding an entry for (k)(2)(iii), and revising the entry for (n). 2\. Revising paragraphs (d)(2) and (3). 3\. Removing paragraph (d)(6). 4\. Redesignating paragraph (d)(7) as paragraph (d)(6). 5\. Revising newly redesignated para- graph (d)(6) Example 1 paragraph (i) and adding paragraph (iv). 6\. Removing the language "(i.e., re- verse)" in paragraph (e)(1)(i) and adding the language "(that is, reverse)" in its place. 7\. Removing the language "other part- ners; and" at the end of paragraph (e)(1)(iii) and adding the language "other partners;" in its place. 8\. Removing the language "of § 1.704- 1(b)(2)(ii)(d)." at the end of paragraph (e)(1)(iv) and adding the language "of § 1.704-1(b)(2)(ii)(d);" in its place. 9\. Removing the language "the regula- tions thereunder." at the end of paragraph (e)(1)(v) and adding the language "the regulations thereunder;" in its place. 10\. Adding new paragraphs (e)(1)(vi) and (vii). 11\. Adding Example 5 to paragraph (e)(5). 12\. Removing the word "and" at the end of paragraph (f)(3). 13\. Redesignating paragraph (f)(4) as paragraph (f)(5) and adding new para- graph (f)(4). 14\. Revising paragraph (k)(1). 15\. Revising the subject heading for paragraph (k)(2)(i). 16\. Revising paragraph (k)(2)(i)(A). 17\. Redesignating paragraph (k)(2)(ii) as paragraph (k)(2)(iii) and adding new paragraph (k)(2)(ii). 18\. Revising paragraph (k)(3)(ii)(B). <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageFooter="December 12, 2016" --> <!-- PageBreak --> 19\. Removing the second sentence in paragraph (m)(1)(ii). 20\. Revising Example 3(ii) of paragraph (m)(2). 21\. Revising the subject heading for paragraph (n). 22\. Adding a sentence to the end of paragraph (n)(2). The revisions and additions read as fol- lows: § 1.514(c)-2. Permitted allocations under section 514(c)(9)(E). (a) Table of contents. (d) * * * (2) * * * (i) In general. (ii) Limitation. (iii) Distributions disregarded. (3) * * * (i) In general. (ii) Reasonable guaranteed payments may be deducted only when paid in cash. * * * * * (6) Examples. * * * * * (k) * * * (1) * * * (i) In general. (ii) Acquisition of partnership interests after initial formation of partnership. (iii) Capital commitment defaults or reductions. (iv) Examples. (2) * * * (i) Qualified organizations. (ii) Non-qualified organizations. (iii) Example. * * * * * (n) Effective/applicability dates. * * * * * (d) * * * (2) Preferred returns-(i) In general. Items of income (including gross income) and gain that may be allocated to a partner with respect to a current or cumulative reasonable preferred return for capital (including allocations of minimum gain attributable to nonrecourse liability (or partner nonrecourse debt) proceeds dis- tributed to the partner as a reasonable pre- ferred return) are disregarded in comput- ing overall partnership income or loss for purposes of the fractions rule. Similarly, if a partnership agreement effects a reason- able preferred return with an allocation of what would otherwise be overall partner- ship income, those items comprising that allocation are disregarded in computing overall partnership income for purposes of the fractions rule. (ii) Limitation. Except as otherwise pro- vided in paragraph (d)(2)(iii) of this section, items of income and gain (or part of what would otherwise be overall partnership in- come) that may be allocated to a partner in a taxable year with respect to a reasonable preferred return for capital are disregarded under paragraph (d)(2)(i) of this section for purposes of the fractions rule only if the partnership agreement requires the partner- ship to make distributions first to pay any accrued, cumulative, and compounding un- paid preferred return to the extent such ac- crued but unpaid preferred return has not otherwise been reversed by an allocation of loss prior to such distribution. (iii) Distributions disregarded. A dis- tribution is disregarded for purposes of paragraph (d)(2)(ii) of this section if the distribution- (A) Is made pursuant to a provision in the partnership agreement intended to fa- cilitate the partners' payment of taxes im- posed on their allocable shares of partner- ship income or gain; (B) Is treated as an advance against distributions to which the distributee part- ner would otherwise be entitled under the partnership agreement; and (C) Does not exceed the distributee part- ner's allocable share of net partnership in- come and gain multiplied by the sum of the highest statutory federal, state, and local tax rates applicable to such partner. (3) Guaranteed payments-(i) In gen- eral. A current or cumulative reasonable guaranteed payment to a qualified organi- zation for capital or services is treated as an item of deduction in computing overall partnership income or loss, and the in- come that the qualified organization may receive or accrue from the current or cu- mulative reasonable guaranteed payment is not treated as an allocable share of overall partnership income or loss. The treatment of a guaranteed payment as rea- sonable for purposes of section 514(c)(9)(E) does not affect its possible characterization as unrelated business tax- able income under other provisions of the Internal Revenue Code. (ii) Reasonable guaranteed payments may be deducted only when paid in cash. If a partnership that avails itself of para- graph (d)(3)(i) of this section would oth- erwise be required (by virtue of its method of accounting) to deduct a reasonable guaranteed payment to a qualified organiza- tion earlier than the taxable year in which it is paid in cash, the partnership must delay the deduction of the guaranteed payment until the taxable year it is paid in cash. For purposes of this paragraph (d)(3)(ii), a guar- anteed payment that is paid in cash on or before the due date (not including exten- sions) for filing the partnership's return for a taxable year may be treated as paid in that prior taxable year. * * * * * (6) * * * Example 1. * * * (i) The partnership agreement provides QO a 10 percent preferred return on its unreturned capital. The partnership agreement provides that the pre- ferred return may be compounded (at 10 percent) and may be paid in future years and requires that when distributions are made, they must be made first to pay any accrued, cumulative, and compounding unpaid preferred return not previously reversed by a loss allocation. The partnership agreement also al- lows distributions to be made to facilitate a partner's payment of federal, state, and local taxes. Under the partnership agreement, any such distribution is treated as an advance against distributions to which the distributee partner would otherwise be entitled and must not exceed the partner's allocable share of net partnership income or gain for that taxable year multiplied by the sum of the highest statutory fed- eral, state, and local tax rates applicable to the part- ner. The partnership agreement first allocates gross income and gain 100 percent to QO, to the extent of the preferred return. All remaining income or loss is allocated 50 percent to QO and 50 percent to TP. * * * * * (iv) The facts are the same as in paragraph (i) of this Example 1, except the partnership makes a dis- tribution to TP of an amount computed by a formula in the partnership agreement equal to TP's allocable share of net income and gain multiplied by the sum of the highest statutory federal, state, and local tax rates applicable to TP. The partnership satisfies the fractions rule. The distribution to TP is disregarded for purposes of paragraph (d)(2)(ii) of this section because the distribution is made pursuant to a pro- vision in the partnership agreement that provides that the distribution is treated as an advance against dis- tributions to which TP would otherwise be entitled and the distribution did not exceed TP's allocable share of net partnership income or gain for that taxable year multiplied by the sum of the highest statutory federal, state, and local tax rates applicable to TP. The income and gain that is specially allo- cated to QO with respect to its preferred return is disregarded in computing overall partnership income or loss for purposes of the fractions rule because the requirements of paragraph (d) of this section are satisfied. After disregarding those allocations, QO's fractions rule percentage is 50 percent (see para- <!-- PageFooter="December 12, 2016" --> <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageBreak --> graph (c)(2) of this section), and, under the partner- ship agreement, QO may not be allocated more than 50 percent of overall partnership income in any taxable year. (e) * * * (1) * * * (vi) Allocations of what would other- wise be overall partnership income that may be made to chargeback (that is, re- verse) prior allocations of partner-specific expenditures that were disregarded in computing overall partnership income or loss for purposes of the fractions rule un- der paragraph (f) of this section; and (vii) Allocations of what would other- wise be overall partnership income that may be made to chargeback (that is, re- verse) prior allocations of unlikely losses and deductions that were disregarded in computing overall partnership income or loss for purposes of the fractions rule un- der paragraph (g) of this section. (5) * * * Example 5. Chargeback of prior allocations of unlikely losses and deductions. (i) Qualified organi- zation (QO) and taxable corporation (TP) are equal partners in a partnership that holds encumbered real property. The partnership agreement generally pro- vides that QO and TP share partnership income and deductions equally. QO contributes land to the part- nership, and the partnership agreement provides that QO bears the burden of any environmental remedia- tion required for that land, and, as such, the partner- ship will allocate 100 percent of the expense attrib- utable to the environmental remediation to QO. In the unlikely event of the discovery of environmental conditions that require remediation, the partnership agreement provides that, to the extent its cumulative net income (without regard to the remediation ex- pense) for the taxable year the partnership incurs the remediation expense and for subsequent taxable years exceeds $500x, after allocation of the $500x of cumulative net income, net income will first be al- located to QO to offset any prior allocation of the environmental remediation expense deduction. On January 1 of Year 3, the partnership incurs a $100x expense for the environmental remediation of the land. In that year, the partnership had gross income of $60x and other expenses of $30x for total net income of $30x without regard to the expense asso- ciated with the environmental remediation. The part- nership allocated $15x of income to each of QO and TP and $100x of remediation expense to QO. (ii) The partnership satisfies the fractions rule. The allocation of the expense attributable to the remediation of the land is disregarded under para- graph (g) of this section. QO's share of overall partnership income is 50 percent, which equals QO's share of overall partnership loss. (iii) In Year 8, when the partnership's cumulative net income (without regard to the remediation ex- pense) for the taxable year the partnership incurred the remediation expense and subsequent taxable years is $480x (the $30x from Year 3, plus $450x of cumulative net income for Years 4-7), the partner- ship has gross income of $170x and expenses of $50x, for total net income of $120x. The partner- ship's cumulative net income for all years from Year 3 to Year 8 is $600x ($480x for Years 3-7 and $120x for Year 8). Pursuant to the partnership agreement, the first $20x of net income for Year 8 is allocated equally between QO and TP because the partnership must first earn cumulative net income in excess of $500x before making the offset allocation to QO. The remaining $100x of net income for Year 8 is allocated to QO to offset the environmental reme- diation expense allocated to QO in Year 3. (iv) Pursuant to paragraph (e)(1)(vii) of this sec- tion, the partnership's allocation of $100x of net income to QO in Year 8 to offset the prior environ- mental remediation expense is disregarded in com- puting overall partnership income or loss for pur- poses of the fractions rule. The allocation does not cause the partnership to violate the fractions rule. (f) * * * (4) Expenditures for management and similar fees, if such fees in the aggregate for the taxable year are not more than 2 percent of the partner's capital commit- ments; and * * * * * * * * (k) Special rules-(1) Changes in part- nership allocations arising from a change in the partners' interests-(i) In general. A qualified organization that acquires a partnership interest from another qualified organization is treated as a continuation of the prior qualified organization partner (to the extent of that acquired interest) for purposes of applying the fractions rule. Changes in partnership allocations that re- sult from other transfers or shifts of part- nership interests will be closely scruti- nized (to determine whether the transfer or shift stems from a prior agreement, understanding, or plan or could otherwise be expected given the structure of the transaction), but generally will be taken into account only in determining whether the partnership satisfies the fractions rule in the taxable year of the change and subsequent taxable years. (ii) Acquisition of partnership interests after initial formation of partnership. Changes in partnership allocations due to an acquisition of a partnership interest by a partner (new partner) after the initial formation of a partnership will not be closely scrutinized under paragraph (k)(1)(i) of this section, but will be taken into account only in determining whether the partnership satisfies the fractions rule in the taxable year of the change and subsequent taxable years, and dispropor- tionate allocations of income, loss, or de- duction to the partners to adjust the part- ners' capital accounts as a result of, and to reflect, the new partner acquiring the part- nership interest and the resulting changes to the other partners' interests will be dis- regarded in computing overall partnership income or loss for purposes of the frac- tions rule if such changes and dispropor- tionate allocations are not inconsistent with the purpose of the fractions rule un- der paragraph (k)(4) of this section and- (A) The new partner acquires the part- nership interest no later than 18 months following the formation of the partnership (applicable period); (B) The partnership agreement and other relevant documents anticipate the new partners acquiring the partnership in- terest during the applicable period, set forth the time frame in which the new partners will acquire the partnership inter- ests, and provide for the amount of capital the partnership intends to raise; (C) The partnership agreement and other relevant documents specifically set forth the method for determining any ap- plicable interest factor and for allocating income, loss, or deduction to the partners to account for the economics of the ar- rangement in the partners' capital ac- counts after the new partner acquires the partnership interest; and (D) The interest rate for any applicable interest factor is not greater than 150 percent of the highest applicable Federal rate, at the appropriate compounding period or periods, at the time the partnership was formed. (iii) Capital commitment defaults or reductions. Changes in partnership alloca- tions that result from an unanticipated partner default on a capital contribution commitment or an unanticipated reduction in a partner's capital contribution commit- ment, that are effected pursuant to provi- sions prescribing the treatment of such events in the partnership agreement, and that are not inconsistent with the purpose of the fractions rule under paragraph (k)(4) of this section, will not be closely scrutinized under paragraph (k)(1)(i) of this section, but will be taken into account only in determining whether the partner- ship satisfies the fractions rule in the tax- able year of the change and subsequent taxable years. In addition, partnership al- locations of income, loss, or deduction to <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageFooter="December 12, 2016" --> <!-- PageBreak --> partners made pursuant to the partnership agreement to adjust partners' capital ac- counts as a result of unanticipated capital contribution defaults or reductions will be disregarded in computing overall partner- ship income or loss for purposes of the fractions rule. The adjustments may in- clude allocations to adjust partners' capi- tal accounts to be consistent with the part- ners' adjusted capital commitments. (iv) Examples. The following examples illustrate the provisions of paragraph (k)(1) of this section. Example 1. Staged closing. (i) On July 1 of Year 1, two taxable partners (TP1 and TP2) form a partner- ship that will invest in debt-financed real property. The partnership agreement provides that, within an 18- month period, partners will be added so that an addi- tional $1000x of capital can be raised. The partnership agreement sets forth the method for determining the applicable interest factor that complies with paragraph (k)(1)(ii)(D) of this section and for allocating income, loss, or deduction to the partners to account for the economics of the arrangement in the partners' capital accounts. During the partnership's Year 1 taxable year, partnership had $150x of net income. TP1 and TP2, each, is allocated $75x of net income. (ii) On January 1 of Year 2, qualified organiza- tion (QO) joins the partnership. The partnership agreement provides that TP1, TP2, and QO will be treated as if they had been equal partners from July 1 of Year 1. Assume that the interest factor is treated as a reasonable guaranteed payment to TP1 and TP2, the expense from which is taken into account in the partnership's net income of $150x for Year 2. To balance capital accounts, the partnership allocates $100x of the income to QO ($50x, or the amount of one-third of Year 1 income that QO was not allo- cated during the partnership's first taxable year, plus $50x, or one-third of the partnership's income for Year 2) and the remaining income equally to TP1 and TP2. Thus, the partnership allocates $100x to QO and $25x to TP1 and TP2, each. (iii) The partnership's allocation to QO would violate the fractions rule because QO's overall per- centage of partnership income for Year 2 of 66.7 percent is greater than QO's fractions rule percent- age of 33.3 percent. However, the special allocation of $100x to QO for Year 2 is disregarded in deter- mining QO's percentage of overall partnership in- come for purposes of the fractions rule because the requirements in paragraph (k)(1)(ii) of this section are satisfied. Example 2. Capital call default. (i) On January 1 of Year 1, two taxable partners, (TP1 and TP2) and a qualified organization (QO) form a partnership that will hold encumbered real property and agree to share partnership profits and losses, 60 percent, 10 percent, and 30 percent, respectively. TP1 agreed to a capital commitment of $120x, TP2 agreed to a capital commitment of $20x, and QO agreed to a capital commitment of $60x. The partners met half of their commitments upon formation of the partner- ship. The partnership agreement requires a partner's interest to be reduced if the partner defaults on a capital call. The agreement also allows the non- defaulting partners to make the contribution and to increase their own interests in the partnership. Fol- lowing a capital call default, the partnership agree- ment requires allocations to adjust capital accounts to reflect the change in partnership interests as though the funded commitments represented the partner's interests from the partnership's inception. (ii) In Year 1, partnership had income of $100x, which was allocated to the partners $60x to TP1, $10x to TP2, and $30x to QO. (iii) In Year 2, partnership required each partner to contribute the remainder of its capital commit- ment, $60x from TP1, $10x from TP2, and $30x from QO. TP1 could not make its required capital contribution, and QO contributed $90x, its own cap- ital commitment, in addition to TP1's. TP1's default was not anticipated. As a result and pursuant to the partnership agreement, TP1's interest was reduced to 30 percent and QO's interest was increased to 60 percent. Partnership had income of $60x and losses of $120x in Year 2, for a net loss of $60x. Partner- ship allocated to TP1 $48x of loss (special allocation of $30x of gross items of loss to adjust capital accounts and $18x of net loss (30 percent of $60x net loss)), TP2 $6x of net loss (10 percent of $60x net loss), and QO $6x of loss (special allocation of $30x of gross items of income to adjust capital accounts - $36x of net loss (60 percent of $60x net loss)). At the end of Year 2, TP1's capital account equals $72x (capital contribution of $60x + $60x income from Year 1 - $48x loss from Year 2); TP2's capital account equals $24x (capital contributions of $20x \+ $10x income from Year 1 - $6x loss from Year 2); and QO's capital account equals $144x (capital con- tributions of $120x ($30x + $90x) + $30x income from Year 1 - $6x loss from Year 2). (iv) The changes in partnership allocations to TP1 and QO due to TP1's unanticipated default on its capital contribution commitment were effected pursuant to provisions prescribing the treatment of such events in the partnership agreement. Therefore these changes in allocations will not be closely scru- tinized under paragraph (k)(1)(i) of this section, but will be taken into account only in determining whether the partnership satisfies the fractions rule in the taxable year of the change and subsequent tax- able years. In addition, pursuant to paragraph (k)(1)(iii) of this section, the special allocations of $30x additional loss to TP1 and $30x additional income to QO to adjust their capital accounts to reflect their new interests in the partnership are dis- regarded when calculating QO's percentage of over- all partnership income and loss for purposes of the fractions rule. (2) * * * (i) Qualified organizations. (A) Qualified organizations do not hold (directly or indirectly through a partner- ship), in the aggregate, interests of greater than five percent in the capital or profits of the partnership; and * * * * * (ii) Non-qualified organizations. Sec- tion 514(c)(9)(B)(vi) does not apply to a partnership otherwise subject to that sec- tion if- (A) All partners other than qualified or- ganizations do not hold (directly or indi- rectly through a partnership), in the aggre- gate, interests of greater than five percent in the capital or profits of the partnership; and (B) Allocations have substantial eco- nomic effect without application of the special rules in § 1.704-1(b)(2)(iii)(c) (re- garding the presumption that there is a reasonable possibility that allocations will affect substantially the dollar amounts to be received by the partners from the part- nership if there is a strong likelihood that offsetting allocations will not be made in five years, and the presumption that the adjusted tax basis (or book value) of part- nership property is equal to the fair market value of such property). * * * * * (3) * * * (ii) * * * (B) $1,000,000. * * * * * (m) * * * (2) * * * Example 3. * * * (ii) P2 satisfies the fractions rule with respect to the P2/P1A chain. See § 1.702- 1(a)(8)(ii) (for rules regarding separately stating partnership items). P2 does not satisfy the fractions rule with respect to the P2/P1B chain. (n) Effective/applicability dates. (2) * * * However, paragraphs (d)(2)(ii) and (iii), (d)(6) Example 1(i) and (iv), (e)(1)(vi) and (vii), (e)(5) Example 5, (f)(4), (k)(1)(ii) through (iv), (k)(2)(i)(A), (k)(2)(ii), (k)(3)(ii)(B), (m)(1)(ii), and (m)(2) Example 3(ii) of this section apply to taxable years ending on or after the date these regulations are published as final regulations in the Federal Register. * * * * * John Dalrymple, Deputy Commissioner for Services and Enforcement. (Filed by the Office of the Federal Register on November 22, 2016, 8:45 a.m., and published in the issue of the Federal Register for November 23, 2016, 81 F.R. 84518) <!-- PageFooter="December 12, 2016" --> <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageBreak --> # Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as "rulings") that have an effect on previous rulings use the following defined terms to describe the effect: Amplified describes a situation where no change is being made in a prior pub- lished position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle ap- plied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified, below). Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confu- sion. It is not used where a position in a prior ruling is being changed. Distinguished describes a situation where a ruling mentions a previously pub- lished ruling and points out an essential difference between them. Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above). Obsoleted describes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rul- ings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling. Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a pe- riod of time in separate rulings. If the new ruling does more than restate the sub- stance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded. Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rul- ings in the series. Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. # Abbreviations The following abbreviations in current use and formerly used will appear in ma- terial published in the Bulletin. A-Individual. Acq .- Acquiescence. B-Individual. BE-Beneficiary. F.R .- Federal Register. FUTA-Federal Unemployment Tax Act. FX-Foreign corporation. G.C.M .- Chief Counsel's Memorandum. GE-Grantee. GP-General Partner. TFR-Transferor. T.I.R .- Technical Information Release. TP-Taxpayer. Ct.D .- Court Decision. I.R.B .- Internal Revenue Bulletin. TR-Trust. CY-County. LE-Lessee. TT-Trustee. D-Decedent. LP-Limited Partner. LR-Lessor. X-Corporation. DE-Donee. Del. Order-Delegation Order. Nonacq .- Nonacquiescence. O Organization. DR-Donor. P-Parent Corporation. PHC-Personal Holding Company. PO-Possession of the U.S. PR-Partner. PRS-Partnership. PTE-Prohibited Transaction Exemption. Pub. L .- Public Law. REIT-Real Estate Investment Trust. Rev. Proc .- Revenue Procedure. Rev. Rul .- Revenue Ruling. S-Subsidiary. S.P.R .- Statement of Procedural Rules. Stat .- Statutes at Large. T-Target Corporation. T.C .- Tax Court. T.D .- Treasury Decision. TFE-Transferee. CFR-Code of Federal Regulations. CI-City. GR-Grantor. COOP-Cooperative. IC-Insurance Company. U.S.C .- United States Code. DC-Dummy Corporation. M-Minor. Y-Corporation. DISC-Domestic International Sales Corporation. E-Estate. EE-Employee. E.O .- Executive Order. ER-Employer. ERISA-Employee Retirement Income Security Act. EX-Executor. F-Fiduciary. FC-Foreign Country. FICA-Federal Insurance Contributions Act. FISC-Foreign International Sales Company. FPH-Foreign Personal Holding Company. BK-Bank. B.T.A .- Board of Tax Appeals. C-Individual. C.B .- Cumulative Bulletin. Z-Corporation. <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageFooter="December 12, 2016" --> <!-- PageBreak --> ## Numerical Finding List1 Bulletin 2016-27 through 2016-50 ### Action on Decision: 2016-01, 2016-16 I.R.B. 580 2016-02, 2016-31 I.R.B. 193 2016-03, 2016-40 I.R.B. 424 ### Announcements: 2016-21, 2016-27 I.R.B. 8 2016-23, 2016-27 I.R.B. 10 2016-24, 2016-30 I.R.B. 170 2016-25, 2016-31 I.R.B. 205 2016-26, 2016-38 I.R.B. 389 2016-27, 2016-33 I.R.B. 238 2016-28, 2016-34 I.R.B. 272 2016-29, 2016-34 I.R.B. 272 2016-30, 2016-37 I.R.B. 355 2016-31, 2016-38 I.R.B. 392 2016-32, 2016-40 I.R.B. 434 2016-33, 2016-39 I.R.B. 422 2016-34, 2016-39 I.R.B. 422 2016-35, 2016-39 I.R.B. 423 2016-36, 2016-39 I.R.B. 423 2016-37, 2016-39 I.R.B. 423 2016-38, 2016-43 I.R.B. 523 2016-39, 2016-45 I.R.B. 720 2016-40, 2016-49 I.R.B. 791 2016-41, 2016-48 I.R.B. 780 2016-42, 2016-49 I.R.B. 793 ### Notices: 2016-40, 2016-27 I.R.B. 4 2016-41, 2016-27 I.R.B. 5 2016-42, 2016-29 I.R.B. 67 2016-43, 2016-29 I.R.B. 132 2016-44, 2016-29 I.R.B. 132 2016-45, 2016-29 I.R.B. 135 2016-46, 2016-31 I.R.B. 202 2016-47, 2016-35 I.R.B. 276 2016-48, 2016-33 I.R.B. 235 2016-49, 2016-34 I.R.B. 265 2016-50, 2016-38 I.R.B. 384 2016-51, 2016-37 I.R.B. 344 2016-52, 2016-40 I.R.B. 425 2016-53, 2016-39 I.R.B. 421 2016-54, 2016-40 I.R.B. 429 2016-55, 2016-40 I.R.B. 432 2016-57, 2016-40 I.R.B. 432 2016-58, 2016-41 I.R.B. 438 2016-59, 2016-42 I.R.B. 457 2016-60, 2016-42 I.R.B. 458 2016-61, 2016-46 I.R.B. 722 2016-62, 2016-46 I.R.B. 725 2016-63, 2016-45 I.R.B. 683 2016-64, 2016-46 I.R.B. 726 2016-65, 2016-48 I.R.B. 772 Notices :- Continued 2016-66, 2016-47 I.R.B. 747 2016-67, 2016-47 I.R.B. 751 2016-68, 2016-48 I.R.B. 774 2016-70, 2016-49 I.R.B. 784 2016-72, 2016-50 I.R.B. 794 ## Proposed Regulations: REG-163113-02, 2016-36 I.R.B. 329 REG-147196-07, 2016-29 I.R.B. 32 REG-123854-12, 2016-28 I.R.B. 15 REG-136978-12, 2016-50 I.R.B. 796 REG-150992-13, 2016-44 I.R.B. 537 REG-131418-14, 2016-33 I.R.B. 248 REG-102516-15, 2016-32 I.R.B. 231 REG-109086-15, 2016-30 I.R.B. 171 REG-134016-15, 2016-31 I.R.B. 205 REG-134122-15, 2016-46 I.R.B. 728 REG-101689-16, 2016-30 I.R.B. 170 REG-103058-16, 2016-33 I.R.B. 238 REG-105005-16, 2016-38 I.R.B. 380 REG-108792-16, 2016-36 I.R.B. 320 REG-108934-16, 2016-44 I.R.B. 532 REG-114734-16, 2016-48 I.R.B. 777 REG-122387-16, 2016-48 I.R.B. 779 REG-123600-16, 2016-43 I.R.B. 523 REG-130314-16, 2016-45 I.R.B. 718 ## Revenue Procedures: 2016-37, 2016-29 I.R.B. 136 2016-39, 2016-30 I.R.B. 164 2016-40, 2016-32 I.R.B. 228 2016-41, 2016-30 I.R.B. 165 2016-42, 2016-34 I.R.B. 269 2016-43, 2016-36 I.R.B. 316 2016-44, 2016-36 I.R.B. 316 2016-45, 2016-37 I.R.B. 344 2016-46, 2016-37 I.R.B. 345 2016-47, 2016-37 I.R.B. 346 2016-48, 2016-37 I.R.B. 348 2016-49, 2016-42 I.R.B. 462 2016-50, 2016-43 I.R.B. 522 2016-51, 2016-42 I.R.B. 465 2016-52, 2016-42 I.R.B. 520 2016-53, 2016-44 I.R.B. 530 2016-54, 2016-45 I.R.B. 685 2016-55, 2016-45 I.R.B. 707 2016-57, 2016-49 I.R.B. 786 ## Revenue Rulings: 2016-17, 2016-27 I.R.B. 1 2016-18, 2016-31 I.R.B. 194 2016-19, 2016-35 I.R.B. 273 2016-20, 2016-36 I.R.B. 279 2016-23, 2016-39 I.R.B. 382 2016-24, 2016-39 I.R.B. 395 2016-25, 2016-41 I.R.B. 435 Revenue Rulings :- Continued 2016-26, 2016-45 I.R.B. 538 2016-27, 2016-49 I.R.B. 781 ## Treasury Decisions: 9772, 2016-28 I.R.B. 11 9773, 2016-29 I.R.B. 56 9774, 2016-30 I.R.B. 151 9775, 2016-30 I.R.B. 159 9776, 2016-32 I.R.B. 222 9777, 2016-36 I.R.B. 282 9778, 2016-31 I.R.B. 196 9779, 2016-33 I.R.B. 233 9780, 2016-38 I.R.B. 357 9781, 2016-35 I.R.B. 274 9782, 2016-36 I.R.B. 301 9783, 2016-39 I.R.B. 396 9784, 2016-39 I.R.B. 402 9785, 2016-38 I.R.B. 375 9786, 2016-42 I.R.B. 442 9789, 2016-44 I.R.B. 527 9790, 2016-45 I.R.B. 540 9791, 2016-47 I.R.B. 734 9792, 2016-48 I.R.B. 751 9793, 2016-48 I.R.B. 768 1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016-01 through 2016-26 is in Internal Revenue Bulletin 2016-26, dated June 27, 2016. <!-- PageFooter="December 12, 2016" --> <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageBreak --> ## Finding List of Current Actions on Previously Published Items1 Bulletin 2016-27 through 2016-50 Notices: 2009-89 Modified by Notice 2016-51, 2016-37 I.R.B. 344 2012-54 Obsoleted by Notice 2016-51, 2016-37 I.R.B. 344 2013-1 Modified by Notice 2016-41, 2016-27 I.R.B. 5 2013-1 Superseded by Notice 2016-41, 2016-27 I.R.B. 5 2013-1 Modified by Notice 2016-65, 2016-47 I.R.B. 745 2013-1 Superseded by Notice 2016-65, 2016-47 I.R.B. 745 2013-67 Modified by Notice 2016-51, 2016-37 I.R.B. 344 2015-63 Superseded by Notice 2016-58, 2016-41 I.R.B. 438 ### Revenue Procedures: 2003-16 Modified by Rev. Proc. 2016-47, 2016-37 I.R.B. 346 2007-44 Clarified by Rev. Proc. 2016-37, 2016-29 I.R.B. 136 2007-44 Modified by Rev. Proc. 2016-37, 2016-29 I.R.B. 136 2007-44 Superseded by Rev. Proc. 2016-37, 2016-29 I.R.B. 136 2009-33 Modified by Rev. Proc. 2016-48, 2016-37 I.R.B. 348 ## Revenue Procedures :- Continued 2015-36 Modified by Rev. Proc. 2016-37, 2016-29 I.R.B. 136 2016-3 Modified by Rev. Proc. 2016-40, 2016-32 I.R.B. 228 2016-3 Modified by Rev. Proc. 2016-45, 2016-37 I.R.B. 228 2016-3 Supplemented by Rev. Proc. 2016-50, 2016-43 I.R.B. 522 2016-29 Modified by Rev. Proc. 2016-39, 2016-30 I.R.B. 164 ### Treasury Decisions: 2013-17 Obsoleted by T.D. 9785 2016-38 I.R.B. 375 2014-12 Modified by T.D. 9776 2016-32 I.R.B. 222 1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016-01 through 2016-26 is in Internal Revenue Bulletin 2016-26, dated June 27, 2016. <!-- PageFooter="Bulletin No. 2016-50" --> <!-- PageFooter="December 12, 2016" --> <!-- PageBreak --> # Internal Revenue Service Washington, DC 20224 Official Business Penalty for Private Use, $300 # INTERNAL REVENUE BULLETIN The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletins are available at www.irs.gov/irb/. # We Welcome Comments About the Internal Revenue Bulletin If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave. NW, IR-6230 Washington, DC 20224.
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