Computer Software Under Section 199(c)(5)(B); Correction

Official source: Federal Register (GovInfo) (https://www.govinfo.gov/content/pkg/FR-2006-07-06/pdf/E6-10245.pdf), retrieved 2026-10-03. U.S. Government work (17 U.S.C. § 105).

38262 Federal Register / Vol. 71, No. 129 / Thursday, July 6, 2006 / Rules and Regulations

revised as of April 1, 2006, on page 10, § 1.301–1 is corrected by adding paragraph (g) to read as follows:

§ 1.301–1 Rules applicable with respect to distributions of money and other property.

- - - (g) Reduction for liabilities —(1) General rule. For the purpose of section 301, no reduction shall be made for the amount of any liability, unless the liability is assumed by the shareholder within the meaning of section 357(d).

(2) No reduction below zero. Any reduction pursuant to paragraph (g)(1) of this section shall not cause the amount of the distribution to be reduced below zero.

(3) Effective dates —(i) In general. This paragraph (g) applies to distributions occurring after January 4, 2001.

(ii) Retroactive application. This paragraph (g) also applies to distributions made on or before January 4, 2001, if the distribution is made as part of a transaction described in, or substantially similar to, the transaction in Notice 99-59 (1999-2 C.B. 761), including transactions designed to reduce gain (see § 601.601(d)(2) of this chapter). For rules for distributions on or before January 4, 2001 (other than distributions on or before that date to which this paragraph (g) applies), see rules in effect on January 4, 2001 (see § 1.301-1(g) as contained in 26 CFR part 1 revised April 1, 2001).

[FR Doc. 06–55522 Filed 7–5–06; 8:45 am]

BILLING CODE 1505–01–D

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9262]

RIN 1545–BF57

Computer Software Under Section 199(c)(5)(B); Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

SUMMARY: This document contains a correction to temporary regulations (TD 9262) that were published in the Federal Register on Thursday, June 1, 2006 (71 FR 31074) concerning the application of section 199 of the Internal Revenue Code, which provides a deduction for income attributable to domestic production activities, to certain transactions involving computer software.

DATES: These corrections are effective June 1, 2006.

FOR FURTHER INFORMATION CONTACT: Paul Handleman or Lauren RossTaylor, (202) 622–3040 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The correction notice that is the subject of this document is under section 199 of the Internal Revenue Code.

Need for Correction

As published, the correction notice (TD 9262) contains errors that may prove to be misleading and are in need of clarification.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

I Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:

PART 1—INCOME TAXES

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

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

§ 1.199–3T [Corrected]

I Par. 2. Section 1.199–3T is amended by revising paragraphs (i)(6)(iii) introductory text and Example 5 to read as follows:

§ 1.199–3T Domestic production gross receipts (temporary).

- - - (i) * - (6) * - (iii) Exceptions. Notwithstanding paragraph (i)(6)(ii) of this section, if a taxpayer derives gross receipts from providing to customers computer software MPGE in whole or in significant part by the taxpayer within the United States for the customers’ direct use while connected to the Internet (online software), then such gross receipts will be treated as being derived from the lease, rental, license, sale, exchange, or other disposition of computer software only if—

Example 5. The facts are the same as in Example 4, except that O does not sell the tax preparation computer software to customers affixed to a compact disc or by download and O’s only method of providing the tax preparation computer software to customers is over the Internet. P, an unrelated person, derives, on a regular and ongoing basis in its business, gross receipts from the sale to customers of P’s substantially identical tax preparation computer software that has been affixed to a compact disc as

well as from the sale to customers of P’s substantially identical tax preparation computer software that customers have downloaded from the Internet. Under paragraph (i)(6)(iii)(B) of this section, O’s gross receipts derived from providing its tax preparation computer software to customers over the Internet will be treated as derived from the lease, rental, license, sale, exchange, or other disposition of computer software and are DPGR (assuming all the other requirements of § 1.199–3 are met).

§ 1.199–8T [Corrected]

I Par. 3. Section 1.199–8T is amended by revising paragraph (i)(4) to read as follows:

§ 1.199–8T Other rules (temporary). (i) * - (4) Computer software. Section 1.199– 3T(i)(6)(ii) through (v) are applicable for taxable years beginning on or after June 1, 2006. Taxpayers may apply these temporary regulations to taxable years beginning after December 31, 2004, and before June 1, 2006. The applicability of § 1.199–3T(i)(6)(ii) through (v) expires on or before May 22, 2009.

Guy R. Traynor, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).

[FR Doc. E6–10245 Filed 7–5–06; 8:45 am]

BILLING CODE 4830–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9267]

RIN 1545–BE02

Disclosure of Return Information to the Bureau of Economic Analysis

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

SUMMARY: This document contains temporary regulations regarding additional items of return information disclosable to the Bureau of Economic Analysis (Bureau) of the Department of Commerce. The text of these temporary regulations serves as the text of the proposed regulations set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this issue of the Federal Register .

DATES: Effective Date: These temporary regulations are effective July 6, 2006. Applicability Date: For dates of applicability, see § 301.6103(j)(1)–1T(f).

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