Part I. Rulings — Internal Revenue Bulletin 2011-31

Section 956.—Investment of Earnings in United States Property

26 CFR 1.956–1: Shareholder’s pro rata share of a controlled foreign corporation’s increase in earnings invested in United States property.

T.D. 9530

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1

Guidance Under Section 956 for Determining the Basis of Property Acquired in Certain Nonrecognition Transactions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

SUMMARY: This document contains final and temporary regulations under section 956 of the Internal Revenue Code (Code) regarding the determination of basis in certain United States property acquired by a controlled foreign corporation in certain nonrecognition transactions that are intended to repatriate earnings and profits of the controlled foreign corporation without U.S. income taxation. The regulations affect United States shareholders of a controlled foreign corporation that acquires United States property in certain nonrecognition transactions.

DATES: Effective Date: These regulations are effective on June 24, 2011.

Applicability Date: For dates of applicability, see §1.956–1(e)(6)(vii).

FOR FURTHER INFORMATION CONTACT: Kristine A. Crabtree at (202) 622–3840 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

On June 24, 2008, the IRS published final and temporary regulations under section 956 (T.D. 9402, 2008–31 I.R.B. 254) in the Federal Register (73 FR 35580). On the same date, the IRS published a notice of proposed rulemaking (REG–102122–08, 2008–31 I.R.B. 278) (the proposed regulations) in the Federal Register (73 FR 35606) cross-referencing the temporary regulations. The temporary and proposed regulations provided guidance regarding the determination of basis in certain United States property (as defined in section 956(c)) acquired by a controlled foreign corporation (as defined in section 957(a)) in certain nonrecognition transactions that are intended to repatriate earnings and profits of the controlled foreign corporation without an income inclusion by its United States shareholders under section 951(a)(1)(B). The purpose of these regulations is to prevent a United States shareholder of a controlled foreign corporation from avoiding an income inclusion under section 951(a)(1)(B) where the controlled foreign corporation acquires United States property in an exchange to which these regulations apply and claims a basis in the United States property that is less than the amount of earnings and profits repatriated. No comments in response to the proposed regulations were received and no public hearing was requested or held. This Treasury decision adopts the proposed regulations with minor changes, described below, as final regulations and removes the corresponding temporary regulations.

Language was added to §1.956–1(e)(6)(iii) to clarify the effect of the assumption of a liability by a controlled foreign corporation in connection with an exchange to which §1.956–1(e)(6) applies. The final regulations also modify §1.956–1(e)(6)(v) to address the situation in which the controlled foreign corporation exchanges specified United States property the adjusted basis in which has been determined under §1.956–1(e)(6) for

other United States property, by providing that for purposes of applying section 956 the controlled foreign corporation’s adjusted basis in the other United States property is no less than its adjusted basis in the specified United States property as determined under §1.956–1(e)(6)(iii). A cross-reference to the anti-abuse rule of §1.956–1T(b)(4) was also added to §1.956–1(e)(6)(vi), Example 3 .

Effective/Applicability Dates

These final regulations apply to property acquired in exchanges occurring on or after June 24, 2011. For transactions that occur prior to June 24, 2011, see §1.956–1T(e)(6) as contained in 26 CFR Part 1 revised as of April 1, 2011.

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866; therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the 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, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Drafting Information

The principal author of these regulations is Kristine A. Crabtree, Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in their development.

- - - -

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 1 is amended as follows:

2011–31 I.R.B. 77 August 1, 2011

corporation’s adjusted basis in any United States property received in the exchange (or exchanges) shall be no less than the aggregate adjusted basis of the specified United States property as determined under paragraph (e)(6)(iii) of this section, and the related person transferee’s adjusted basis in such specified United States property shall be no less than the adjusted basis of such specified United States property in the hands of the controlled foreign corporation as determined under paragraph (e)(6)(iii) of this section. This paragraph (e)(6)(v) shall also apply in the case of one or more successive transfers of the specified United States property by a related person transferee to one or more persons related to the controlled foreign corporation (within the meaning of section 954(d)(3)). This paragraph (e)(6)(v) shall apply regardless of whether a subsequent transfer was part of a plan (or series of related transactions) that includes the controlled foreign corporation’s acquisition of the specified United States property.

(vi) Examples . The rules of this paragraph (e)(6) are illustrated by the following examples:

Example 1 . (i) Facts . USP, a domestic corporation, is the common parent of an affiliated group that joins in the filing of a consolidated return. USP owns 100 percent of the stock of US1 and US2, both domestic corporations and members of the USP consolidated group. US1 owns 100 percent of the stock of CFC, a controlled foreign corporation. US2 issues $100x of its stock to CFC in exchange for $10x of CFC stock and $90x cash. US2’s transfer of its stock to CFC is described in section 351, US2 recognizes no gain in the exchange under section 1032(a), and CFC’s basis in the US2 stock acquired in the exchange is determined under section 362(a).

(ii) Analysis . The US2 stock acquired by CFC in the exchange constitutes specified United States property under paragraph (e)(6)(ii) of this section because CFC acquires the US2 stock from US2, the issuing corporation. Therefore, because CFC’s adjusted basis in the US2 stock is determined under section 362(a), then for purposes of applying section 956, CFC’s adjusted basis in the US2 stock shall, under paragraph (e)(6)(iii) of this section, be no less than $90x, the fair market value of the property exchanged by CFC for the US2 stock (the $10x of CFC stock issued in the exchange does not constitute property for purposes of paragraph (e)(6)(iii) of this section). Pursuant to paragraph (e)(6)(iv) of this section, for purposes of §1.956–2(d)(1)(i)(a) CFC shall be treated as acquiring its adjusted basis of no less than $90x in the US2 stock at the time of its transfer of property to US2 in exchange for the US2 stock. The result would be the same if, instead of CFC transferring $90x of cash to US2 in the exchange, CFC assumes a $90x liability of US2.

Example 2 . (i) Facts . USP, a domestic corporation, owns 100 percent of the stock of USS, a

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by adding entries in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Section 1.956–1(e)(6) also issued under 26 U.S.C. 367(b) and 956(e). Par. 2. Section 1.956–1 is amended by revising the last sentence of paragraph (e)(1), revising paragraphs (e)(5) and (e)(6), and removing paragraph (f) to read as follows:

§1.956–1 Shareholder’s pro rata share of a controlled foreign corporation’s increase in earnings invested in United States property .

- - - (e) - * (1) * * * See §1.956–1(e)(6) for a special rule for determining amounts attributable to United States property acquired as the result of certain nonrecognition transactions.
- - - (5) [Reserved]. For further guidance, see §1.956–1T(e)(5).

(6) Adjusted basis of property ac- quired in certain nonrecognition transac- tions —(i) Scope . This paragraph (e)(6) provides rules for determining, solely for purposes of applying section 956, the adjusted basis of specified United States property acquired by a controlled foreign corporation pursuant to an exchange in which the controlled foreign corporation’s basis in such specified United States property is determined under section 362(a). This paragraph (e)(6) also applies if specified United States property, the adjusted basis in which has been determined under these regulations, is transferred (in one or more subsequent exchanges) to a related person (within the meaning of section 954(d)(3)), pursuant to one or more exchanges in which the related person’s adjusted basis in such property is determined, in whole or in part, by reference to the transferor controlled foreign corporation’s adjusted basis in such property.

(ii) Definition of specified United States property . For purposes of this paragraph (e)(6), specified United States property is stock of a domestic corporation described in section 956(c)(1)(B) or an obligation of a domestic corporation described in

section 956(c)(1)(C) that is acquired by a controlled foreign corporation from the domestic issuing corporation. Specified United States property does not include property described in section 956(c)(2).

(iii) Adjusted basis of specified United States property . Solely for purposes of applying section 956, the adjusted basis of specified United States property acquired by a controlled foreign corporation in connection with an exchange to which this paragraph (e)(6) applies shall be no less than the fair market value of any property transferred by the controlled foreign corporation in exchange for such specified United States property. For purposes of this paragraph (e)(6), the term prop- erty has the meaning set forth in section 317(a), but also includes any liability that is assumed by the controlled foreign corporation in connection with the exchange notwithstanding the application of section 357(a). The assumption of a liability by the controlled foreign corporation in connection with the exchange will be considered the transfer of property. The fair market value of such property will be the amount of the liability assumed. The fair market value of any property transferred by the controlled foreign corporation in exchange for the specified United States property shall be determined at the time of the exchange.

(iv) Timing . For purposes of §1.956–2(d)(1)(i)(a), a controlled foreign corporation that acquires specified United States property in an exchange to which this paragraph (e)(6) applies acquires an adjusted basis in such property at the time of the controlled foreign corporation’s exchange of property for such specified United States property.

(v) Transfers to related persons . If a controlled foreign corporation transfers specified United States property, the adjusted basis in which has been determined under this paragraph (e)(6), to a related person (within the meaning of section 954(d)(3)) (related person transferee) in one or more exchanges pursuant to which the related person transferee’s adjusted basis in such specified United States property is determined, in whole or in part, by reference to the controlled foreign corporation’s adjusted basis in such specified United States property, then, solely for purposes of applying section 956 following such exchange, the controlled foreign

August 1, 2011 78 2011–31 I.R.B.

DATES: Effective Date: These regulations are effective on June 24, 2011.

Applicability Date: For dates of applicability of these regulations, see §§1.6081–2(h), 1.6081–6(g), and 54.6081–1(f).

FOR FURTHER INFORMATION CONTACT: Jason Bremer, (202) 622–4910 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to 26 CFR parts 1 and 54 under section 6081 of the Internal Revenue Code (Code). On November 8, 2005, the Treasury Department and the IRS published a notice of proposed rulemaking (REG–144898–04, 2005–2 C.B. 1062) by cross-reference to temporary regulations (T.D. 9229, 2005–2 C.B. 1051) in the Federal Regis- ter (70 FR 67356, 70 FR 67397) relating to the simplification of procedures for obtaining automatic extensions of time to file certain returns. On July 1, 2008, the Treasury Department and the IRS published final and temporary regulations (T.D. 9407, 2008–33 I.R.B. 330) in the Federal Register (73 FR 37362) finalizing the rules simplifying the procedures for obtaining automatic extensions of time to file certain returns. A notice of proposed rulemaking (REG–115457–08, 2008–33 I.R.B. 390) cross-referencing the temporary regulations also was published in the Federal Register (73 FR 37389) on July 1, 2008. The temporary and proposed regulations reduced the automatic six-month extension of time to file contained in the 2005 proposed regulations to five months for certain pass-through entities (most partnerships, estates, and certain trusts).

As these pass-through entities were previously allowed to obtain an automatic sixmonth extension of time to file certain returns, the Treasury Department and the IRS requested comments on whether, and how, a five-month extension of time to file for these pass-through entities might increase or reduce overall taxpayer burden. Approximately 70 comments were received in response to the notice of proposed rulemaking. A public hearing was held on January 13, 2009. Three speakers

domestic corporation. USP also owns 100 percent of the stock of CFC, a controlled foreign corporation. USP’s adjusted basis in its USS stock equals the fair market value of the USS stock, or $100x. USP transfers its USS stock to CFC in exchange for $100x of CFC stock. USP’s transfer of its USS stock to CFC is described in section 351, USP recognizes no gain in the exchange under section 351(a), and CFC’s adjusted basis in the USS stock acquired in the exchange, determined under section 362(a), equals $100x.

(ii) Analysis . The USS stock acquired by CFC in the exchange does not constitute specified United States property under paragraph (e)(6)(ii) of this section because CFC acquires the USS stock from USP. Therefore, CFC’s adjusted basis in the USS stock, for purposes of section 956, is not determined under this paragraph (e)(6). Instead, CFC’s adjusted basis in the USS stock is determined under the general rule of section 956(a) and under paragraphs (e)(1) through (4) of this section. As determined under section 362(a), CFC’s adjusted basis in the USS stock is $100x.

Example 3 . (i) Facts . USP, a domestic corporation, owns 100 percent of the stock of CFC1, a controlled foreign corporation. CFC1 holds specified United States property (within the meaning of paragraph (e)(6)(ii) of this section) with an adjusted basis of $30x for purposes of applying section 956 that was determined under paragraph (e)(6)(iii) of this section. CFC1 owns 100 percent of the stock of CFC2, a controlled foreign corporation. CFC1 transfers the specified United States property to CFC2 in an exchange described in section 351. CFC2’s adjusted basis in the specified United States property is determined under section 362(a).

(ii) Analysis . In the section 351 exchange, CFC1 transferred specified United States property to CFC2 with an adjusted basis that was determined under paragraph (e)(6)(iii) of this section. Further, CFC2’s adjusted basis in the specified United States property is determined under section 362(a) by reference, in whole or in part, to CFC1’s adjusted basis in such property. Therefore, for purposes of applying section 956, pursuant to paragraph (e)(6)(v) of this section CFC2’s adjusted basis in the specified United States property shall be no less than $30x. Paragraph (e)(6)(v) of this section would also apply if CFC2 subsequently transfers the specified United States property to another person related to CFC1 (within the meaning of section 954(d)(3)) if such related person’s adjusted basis in the specified United States property is determined by reference, in whole or in part, to CFC2’s adjusted basis in such property. See also §1.956–1T(b)(4) if one of the principal purposes of CFC1’s transfer of property to CFC2 was the avoidance of the application of section 956 with respect to CFC1.

(vii) Effective/applicability dates . This paragraph (e)(6) applies to property acquired in exchanges occurring on or after June 24, 2011. For transactions that occur prior to June 24, 2011, see §1.956–1T(e)(6) as contained in 26 CFR Part 1 revised as of April 1, 2011.

Par. 3. Section 1.956–1T is amended by removing paragraph (e)(6) and revising paragraph (f) to read as follows:

§1.956–1T Shareholder’s pro rata share of a controlled foreign corporation’s increase in earnings invested in United States property (temporary) .

- - - (f) Effective/applicability date . Paragraph (e)(5) of this section applies to investments made on or after June 14, 1988.

Steven T. Miller, Deputy Commissioner for Services and Enforcement.

Approved June 11, 2011.

Emily S. McMahon, Acting Assistant Secretary of the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on June 23, 2011, 8:45 a.m., and published in the issue of the Federal Register for June 24, 2011, 76 F.R. 36993)

Section 6081.—Extension of Time for Filing Returns

26 CFR 1.6081–2: Automatic extension of time to file certain returns filed by partnerships.

T.D. 9531

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 54

Extension of Time for Filing Returns

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and removal temporary regulations

SUMMARY: This document contains final regulations relating to the automatic extensions of time to file returns for partnership, trust, and estate taxpayers, and automatic extensions of time for filing returns for pension excise taxes. The objective of these final regulations is to reduce overall taxpayer burden by providing an extension period that strikes the most reasonable balance for these pass-through entities and the large number of taxpayers who require information from these entities for completion of their income tax returns.

2011–31 I.R.B. 79 August 1, 2011

ing what the optimal period of extension would be for reducing taxpayer burden.

The Treasury Department and the IRS considered several extension periods for pass-through entities, including a four-month and a five-month extension period, when drafting the proposed and temporary regulations. The Treasury Department and the IRS ultimately decided upon a five-month automatic extension period for the proposed and temporary regulations. Many comments were received supporting the five-month extension period. Some commentators noted, however, that the five-month extension period would not alleviate the burden on corporate taxpayers with ownership interests in pass-through entities. These commentators expressed a concern that even a five-month extension period for these entities would, in most cases, simply align the extended due date for pass-through entities with the extended due date for corporate returns, resulting in the same delay of information to corporate owners of these entities. That delay, the commentators contend, would greatly increase the need for filing amended returns. Commentators suggested shortening the automatic extension for these entities to less than five months.

In opting for the five-month extension, the Treasury Department and the IRS recognize that some corporations with ownership interests in pass-through entities may continue to experience delayed receipt of information needed to complete their own corporate returns. The Treasury Department and the IRS, however, continue to believe that a five-month extension period reduces the overall burden on taxpayers and strikes the most reasonable balance for all affected taxpayers. The five-month extension period allows pass-through entities, including complex and tiered entities, an adequate time for preparation of the required pass-through returns and also ensures the timely and accurate dissemination of information to a large number of taxpayers who require that information for completion of their own income tax returns.

Electing large partnerships required to file Form 1065–B, “ U.S. Return of Income for Electing Large Partnerships,” for any taxable year will be allowed an automatic six-month extension of time to file the return, however, because these pass-through

appeared at the public hearing and commented on the notice of proposed rulemaking.

All comments were considered and are available for public inspection at www.regulations.gov or upon request. After consideration of the written comments and the comments provided at the public hearing, the proposed regulations under section 6081 are adopted as revised by this Treasury decision. The public comments, public hearing, and the revisions are discussed in this preamble.

Explanation and Summary of Comments

Prior to issuance of the 2005 temporary regulations, T.D. 9229, pass-through entities were entitled to an automatic three-month extension of time to file certain returns by filing one form, and could also request a discretionary additional three-month extension of time to file by filing a second form. T.D. 9229 provided temporary regulations that simplified the extension process by allowing most taxpayers, including pass-through entities, to obtain a six-month automatic extension of time to file by filing one single form. In the 2008 final and temporary regulations, T.D. 9407, the Treasury Department and the IRS finalized rules granting an automatic six-month extension of time to file for non pass-through entities and granting certain pass-through entities a five-month automatic extension of time to file certain returns. The five-month extension included in the 2008 final and temporary regulations for certain pass-through entities responded to comments received on the 2005 temporary regulations. Commentators expressed concern that an automatic six-month extension for pass-through entities would unduly burden individual and corporate taxpayers with ownership interests in pass-through entities because individual and corporate taxpayers might not receive information returns from pass-through entities in sufficient time to complete their income tax returns in an accurate and timely manner.

Partnership, Trust, and Estate Taxpayers

Recognizing the inherent conflict between providing sufficient time for pass-through entities to prepare returns and ensuring that the owners and bene

ficiaries of pass-through entities timely receive information returns needed to file their own returns, the 2008 proposed and temporary regulations specifically requested comments on whether a shorter filing extension period for pass-through entities might increase or reduce overall taxpayer burden. The IRS received approximately 70 comments, many of which are summarized in this preamble.

Several commentators suggested that the Treasury Department and the IRS should consider changing the filing and extension due dates for individual and corporate tax returns rather than shortening the extension period for pass-through entities. For example, some commentators suggested moving the individual taxpayer return due date to April 30th, or allowing individuals and corporations a seven-month extension of time to file returns. Other commentators suggested moving up the filing date for partnership, trust, and estate taxpayers to March 15th, thereby allowing these entities a full six-month extension of time to file until September 15th so that individual taxpayers with ownership interests in the entities would receive information timely.

These suggestions are not viable options for a regulation project because the due dates for filing tax returns are determined by statute. See, for example, sections 6012(a) and 6072. Further, section 6081 provides that, except in the case of taxpayers who are abroad, the maximum extension of time to file a tax return cannot exceed six months. Accordingly, without legislative action, the Treasury Department and the IRS cannot change the due date for filing tax returns or increase the maximum extension of time to file a tax return for pass-through entities, individuals, or corporations.

Although the comments with regard to shortening the automatic extension period for these pass-through entities varied as to time periods, the majority of commentators agreed that a less than six-month extension period for pass-through entities would generally reduce overall taxpayer burden by allowing taxpayers with ownership interests in pass-through entities to receive information in a more timely fashion vis-à-vis preparation of their own individual or corporate income tax returns. There was no clear consensus, however, regard

August 1, 2011 80 2011–31 I.R.B.

Pension Excise Taxes

These final regulations also adopt without modification the proposed amendments to 26 CFR part 54, which allow filers of Form 8928, “ Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code,” to obtain an automatic six-month extension of time to file the return after the date prescribed for filing the return.

Special Analyses

It has been determined that this Treasury Decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. Although these final regulations reference forms that are approved under the Paperwork Reduction Act (44 U.S.C. chapter 35), the regulations themselves do not impose a collection of information on small entities. Therefore, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding this regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses.

Drafting Information

The principal author of these regulations is Jason Bremer of the Office of the Associate Chief Counsel (Procedure and Administration).

- - - -

Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 54 are amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by adding entries in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Section 1.6081–2 also issued under 26 U.S.C. 6081. - * *

entities are statutorily required to furnish Schedules K–1 by March 15, regardless of any extension of time to file the return. See section 6031(b).

Comments varied in response to the five-month automatic filing extension period provided for trust taxpayers. Several commentators expressed support of the overall five-month extension to pass-through entities. Other commentators suggested that trusts resemble an end taxpayer more than a pass-through entity, and in that respect are more akin to individuals than to partnerships. These commentators argued that trusts did not belong in the same class of entities as partnerships and estates for purposes of automatic filing extensions.

Some commentators further expressed concern that Schedules K–1 would not be received by trusts in a sufficiently timely fashion. For example, commenters noted that trusts are often invested in partnerships, which are often invested in other partnerships in tiered structures, with each entity relying on the next for information before preparing their own statements. These commenters feared that, due to the compressed timeframe when Forms 1065, “ U.S. Return of Partnership Income,” will typically be prepared, Schedules K–1 received by each succeeding entity in the chain ultimately will be received by trusts at the very last minute, resulting in inaccuracies and increased preparer burden.

Commentators also pointed out that the five-month extended deadline for trusts would coincide with the extended due date for S Corporation tax returns. Due to the fact that many trusts are invested in S Corporations, these commentators viewed this as an increased burden on trusts and their return preparers.

The Treasury Department and the IRS recognize that only allowing a five-month extension of time to file for trusts may cause a hardship, as some trusts may have less time to complete accurate income tax returns and to provide timely information to the trust’s beneficiaries. Providing a longer extension of time to file, however, still presents the potential of shifting the burden to individuals who might not receive timely information. In addition, the Treasury Department and the IRS believe that the five-month automatic filing extension period has generally been successful

and continues to strike the right balance in reducing overall taxpayer burden since the proposed and temporary regulations were adopted.

Therefore, after thorough consideration of all the comments, the Treasury Department and the IRS determined that the fivemonth extension period best reduces overall tax burden. Accordingly, these final regulations provide that trusts will continue to receive an automatic five month extension of time to file as provided in the proposed and temporary regulations.

Finally, a comment questioned whether the five-month automatic extension of time to file estate or trust income tax returns applies to individuals filing bankruptcy petitions under chapter 7 or 11 of title 11 of the United States Code. The bankruptcy estate created when a petition is filed by an individual under either chapter 7 or 11 is a separate taxable entity for title 26 purposes. See 26 U.S.C. §1398. Although fiduciaries of these individual bankruptcy estates (trustees or debtors-in-possession) may be required to file Forms 1041, the bankruptcy estates are not pass-through entities as described in these regulations. Therefore, the five-month automatic extension provided by these regulations is inapplicable to bankruptcy estates of individuals under chapter 7 or 11 of title 11 of the Bankruptcy Code.

Pass-through entities eligible to file bankruptcy petitions, such as partnerships, would be affected by these regulations. A separate taxable entity is not created when a partnership files a bankruptcy case. See generally 26 U.S.C. §1399. The trustee or debtor-in-possession of the bankrupt partnership files a Form 1065, not a Form 1041. Thus, the five-month automatic extension provided in these regulations would apply, as the filing of a bankruptcy petition does not change the information reporting requirements of pass-through entities, such as a partnership.

Accordingly, after consideration of all comments and in order to best minimize overall taxpayer burden, these final regulations provide for a five-month automatic extension of time to file certain returns for partnerships, trusts, and estates other than certain bankruptcy estates.

2011–31 I.R.B. 81 August 1, 2011

No additional extension will be allowed pursuant to §1.6081–1(b) beyond the automatic 5-month extension provided by this section.

(2) A bankruptcy estate that is created when an individual debtor files a petition under either chapter 7 or chapter 11 of Title 11 of the U.S. Code that is required to file an income tax return on Form 1041, “ U.S. Income Tax Return for Estates and Trusts,” and an estate or trust required to file an income tax return on Form 1041–N, “ U.S. Income Tax Return for Electing Alaska Na- tive Settlement,” or Form 1041–QFT, “ U.S. Income Tax Return for Qualified Funeral Trusts ” for any taxable year will be allowed an automatic 6-month extension of time to file the return after the date prescribed for filing the return if the estate files an application under this section in accordance with paragraph (b) of this section.

(b) Requirements . To satisfy this paragraph (b), an estate or trust must—

(1) Submit a complete application on Form 7004, “ Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Re- turns,” or in any other manner prescribed by the Commissioner;

(2) File the application on or before the date prescribed for filing the return with the Internal Revenue Service office designated in the application’s instructions; and

(3) Show the amount properly estimated as tax for the estate or trust for the taxable year.

(c) No extension of time for the payment of tax . An automatic extension of time for filing a return granted under paragraph (a) of this section will not extend the time for payment of any tax due on such return.

(d) Effect of extension on beneficiary . An automatic extension of time to file an estate or trust income tax return under this section will not extend the time for filing the income tax return of a beneficiary of the estate or trust or the time for the payment of any tax due on the beneficiary’s income tax return.

(e) Termination of automatic extension . The Commissioner may terminate an automatic extension at any time by mailing to the estate or trust a notice of termination at least 10 days prior to the termination date designated in such notice. The Commissioner must mail the notice of termination to the address shown on the Form

Section 1.6081–6 also issued under 26 U.S.C. 6081. - * * Par. 2. Section 1.6081–2 is added to read as follows:

§1.6081–2 Automatic extension of time to file certain returns filed by partnerships .

(a) In general . (1) A partnership required to file Form 1065, “ U.S. Partner- ship Return of Income,” or Form 8804, “ Annual Return for Partnership Withhold- ing Tax (Section 1446),” for any taxable year will be allowed an automatic 5-month extension of time to file the return after the date prescribed for filing the return if the partnership files an application under this section in accordance with paragraph (b) of this section. No additional extension will be allowed pursuant to §1.6081–1(b) beyond the automatic 5-month extension provided by this section. In the case of a partnership described in §1.6081–5(a)(1), the automatic extension of time to file allowed under this section runs concurrently with an extension of time to file granted pursuant to §1.6081–5.

(2) An electing large partnership (ELP) required to file Form 1065–B, “ U.S. Re- turn of Income for Electing Large Partner- ships,” for any taxable year will be allowed an automatic 6-month extension of time to file the return after the date prescribed for filing the return if the partnership files an application under this section in accordance with paragraph (b) of this section.

(b) Requirements . To satisfy this paragraph (b), the partnership must—

(2) File the application on or before the later of—

(i) The date prescribed for filing the return of the partnership; or

(ii) The expiration of any extension of time to file granted under §1.6081–5(a); and

(3) File the application with the Internal Revenue Service office designated in the application’s instructions.

(c) Payment of section 7519 amount . An automatic extension of time for filing a partnership return of income granted under paragraph (a) of this section does

not extend the time for payment of any amount due under section 7519, relating to required payments for entities electing not to have a required taxable year.

(d) Section 444 election . An automatic extension of time for filing a partnership return of income will run concurrently with any extension of time for filing a return allowed because of section 444, relating to the election of a taxable year other than a required taxable year.

(e) Effect of extension on partner . An automatic extension of time for filing a partnership return of income under this section does not extend the time for filing a partner’s income tax return or the time for the payment of any tax due on a partner’s income tax return.

(f) Termination of automatic extension . The Commissioner may terminate an automatic extension at any time by mailing to the partnership a notice of termination at least 10 days prior to the termination date designated in such notice. The Commissioner must mail the notice of termination to the address shown on the Form 7004 or to the partnership’s last known address. For further guidance regarding the definition of last known address, see §301.6212–2 of this chapter.

(g) Penalties . See section 6698 for failure to file a partnership return.

(h) Effective/applicability dates . This section applies to applications for an automatic extension of time to file the partnership returns listed in paragraph (a) of this section filed on or after June 24, 2011.

§1.6081–2T [Removed]

Par. 3. Section 1.6081–2T is removed. Par. 4. Section 1.6081–6 is added to read as follows:

§1.6081–6 Automatic extension of time to file estate or trust income tax return .

(a) In general . (1) Except as provided in paragraph (a)(2) of this section, any estate, including but not limited to an estate defined in section 2031, or trust required to file an income tax return on Form 1041, “ U.S. Income Tax Return for Es- tates and Trusts,” will be allowed an automatic 5-month extension of time to file the return after the date prescribed for filing the return if the estate or trust files an application under this section in accordance with paragraph (b) of this section.

August 1, 2011 82 2011–31 I.R.B.

notice of termination at least 10 days prior to the termination date designated in such notice. The Commissioner must mail the notice of termination to the address shown on the Form 7004 or to the estate or trust’s last known address. For further guidance regarding the definition of last known address, see §301.6212–2 of this chapter.

(e) Penalties . See section 6651 for failure to file a pension excise tax return or failure to pay the amount shown as tax on the return.

(f) Effective/applicability date . This section is applicable for applications for an automatic extension of time to file a return due under chapter 43, filed on or after June 24, 2011.

Steven T. Miller, Deputy Commissioner for Services and Enforcement.

Approved June 17, 2011.

Emily S. McMahon, Acting Assistant Secretary of the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on June 23, 2011, 8:45 a.m., and published in the issue of the Federal Register for June 24, 2011, 76 F.R. 36996)

7004 or to the estate or trust’s last known address. For further guidance regarding the definition of last known address, see §301.6212–2 of this chapter.

(f) Penalties . See section 6651 for failure to file an estate or trust income tax return or failure to pay the amount shown as tax on the return.

(g) Effective/applicability dates . This section applies to applications for an automatic extension of time to file an estate or trust income tax return filed on or after June 24, 2011.

§1.6081–6T [Removed]

Par. 5. Section 1.6081–6T is removed.

PART 54—PENSION EXCISE TAXES

Par. 6. The authority citation for part 54 is amended by adding an entry in numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * * Section 54.6081–1 also issued under 26 U.S.C. 6081(a). Par. 7. Section 54.6081–1 is added to read as follows:

§54.6081–1 Automatic extension of time for filing returns for certain excise taxes under Chapter 43 .

(a) In general . An employer, other person or health plan that is required to file

a return on Form 8928, “ Return of Cer- tain Excise Taxes Under Chapter 43 of the Internal Revenue Code,” will be allowed an automatic 6-month extension of time to file the return after the date prescribed for filing the return if the employer, other person or health plan files an application under this section in accordance with paragraph (b) of this section.

(b) Requirements . To satisfy this paragraph (b), an employer, other person or health plan must—

(1) Submit a complete application on Form 7004, “ Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Re- turns,” or in any other manner prescribed by the Commissioner;

(2) File the application on or before the date prescribed for filing the return with the Internal Revenue Service office designated in the application’s instructions; and

(3) Remit the amount of the properly estimated unpaid tax liability on or before the date prescribed for payment.

(d) Termination of automatic extension . The Commissioner may terminate an automatic extension at any time by mailing to the employer, other person, or health plan a

2011–31 I.R.B. 83 August 1, 2011