SECTION 7. TRANSITION RULE

.01 Noncomplying Election . Except as otherwise provided in this section 7.01, the Service will treat a § 108(i) election as effective if a taxpayer files an election with the taxpayer’s federal income tax return filed on or before September 16, 2009, using any reasonable procedure to make the election. However, an election that does not comply with section 4 of this revenue procedure will not be effective unless the taxpayer on or before November 16, 2009, files an amended return for the taxable year of the election and complies with the requirements of section 4 of this revenue procedure.

.02 Modification of Election . A taxpayer that files a § 108(i) election on or before September 16, 2009, may modify that election by filing an amended return on or before November 16, 2009 (for ex

(Form 1065) to the federal income tax returns filed with the Service pursuant to section 5.05(2) of this revenue procedure.

(5) For each taxable year for which a statement is required under section 5.01 of this revenue procedure, the nonfiling foreign partnership must attach to each affected partner’s Schedule K–1 (Form 1065) a statement meeting the requirements of section 5.03(2) of this revenue procedure. The partnership should not attach these statements to the Schedules K–1 that are filed with the Service, but must retain the statements, and each partner must retain that partner’s statement, in their respective books and records.

.06 Information Statements Made on Behalf of Certain Foreign Corporations . Each controlling domestic shareholder must attach a statement identifying the foreign corporation and meeting the requirements of section 5.02 of this revenue procedure to the shareholder’s federal income tax return for each taxable year for which a statement is required under section 5.01 of this revenue procedure.

.07 Additional Annual Reporting Re- quirements for Tiered Pass-Through Enti- ties .

(1) A partnership required to file a U.S. partnership return other than under § 1.6031(a)–1(b)(5), or an S corporation, that receives a Schedule K–1 (Form 1065 or Form 1065–B) described in the second sentence of section 5.03(1) of this revenue procedure reflecting its share of any § 108(i) information must report on the Schedules K–1 (Form 1065, Form 1065–B, or Form 1120S) to its partners or shareholders, as the case may be, each partner’s or shareholder’s share of those items (an S corporation only reports to its shareholders the items described in section 4.07(1)(a) through (d) of this revenue procedure).

(2) If a partnership described in section 5.07(1) of this revenue procedure receives a statement described in sections 5.03(2) or 5.05(5) of this revenue procedure or this section 5.07(2), it must provide each of its partners a statement containing the partner’s share of each of the items listed on each statement received by the partnership. If an S corporation receives a statement described in sections 5.03(2) or 5.05(5) of this revenue procedure or this section 5.07(2), it must provide each of its shareholders a statement contain

ing the shareholder’s share of each of the items listed on each statement received by the S corporation that are described in section 5.03(2)(b)(i) through (viii) of this revenue procedure. The partnership or S corporation must attach the statement or statements to the Schedule K–1 (Form 1065 or Form 1065–B) or Schedule K–1 (Form 1120S) that is provided to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. The partnership or S corporation should not attach these statements to the Schedules K–1 that are filed with the Service, but must retain these statements, and each partner and shareholder must retain that partner’s or shareholder’s statement, in their respective books and records.

(3) This paragraph 5.07(3) provides the rules for persons described in section 4.12(6) of this revenue procedure if the foreign partnership, for which the Category 1 or 2 filer has a filing requirement, receives a Schedule K–1 (Form 1065 or Form 1065–B) reflecting the partnership’s share of any items described in the second sentence of section 5.03(1) of this revenue procedure, or a statement described in sections 5.03(2) or 5.05(5) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity).

(a) For each partner for whom the Category 1 filer is required to complete a Schedule K–1 (Form 8865) (which includes the Category 1 filer itself), the Category 1 filer must:

(i) Include the information described in section 4.07(1) of this revenue procedure in the Schedule K–1 (Form 8865) that the Category 1 filer files with the Service and completes for the partner;

(ii) Produce a statement containing the partner’s share of the items listed on each statement received by the partnership; and

(iii) Attach the statement described in section 5.07(3)(a)(ii) of this revenue procedure to each Schedule K–1 (Form 8865) that it is required to provide to a partner of the foreign partnership.

(b) A Category 2 filer must include its share of the information described in section 4.07(1) on the Schedule K–1 (Form 8865) that it is required to complete. Cat

September 8, 2009 317 2009–36 I.R.B.

as their contents may become material in the administration of any internal revenue law. Generally, tax returns and return information are confidential, as required by § 6103.

DRAFTING INFORMATION

The principal authors of this revenue procedure are Megan A. Stoner of the Office of Associate Chief Counsel (Passthroughs & Special Industries) and Craig Wojay of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Megan A. Stoner at (202) 622–3070 for questions involving partnerships and S corporations, William E. Blanchard at (202) 622–3950 for questions involving OID, Ronald M. Gootzeit at (202) 622–3860 for questions involving foreign entities, Robert Rhyne at (202) 622–7790 for questions involving earnings and profits and consolidated groups, and Craig Wojay at (202) 622–4920 for questions on § 108(i) generally (not toll-free calls).

ample, to modify the amount of COD income the taxpayer elects to defer). To be effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure.

.03 Notations . A taxpayer that files the amended return on paper must write “Section 108(i) Election” on the top of the first page. A taxpayer that files the amended return electronically should indicate “Section 108(i) Election” on the return. See Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-file Providers for Business Returns Tax Year 2008 for more details.