Bulletin No. 2021–27
Agency decision
Ask Donna
What actually matters in this document.
Text
HIGHLIGHTS
OF THIS ISSUE
Bulletin No. 2021–27
July 6, 2021
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.
ADMINISTRATIVE
Notice 2021-39, page 3.
Transition penalty relief for taxable years that begin in 2021
with respect to new Schedules K-2 and K-3 required for Forms
1065, U.S. Return of Partnership Income, 1120-S, U.S. Income Tax Return for an S Corporation, and 8865, Return of
U.S. Persons With Respect to Certain Foreign Partnerships.
Rev. Proc. 2021-29, page 12.
This document contains a draft Revenue Procedure allowing
an eligible partnership to file an amended Form 1065, U.S.
Return of Partnership Income, and furnish a corresponding
Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., to each of its partners as an alternative option to filing an administrative adjustment request
(AAR).
INCOME TAX
Rev. Proc. 2021-28, page 5.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020
(TCDTRA), enacted in December 2020, retroactively provides
Finding Lists begin on page ii.
a recovery period of 30 years under the alternative depreciation system in § 168(g) (ADS) for certain residential rental
property, as defined in § 168(e)(2)(A) of the Code, placed
in service before January 1, 2018, held by an electing real
property trade or business as defined in § 163(j)(7)(B), and
not previously subject to the ADS. This revenue procedure
explains how a taxpayer changes its method of computing
depreciation under § 168(g) for such property to comply with
TCDTRA. This revenue procedure also modifies Rev. Proc.
2019-08, which provides guidance under § 168(g) related
to certain property held by an electing real property trade or
business. Finally, this revenue procedure modifies Rev. Proc.
2019-43, which provides the list of automatic changes in
methods of accounting, to expand the applicability of automatic changes for a change in use of certain depreciable
property.
Rev. Rul. 2021-12, page 1.
Federal rates; adjusted federal rates; adjusted federal longterm rate, and the long-term tax exempt rate. For purposes
of sections 382, 1274, 1288, 7872 and other sections of
the Code, tables set forth the rates for July 2021.
The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and enforce 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
Conventions, 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 otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal 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,
identifying 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,
Legislation 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
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment 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.
July 6, 2021
Bulletin No. 2021–27
Part I
Section 1274.—
Determination of Issue
Price in the Case of Certain
Debt Instruments Issued for
Property
(Also Sections 42, 280G, 382, 467, 468, 482, 483,
1288, 7520, 7872.)
Rev. Rul. 2021-12
This revenue ruling provides various prescribed rates for federal income
Annual
AFR
110% AFR
120% AFR
130% AFR
0.12%
0.13%
0.14%
0.16%
AFR
110% AFR
120% AFR
130% AFR
150% AFR
175% AFR
1.00%
1.10%
1.20%
1.30%
1.51%
1.76%
AFR
110% AFR
120% AFR
130% AFR
2.07%
2.28%
2.49%
2.70%
Short-term adjusted AFR
Mid-term adjusted AFR
Long-term adjusted AFR
Bulletin No. 2021–27
tax purposes for July 2021 (the current
month). Table 1 contains the shortterm, mid-term, and long-term applicable federal rates (AFR) for the current
month for purposes of section 1274(d)
of the Internal Revenue Code. Table 2
contains the short-term, mid-term, and
long-term adjusted applicable federal
rates (adjusted AFR) for the current
month for purposes of section 1288(b).
Table 3 sets forth the adjusted federal long-term rate and the long-term
tax-exempt rate described in section
382(f). Table 4 contains the appropriate percentages for determining the
REV. RUL. 2021-12 TABLE 1
Applicable Federal Rates (AFR) for July 2021
Period for Compounding
Semiannual
Short-term
0.12%
0.13%
0.14%
0.16%
Mid-term
1.00%
1.10%
1.20%
1.30%
1.50%
1.75%
Long-term
2.06%
2.27%
2.47%
2.68%
Annual
0.09%
0.76%
1.57%
REV. RUL. 2021-12 TABLE 2
Adjusted AFR for July 2021
Period for Compounding
Semiannual
0.09%
0.76%
1.56%
1
low-income housing credit described
in section 42(b)(1) for buildings placed
in service during the current month.
However, under section 42(b)(2), the
applicable percentage for non-federally subsidized new buildings placed in
service after July 30, 2008, shall not
be less than 9%. Table 5 contains the
federal rate for determining the present
value of an annuity, an interest for life
or for a term of years, or a remainder
or a reversionary interest for purposes
of section 7520. Finally, Table 6 contains the blended annual rate for 2021
for purposes of section 7872.
Quarterly
Monthly
0.12%
0.13%
0.14%
0.16%
0.12%
0.13%
0.14%
0.16%
1.00%
1.10%
1.20%
1.30%
1.50%
1.75%
1.00%
1.10%
1.20%
1.30%
1.50%
1.74%
2.05%
2.26%
2.46%
2.67%
2.05%
2.26%
2.46%
2.67%
Quarterly
0.09%
0.76%
1.56%
Monthly
0.09%
0.76%
1.55%
July 6, 2021
REV. RUL. 2021-12 TABLE 3
Rates Under Section 382 for July 2021
Adjusted federal long-term rate for the current month
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal
long-term rates for the current month and the prior two months.)
1.57%
1.64%
REV. RUL. 2021-12 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for July 2021
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July
30, 2008, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit
7.35%
Appropriate percentage for the 30% present value low-income housing credit
3.15%
REV. RUL. 2021-12 TABLE 5
Rate Under Section 7520 for July 2021
Applicable federal rate for determining the present value of an annuity, an interest for life or a
term of years, or a remainder or reversionary interest
1.2%
REV. RUL. 2021-12 TABLE 6
Blended Annual Rate for 2021
Section 7872(e)(2) blended annual rate for 2021
Section 42.—Low-Income
Housing Credit
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2021. See Rev. Rul. 2021-12, page 1.
Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2021. See Rev. Rul. 2021-12, page 1.
Section 382.—Limitation
on Net Operating Loss
Carryforwards and
Certain Built-In Losses
Following Ownership
Change
The adjusted applicable federal long-term rate
is set forth for the month of July 2021. See Rev.
Rul. 2021-12, page 1.
.13%
Section 467.—Certain
Payments for the Use of
Property or Services
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2021. See Rev. Rul. 2021-12, page 1.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The applicable federal short-term rates are set
forth for the month of July 2021. See Rev. Rul.
2021-12, page 1.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2021. See Rev. Rul. 2021-12, page 1.
Section 483.—Interest on
Certain Deferred Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2021. See Rev. Rul. 2021-12, page 1.
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of
July 2021. See Rev. Rul. 2021-12, page 1.
Section 7520.—Valuation
Tables
The applicable federal mid-term rates are set
forth for the month of July 2021. See Rev. Rul.
2021-12, page 1.
Section 7872.—Treatment
of Loans With BelowMarket Interest Rates
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
July 2021. See Rev. Rul. 2021-12, page 1.
July 6, 2021
2
Bulletin No. 2021–27
Part III
Transition Period Penalty
Relief for New Schedules
K-2 and K-3 for Forms
1065, 1120-S and 8865
Notice 2021-39
SECTION 1. PURPOSE
This notice announces transition relief for taxable years that begin in 2021
with respect to new Schedules K-2 and
K-3 required for Forms 1065, U.S. Return of Partnership Income, 1120-S, U.S.
Income Tax Return for an S Corporation,
and 8865, Return of U.S. Persons With
Respect to Certain Foreign Partnerships.
Section 2 provides background on these
new schedules and the penalties that may
apply for failure to furnish complete and
correct information with respect to such
schedules. Section 3 provides transition
relief from these penalties for any incorrect or incomplete reporting on the Schedules K-2 and K-3 if the filer establishes to
the satisfaction of the Commissioner that
it made a good faith effort to comply with
the new reporting requirements.
SECTION 2. BACKGROUND
.01 Longstanding Filing and Reporting
Requirements
Section 6031 of the Internal Revenue
Code (“Code”) and §§ 1.6031(a)-1 and
1.6031(b)-1T of the Income Tax Regulations generally require a partnership to do
the following:
• make a return for each taxable year
stating the items of its gross income
and deductions allowable by subtitle
A of the Code and any other information as prescribed by forms and instructions for the purpose of carrying
out the provisions of subtitle A of the
Code, and
• furnish to its partners statements containing each partner’s distributive
share of the partnership’s items of income, gain, loss, deduction, or credit
required to be shown on the partnership return and any additional infor-
Bulletin No. 2021–27
mation required to apply particular
provisions of subtitle A of the Code to
the partner with respect to items related to the partnership as prescribed by
form or accompanying instructions.
Section 6037(a) and (b) provide similar
requirements with respect to an S corporation.
Section 6038(a)(1) and (a)(5) and
§1.6038-3 of the Income Tax Regulations
generally require a United States person
that controls a foreign partnership or holds
at least a 10-percent interest in a foreign
partnership that is controlled by United
States persons holding at least 10-percent
interests (a U.S. partner) to furnish information relating to the partnership (a controlled
foreign partnership or CFP), including
information relating to the U.S. partner’s
ownership interests in the partnership and
allocations to the partner of partnership
items. A U.S. partner that controls a CFP
may also need to provide information relating to another U.S. partner’s ownership
interest in the partnership and allocations to
that partner of partnership items.
Pursuant to sections 6031, 6037, and
6038 and the accompanying Income Tax
Regulations, the Internal Revenue Service
(IRS) has, in forms and instructions, long
required that any partnership, S corporation, or U.S. partner in a CFP report information of international tax relevance.
.02 New Schedules K-2 and K-3
Form 1065, Schedules K-2, Partners’
Distributive Share Items—International,
and K-3, Partner’s Share of Income, Deductions, Credits, etc.—International, are
new for taxable years beginning in 2021.
These schedules replace, supplement, and
clarify the reporting of certain amounts
formerly reported on Form 1065, Schedule K, Partners’ Distributive Share Items,
line 16, Foreign Transactions, and Schedule K-1 (Form 1065), Partner’s Share of
Income, Deductions, Credits, etc., Part III,
Partner’s Share of Current Year Income,
Deductions, Credits, and Other Items, line
16, Foreign Transactions. Schedules K-2
and K-3 also replace, supplement, and
clarify reporting of certain amounts formerly reported on Form 1065, Schedule
K, line 20c, Other items and amounts, and
3
Schedule K-1 (Form 1065), Part III, line
20, Other information. The new standardized format assists partnerships in providing partners with the information necessary to complete their returns with respect
to the international tax aspects of the Code
and allows the IRS to more efficiently verify tax compliance.
For the same reasons, for taxable years
beginning in 2021, Form 1120-S includes
new Schedules K-2, Shareholders’ Pro
Rata Share Items—International, and K-3,
Shareholder’s Share of Income, Deductions, Credits, etc.—International. These
schedules replace, supplement, and clarify
the reporting of certain amounts formerly
reported on line 14, Foreign Transactions,
of both Form 1120-S, Schedule K, Shareholders’ Pro Rata Share Items, and Schedule
K-1 (Form 1120-S), Shareholder’s Share of
Income, Deductions, Credits, etc. Part III,
Shareholder’s Share of Current Year Income, Deductions, Credits, etc. Schedules
K-2 and K-3 also replace, supplement, and
clarify the reporting of certain amounts formerly reported on Form 1120-S, Schedule
K, line 17d, Other items and amounts, and
Schedule K-1 (Form 1120-S), Part III, line
17, Other information.
Finally, for the same reasons, for taxable years beginning in 2021, Form 8865
includes new Schedules K-2, Partners’
Distributive Share Items—International, and K-3, Partner’s Share of Income,
Deductions, Credits, etc.—International.
These schedules replace, supplement, and
clarify the reporting of certain amounts
formerly reported on line 16, Foreign
Transactions, of both Form 8865, Return
of U.S. Persons With Respect to Certain
Foreign Partnerships, Schedule K, Partners’ Distributive Share Items, and Schedule K-1 (Form 8865), Partner’s Share of
Income, Deductions, Credits, etc., Part III,
Partner’s Share of Current Year Income,
Deductions, Credits, and Other Items.
Schedules K-2 and K-3 also replace, supplement, and clarify the reporting of certain amounts formerly reported on Form
8865, Schedule K, line 20c, Other items
and amounts, and Schedule K-1 (Form
8865), Part III, line 20, Other information.
The IRS released on July 14, 2020, for
public comment drafts of the Form 1065,
Schedules K-2 and K-3 and the associat-
July 6, 2021
ed instructions. At that time, the IRS also
requested comments on the Forms 1120-S
and 8865 with respect to which the IRS
planned to issue similar Schedules K-2
and K-3. After considering the comments
received, on June 3 and 4, 2021, the IRS
released the final versions of new Schedules K-2 and K-3 for the Forms 1065,
1120-S and 8865 applicable for taxable
years beginning in 2021.
.03 Penalties
(a) Failure to File or Show Information
on Partnership Return
Section 6698 imposes a penalty for failing to file a return at the time prescribed
therefor, or for filing a return that fails to
show the information required under section 6031. A return required under section
6031 includes Form 1065 and Schedule
K-1 (Form 1065). For partnership taxable
years beginning in 2021, it will also include
Schedules K-2 and K-3. A failure to file a
timely partnership return that shows information required under section 6031 would
generally subject a partnership to the section 6698 penalty. A section 6698 penalty
will not be imposed if it is shown that the
failure is due to reasonable cause.
(b) Failure to File or Show Information
on an S Corporation Return
Section 6699 imposes a penalty for failing to file a return required under section
6037 at the time prescribed therefor, or for
filing a return that fails to show the information required under that section. A return
required under section 6037 includes Form
1120-S and Schedule K-1 (Form 1120-S).
For S corporation taxable years beginning
in 2021, it will also include Schedules K-2
and K-3. A failure to file a timely S corporation return that shows information required under section 6037 would generally
subject an S corporation to the section 6699
penalty. A section 6699 penalty will not be
imposed if it is shown that the failure is due
to reasonable cause.
(c) Failure to File Correct Information
Returns
Section 6721 imposes a penalty for
any failure to file an information return
July 6, 2021
on or before the required filing date, and
for any failure to include all of the information required to be shown on the return
or the inclusion of incorrect information.
When regulations under section 6011 require a partnership to file a partnership
return electronically, each schedule required to be included with the return with
respect to each partner (that is, Schedules
K-1 and K-3) is treated as a separate information return subject to the section
6721 penalty. See section 6724(e). Failure to electronically file a correct Schedule K-1 or K-3 when required would generally subject a partnership to a section
6721 penalty.
(d) Failure to Furnish Correct Payee
Statements
Section 6722 imposes a penalty for
failure to furnish a payee statement on
or before the date prescribed therefor to
the person to whom such statement is required to be furnished, and for any failure
to include all of the information required
to be shown on a payee statement or the
inclusion of incorrect information. Section 6724(d)(2) provides a definition for
“payee statement” that applies to section
6722. Under section 6724(d)(2)(A), a payee statement includes a statement required
to be furnished to each partner under section 6031(b) or (c) and to each S corporation shareholder under section 6037(b). A
failure to furnish a correct Schedule K-1
or K-3 as required under section 6031
would generally subject a partnership
to the section 6722 penalty. A failure to
furnish a correct Schedule K-1 or K-3 as
required under section 6037 would generally subject an S corporation to the section
6722 penalty.
Section 6724 provides an exception to
a penalty for any failure under sections
6721 and 6722 if it is shown that the failure is due to reasonable cause and not to
willful neglect. Under § 301.6724-1 of the
Procedure and Administration Regulations, a penalty is waived for reasonable
cause only if the filer establishes that either there are significant mitigating factors
with respect to the failure or the failure
arose from events beyond the filer’s control. In addition, the filer must establish
that the filer acted in a responsible manner
both before and after the failure occurred.
4
(e) Failure to furnish information
required by section 6038
Section 6038(b) and (c) impose penalties for failing to furnish the information
required under that section by its due date.
The reporting required under section 6038
includes Form 8865 and each Schedule
K-1 (Form 8865). For partnership taxable
years beginning in 2021, it will also include Schedules K-2 and K-3. A U.S. partner is generally subject to penalties under
section 6038 for failure to file a Form
8865 that shows information required under section 6038. No penalties are applicable under section 6038 for a partner that
shows that the failure to file Form 8865 is
due to reasonable cause.
SECTION 3. PENALTY RELIEF
This section provides transition relief for taxable years that begin in 2021
(processing year 2022) with respect to
Schedules K-2 and K-3 to Forms 1065,
1120-S, and 8865. During this transition
period, a partnership required to file Form
1065, an S corporation required to file
Form 1120-S, or a U.S. partner required
to file Form 8865 (a “Schedule K-2/K-3
filer”) will not be subject to the relevant
penalties described in section 2 for any
incorrect or incomplete reporting on the
Schedules K-2 and K-3 if the filer establishes to the satisfaction of the Commissioner that it made a good faith effort to
comply with the Schedules K-2 and K-3
filing requirements (and the Schedule K-3
furnishing requirements) per the instructions. A Schedule K-2/K-3 filer that does
not establish that it made a good faith effort to comply with the new requirements
will not be eligible for penalty relief under
this notice.
For purposes of determining whether a
Schedule K-2/K-3 filer makes a good faith
effort to complete Schedules K-2 and K-3,
the IRS will take into account the extent to
which a Schedule K-2/K-3 filer has made
changes to its systems, processes, and
procedures for collecting and processing
information relevant to filing the Schedules K-2 and K-3 and the extent to which
a Schedule K-2/K-3 filer has obtained information from partners, shareholders, or
the CFP, or applied reasonable assumptions when information is not obtained.
Bulletin No. 2021–27
The IRS will also take into account the
steps taken by the Schedule K-2/K-3 filer
to modify the partnership or S corporation agreement or governing instrument to
facilitate the sharing of information with
partners and shareholders that is relevant
to determining whether and how to file
Schedules K-2 and K-3.
In several instances, certain information about partners, shareholders, or the
CFP is relevant for determining the applicability of a part of Schedules K-2 and
K-3. For example, if a partnership has a
direct or indirect partner that is a nonresident alien individual or a foreign corporation, the partnership must complete Form
1065, Part X of Schedules K-2 and K-3.
Information about the partners, shareholders, or the CFP is also relevant for determining how to report some amounts. For
example, for taxable years beginning in
2021, the instructions for Form 1065, Part
IX of Schedule K-2 and K-3 state that a
partnership is expected to collaborate with
its partners to identify the foreign related
parties of each partner.
The Treasury Department and the IRS
are aware that a Schedule K-2/K-3 filer
may not currently have systems or procedures in place to obtain information about
its partners, shareholders, or the CFP to
determine whether it must file a part of
Schedules K-2 and K-3 or how to complete a part that must be filed. In general, in
the taxable year 2021 instructions, unless
the Schedule K-2/K-3 filer has knowledge
to the contrary, it must file or complete
certain parts assuming that the information would be relevant to the partner or
shareholder. Under this notice, during the
transition period, a Schedule K-2/K-3 filer
will not be subject to the relevant penalties
described in section 2 for any incorrect or
incomplete reporting on Schedules K-2
or K-3 if it establishes to the satisfaction
of the Commissioner that it made a good
faith effort to determine whether it must
file a part and how to complete a part that
it files.
With respect to information about
partners, shareholders, or the CFP that is
relevant to determine whether to file and
how to complete a part, the IRS will assess the effort the Schedule K-2/K-3 filer
made to obtain this information and the
reasonableness of any assumptions, taking
into account the relationship between the
Bulletin No. 2021–27
Schedule K-2/K-3 filer and its partners,
shareholders or the CFP. For example, the
appropriate level of diligence and/or the
reasonableness of an assumption may differ with respect to a partner that manages
or controls the partnership, or a partnership with a partner with a significant interest in the partnership, such as a partner
with a 10-percent interest, as compared to
partners holding small interests for which
there may not be the same ease of access
to information. Nevertheless, a Schedule K-2/K-3 filer may have made a good
faith effort despite being unsuccessful in
obtaining information from its partners,
shareholders, or the CFP.
SECTION 4. REQUEST FOR
COMMENTS
The IRS solicits comments on the draft
instructions to Schedules K-2 and K-3 for
taxable years beginning in 2021 being released the same date as this Notice, particularly any instances where the instructions
do not provide sufficient guidance on how
to complete the returns or where additional clarity is needed. The IRS is specifically interested in suggestions for addressing
structures and situations that make it difficult to determine certain information (for
example, tiered partnership structures or
publicly-traded partnerships).
As discussed in section 3, in general, the instructions for taxable years beginning in 2021 for certain parts of the
Schedules K-2 and K-3 require the partnership and the S corporation to report
information unless the partnership and
S corporation know that the information
is not relevant to partners, shareholders, or indirect partners. The IRS solicits comments concerning reasonable
assumptions Schedule K-2/K-3 filers
could make in determining whether and
how to complete Schedules K-2 and K-3
for years after the transition period and
whether these assumptions may differ
between various parts of the Schedules
K-2 and K-3.
Comments should be submitted in
writing and should include a reference to
Notice 2021-39. Comments may be submitted in one of two ways:
(1) Electronically via the Federal
eRulemaking Portal at www.regulations.
gov (type IRS-2021-0006 in the search
5
field on the regulations.gov homepage to
find this notice and submit comments).
(2) Alternatively, by mail to: Internal
Revenue Service, Attn: CC:PA:LPD:PR
(Notice 2021-39), Room 5203, P.O. Box
7604, Ben Franklin Station, Washington,
D.C. 20044.
All commenters are strongly encouraged to submit public comments electronically. The IRS expects to have limited
personnel available to process public comments that are submitted on paper through
the mail and these comments, submitted
through the mail, may not be processed
with enough time before revisions to the
instructions need to be prepared. Until
further notice, any comments submitted
on paper will be considered to the extent
practicable. The Treasury Department and
the IRS will publish for public availability any comment submitted electronically,
and to the extent practicable on paper, to
its public docket.
SECTION 5. CONTACT
INFORMATION
The principal author of this notice is
Ronald M. Gootzeit of the Office of Associate Chief Counsel (International).
For further information regarding the issues described in this notice, contact Mr.
Gootzeit at (202) 317-6937 (not a toll-free
number).
26 CFR 1.168(i)-4: Changes in use.
(Also Part I, §§ 163(j), 168, 446; 1.446-1, 1.163(j)-9.)
Rev. Proc. 2021-28
SECTION 1. PURPOSE
This revenue procedure provides
guidance under § 202 of the Taxpayer
Certainty and Disaster Tax Relief Act of
2020 (TCDTRA), enacted as Division EE
of the Consolidated Appropriations Act,
2021, Pub. L. No. 116-260, 134 Stat.
1182 (December 27, 2020). Section 202
of the TCDTRA retroactively provides a
recovery period of 30 years under the alternative depreciation system in § 168(g)
(ADS) of the Internal Revenue Code
(Code) for certain residential rental property, as defined in § 168(e)(2)(A) of the
Code, placed in service before January
July 6, 2021
1, 2018, held by an electing real property
trade or business as defined in § 163(j)
(7)(B) of the Code, and not previously
subject to the ADS. This revenue procedure explains how a taxpayer changes its
method of computing depreciation under
§ 168(g) of the Code for such property
to comply with § 202 of the TCDTRA.
This revenue procedure also modifies
Rev. Proc. 2019-08, 2019-03 I.R.B. 347,
which provides guidance under § 168(g)
of the Code related to certain property
held by an electing real property trade
or business. Finally, this revenue procedure modifies Rev. Proc. 2019-43, 201948 I.R.B. 1107, which provides the list
of automatic changes in methods of accounting, to expand the applicability of
automatic changes for a change in use of
certain depreciable property.
SECTION 2. BACKGROUND
.01 Alternative depreciation system under § 168(g) for residential rental property.
(1) Prior to amendment by §§ 13204
and 13205 of Public Law 115-97, 131 Stat.
2054 (2017), commonly referred to as the
Tax Cuts and Jobs Act (TCJA), § 168(g)
(1) of the Code provided that the depreciation deduction provided by § 167(a)
of the Code is determined under the ADS
for: (A) any tangible property that during
the taxable year is used predominantly
outside the United States; (B) any tax-exempt use property; (C) any tax-exempt
bond financed property; (D) any imported
property covered by an Executive order
under § 168(g)(6) of the Code; and (E)
any property to which an election under
§ 168(g)(7) of the Code applies. Sections
13204(a)(3)(A) and 13205(a) of the TCJA
amended § 168(g)(1) of the Code by requiring the depreciation deduction provided by § 167(a) of the Code to be determined under the ADS for the following
additional property: nonresidential real
property, residential rental property, and
qualified improvement property held by an
electing real property trade or business as
defined in § 163(j)(7)(B) of the Code; and
any property with a recovery period of 10
years or more that is held by an electing
farming business as defined in § 163(j)(7)
(C) of the Code. These amendments apply
to taxable years beginning after December
July 6, 2021
31, 2017, without regard to when the property is or was placed in service. See TCJA
§ 13204(b)(2) and § 13205(b).
(2) Prior to amendment by the TCJA,
the table of recovery periods under
§ 168(g)(2)(C) of the Code provided that
the recovery period under the ADS was 40
years for residential rental property. Section 13204(a)(3)(C) of the TCJA amended
that table by providing that the ADS recovery period is 30 years for residential
rental property. Prior to the enactment of
the TCDTRA, this amendment applied
only to property placed in service after
December 31, 2017. See TCJA § 13204(b)
(1).
(3) Therefore, although the TCJA added residential rental property held by an
electing real property trade or business to
the list of property to which the ADS is
applicable, the change in recovery period
from 40 years to 30 years for all residential rental property applied only to property placed in service after December 31,
2017. See TCJA § 13204(b)(1) and (2).
(4) Section 202 of the TCDTRA
amended § 13204(b) of the TCJA to add
new § 13204(b)(3) of the TCJA. Section
13204(b)(3) of the TCJA provides that
in the case of any residential rental property (i) that was placed in service before
January 1, 2018, (ii) that is held by an
electing real property trade or business,
as defined in § 163(j)(7)(B) of the Code
(electing real property trade or business),
and (iii) for which § 168(g)(1)(A) through
(E) of the Code did not apply prior to January 1, 2018, the amendments made by
§ 13204(a)(3)(C) of the TCJA apply to
taxable years beginning after December
31, 2017. Accordingly, such residential
rental property has a 30-year recovery period under the ADS for taxable years beginning after December 31, 2017.
(5) Unless otherwise provided, all references hereinafter in this revenue procedure to § 168(g) of the Code are references to § 168(g) of the Code as in effect
on December 28, 2020, the day after the
enactment date of the TCDTRA.
.02 Rev. Proc. 2019-08.
(1) On January 14, 2019, the Department of Treasury (Treasury Department)
and the Internal Revenue Service (IRS)
published Rev. Proc. 2019-08 to provide
guidance, in part, on the recovery period
under the ADS for residential rental prop-
6
erty placed in service before 2018 and on
how taxpayers can change their computation of depreciation to the ADS for certain
properties held by electing real property
trades or businesses.
(2) Section 4.01(1) of Rev. Proc. 201908 provides that the recovery period under
the table in § 168(g)(2)(C) of the Code
is 30 years for residential rental property
placed in service by the taxpayer after December 31, 2017, and 40 years for residential rental property placed in service by the
taxpayer before January 1, 2018. To comply with § 202 of the TCDTRA, section 6
of this revenue procedure modifies section
4.01 of Rev. Proc. 2019-08 to provide that
the 30-year recovery period also applies to
certain residential rental property placed
in service before January 1, 2018, and
held by an electing real property trade or
business for taxable years beginning after
December 31, 2017.
(3) Sections 4.02(1) and 4.02(2)(a)
of Rev. Proc. 2019-08 provide that for
the election year (that is, the first taxable
year for which a trade or business makes
an election under § 163(j)(7)(B) and the
regulations thereunder), the electing real
property trade or business must begin
depreciating nonresidential real property, residential rental property, and qualified improvement property in accordance
with the ADS. This rule applies to such
properties placed in service by the electing real property trade or business in the
election year and all subsequent taxable
years (newly-acquired property), and to
such properties placed in service by the
electing real property trade or business in
taxable years beginning before the election year (existing property). Pursuant to
section 4.02(2)(b) of Rev. Proc. 2019-08,
a change in use occurs under § 168(i)(5)
and § 1.168(i)-4(d) of the Income Tax
Regulations for existing property as a result of an election under § 163(j)(7)(B).
Therefore, depreciation for such property
is determined in accordance with the rules
under § 1.168(i)-4(d).
.03 Method of accounting.
(1) Section 446(e) and § 1.446-1(e)(2)
require a taxpayer to secure the consent
of the Commissioner of Internal Revenue
(Commissioner) before changing a method of accounting for Federal income tax
purposes. Section 1.446-1(e)(3)(ii) authorizes the Commissioner to prescribe ad-
Bulletin No. 2021–27
ministrative procedures setting forth the
limitations, terms, and conditions necessary to permit a taxpayer to obtain consent
to change a method of accounting.
(2) Section 2.05 of Rev. Proc. 201513, 2015-5 I.R.B 419, 425, provides that
a taxpayer may not request, or otherwise
make, a retroactive change in method of
accounting, unless specifically authorized
by the Commissioner or by statute.
(3) Section 1.446-1(e)(2)(ii)(d)(3)(ii)
provides that a change in computing depreciation or amortization allowances in
the taxable year in which the use of an
asset changes in the hands of the same
taxpayer is not a change in method of accounting. See also § 1.168(i)-4(f).
(4) Section 1.446-1(e)(2)(ii)(d)(5)(iii)
provides that a change from an impermissible method of computing depreciation
to a permissible method of computing depreciation for an asset results in a § 481(a)
adjustment.
(5) With the enactment of the TCDTRA, immediate guidance is needed
under § 168(g) of the Code for taxpayers
who are affected by the retroactive effective date of § 13204(b)(3) of the TCJA.
Accordingly, this revenue procedure permits taxpayers to file an amended Federal
income tax return or information return,
administrative adjustment request under
§ 6227 of the Code (AAR), or a Form
3115, Application for Change in Accounting Method, to change their method of
computing depreciation of certain residential rental property held by an electing real
property trade or business to use a 30-year
ADS recovery period and, if such property
is included in a general asset account, to
change their general asset account treatment for such property to comply with
§ 1.168(i)-1(h)(2). See section 4.04 of this
revenue procedure for the procedures to
change to a 30-year recovery period.
(6) The Treasury Department and the
IRS are aware that some taxpayers may
have elected to be an electing real property trade or business for their taxable year
beginning in 2019 (2019 taxable year),
and thereby changed to a 40-year ADS recovery period for residential rental property placed in service before 2018 under
the change in use rules for the 2019 taxable year. The Treasury Department and
the IRS also are aware that some of those
taxpayers may not have made the adjust-
Bulletin No. 2021–27
ments to general asset accounts under the
change in use rules in § 1.168(i)-1(h)(2)
for the 2019 taxable year. To the extent
those taxpayers have not yet filed their
Federal income tax return or Form 1065,
U.S. Return of Partnership Income, for the
taxable year beginning in 2020, the change
to the 30-year recovery period for residential rental property to comply with the TCDTRA or to the method of accounting provided in § 1.168(i)-1(h)(2) would be made
on an amended Federal income tax return
or information return, or an AAR, as applicable. See Rev. Rul. 90-38, 1990-1 C.B.
57 (a taxpayer adopts an impermissible
method of accounting for a material item
by treating the item in the same way in determining the gross income or deductions
in two or more consecutively filed Federal income tax returns). However, consistent with section 4 of Rev. Proc. 2007-16,
2007-1 C.B. 358, this revenue procedure
provides these taxpayers with the option
of changing to a 30-year recovery period
or to the method of accounting provided
in § 1.168(i)-1(h)(2) by filing a Form 3115
in lieu of an amended Federal income tax
return or information return, or an AAR.
See sections 4.01(2) and 4.04(2) of this
revenue procedure for the procedures to
change to a 30-year recovery period by
filing a Form 3115. See sections 4.02(3)
and 4.04(2) of this revenue procedure for
the procedures to change to the method of
accounting provided in § 1.168(i)-1(h)(2).
.04 Earnings and profits. In the case
of tangible property to which § 168 applies, § 312(k)(3)(A) provides that the
adjustment to earnings and profits for depreciation for any taxable year generally
is determined under the ADS within the
meaning of § 168(g)(2). If a change in use
occurs for such property under § 168(i)(5)
and § 1.168(i)-4 for Federal income tax
purposes, the adjustment to earnings and
profits for depreciation under § 312(k)(3)
(A) for such property beginning for the
year of change, as defined in § 1.168(i)4(a), is determined under the ADS in
accordance with § 1.168(i)-4. However, if
the depreciation method and recovery period for such property under the ADS are
the same before and after the change in
use for § 312(k)(3)(A), the adjustment to
earnings and profits for depreciation under § 312(k)(3)(A) is not affected by the
change in use.
7
SECTION 3. SCOPE
.01 In general. This revenue procedure
applies to residential rental property:
(1) that was placed in service by (a) the
taxpayer before January 1, 2018, or (b) the
transferor of the residential rental property
before January 1, 2018, if the acquisition
of such property by the transferee-taxpayer is subject to § 168(i)(7) as provided in
section 3.03 of this revenue procedure;
(2) that is held by an electing real property trade or business; and
(3) that was not subject to § 168(g)(1)
(A), (B), (C), (D), or (E) prior to January
1, 2018, in the hands of (a) the taxpayer or
(b) the transferor if the acquisition of such
property by the transferee-taxpayer is subject to § 168(i)(7) as provided in section
3.03 of this revenue procedure.
.02 Exclusions. This revenue procedure
does not apply to:
(1) A taxpayer that makes an election
under § 163(j)(7)(B) and the regulations
thereunder on its Federal income tax return or information return for a taxable
year ending after December 27, 2020. See
section 4.02(2) of Rev. Proc. 2019-08 for
the method of changing depreciation for
residential rental property or other depreciable property for the election year and
for subsequent taxable years;
(2) A taxpayer that makes a late election under § 163(j)(7)(B) on an amended
Federal income tax return, amended Form
1065, or an AAR, as applicable, filed after
December 27, 2020, pursuant to section
4 of Rev. Proc. 2020-22, 2020-18 I.R.B.
745. See sections 4.02 and 4.03 of Rev.
Proc. 2020-22 for the method of changing
depreciation for residential rental property
or other depreciable property; or
(3) A taxpayer that withdraws the election under § 163(j)(7)(B) pursuant to section 5 of Rev. Proc. 2020-22. See section
5.02 of Rev. Proc. 2020-22 for the method
of changing depreciation for residential
rental property or other depreciable property.
.03 Transferor in a § 168(i)(7)(B)
transaction.
(1) Section 168(i)(7)(A) provides that,
in the case of any property transferred in
a transaction described in § 168(i)(7)(B),
the transferee is treated as the transferor
for purposes of computing the depreciation deduction determined under § 168
July 6, 2021
with respect to so much of the basis in
the hands of the transferee as does not
exceed the adjusted basis in the hands of
the transferor. As a result, where the transferee-taxpayer acquires residential rental property in a transaction described in
§ 168(i)(7)(B) (for example, §§ 351 and
721) and such residential rental property
was placed in service by the transferor, the
transferee-taxpayer is treated as placing in
service the residential rental property on
the same date as the transferor, but only
for the portion of the transferee-taxpayer’s basis in such property that does not
exceed the transferor’s adjusted depreciable basis (as defined in § 1.168(b)-1(a)
(4)) in such property. Similarly, where the
transferee-taxpayer acquires residential
rental property in a transaction described
in § 168(i)(7)(B) and such residential rental property was placed in service by the
transferor and was subject to § 168(g)(1)
(A), (B), (C), (D), or (E) before January
1, 2018, in the hands of the transferor,
the property is treated as being subject to
§ 168(g)(1)(A), (B), (C), (D), or (E) before January 1, 2018, in the hands of the
transferee-taxpayer, but only for the portion of the transferee-taxpayer’s basis in
such property that does not exceed the
transferor’s adjusted depreciable basis
in such property. Therefore, where the
transferee-taxpayer acquires residential
rental property in a transaction described
in § 168(i)(7)(B), the determination under
sections 3.01(1) and (3) of this revenue
procedure must be made by taking into
account the transferee-taxpayer, the transferor, or both as described above, but only
for the portion of the transferee-taxpayer’s
basis in such property that does not exceed
the transferor’s adjusted depreciable basis
of this property.
.04 Examples. The following examples
illustrate section 3 of this revenue procedure.
(1) Example 1. In January 2016, B purchased
and placed in service a residential rental property
at a cost of $1,000,000. B depreciates the residential rental property under the general depreciation
system of § 168(a) (GDS) by using the straight-line
method, a 27.5-year recovery period, and the midmonth convention. In January 2018, B and D form
an equal partnership, BD. D contributes cash to BD,
and B contributes the residential rental property to
BD. The contribution of the residential rental property by B to BD is a transaction described in § 721. At
the time of the contribution, B’s adjusted basis in the
residential rental property was $928,790. Pursuant to
July 6, 2021
§ 723, BD’s basis in the residential rental property
contributed by B is $928,790. On its Form 1065 for
the 2019 taxable year, BD makes an election under
§ 163(j)(7)(B) and the regulations thereunder to be
an electing real property trade or business. Because
the contribution of the residential rental property
by B to BD is a transaction described in § 168(i)
(7)(B), § 168(i)(7)(A) and section 3.03 of this revenue procedure apply. To the extent of BD’s basis
of $928,790 in the residential rental property, BD is
treated as placing in service such property in January 2016 and as depreciating such property under the
GDS before January 1, 2018. Accordingly, this residential rental property is within the scope of section
3.01 of this revenue procedure and is subject to the
30-year recovery period under the ADS beginning in
the 2019 taxable year, which is the election year.
(2) Example 2. The facts are the same as in Example 1, except B made an election under § 168(g)
(7) on its timely filed 2016 Federal income tax return
to depreciate the residential rental property under the
ADS by using the straight-line method, a 40-year
recovery period, and the mid-month convention. As
a result, B’s adjusted basis in the residential rental
property was $951,040 at the time of the contribution and BD’s basis in the residential rental property
contributed by B is $951,040. Because the contribution of the residential rental property by B to BD is
a transaction described in § 168(i)(7)(B), § 168(i)(7)
(A) and section 3.03 of this revenue procedure apply. To the extent of BD’s basis of $951,040 in the
residential rental property, BD is treated as placing
in service such property in January 2016 and such
property is treated as being subject to § 168(g)(1)(E)
in the hands of BD before January 1, 2018. Accordingly, this residential rental property is not within the
scope of section 3.01 of this revenue procedure and
continues to be subject to the 40-year recovery period under the ADS.
(3) Example 3. In January 2016, C purchased
and placed in service a residential rental property
at a cost of $1,000,000. C made an election under
§ 168(g)(7) on its timely filed 2016 Federal income
tax return to depreciate the residential rental property under the ADS by using the straight-line method,
a 40-year recovery period, and the mid-month convention. In January 2017, C transfers this residential rental property to X Corporation in exchange
for 80 percent of its only class of stock, plus cash of
$10,000. The transfer of the residential rental property by C to X Corporation is a transaction described
in § 351, and C recognized gain of $10,000 on such
transfer. At the time of the transfer, C’s adjusted basis
in the residential rental property was $976,040. Pursuant to § 362(a), X Corporation’s basis in the residential rental property transferred by C is $986,040.
For the 2017 taxable year, X Corporation depreciates
its excess basis of $10,000 ($986,040-$976,040)
in the residential rental property under the GDS by
using the straight-line method, a 27.5-year recovery
period, and the mid-month convention. On its Federal income tax return for the 2018 taxable year, X
Corporation makes an election under § 163(j)(7)(B)
and the regulations thereunder to be an electing real
property trade or business. Because the transfer of
the residential rental property by C to X Corporation
is a transaction described in § 168(i)(7)(B), § 168(i)
(7)(A) and section 3.03 of this revenue procedure
8
apply. To the extent of X Corporation’s basis of
$976,040 in the residential rental property, X Corporation is treated as placing in service such property
in January 2016 and such property is treated as being
subject to § 168(g)(1)(E) in the hands of X Corporation before January 1, 2018, and, accordingly, this
residential rental property with a basis of $976,040
is not within the scope of section 3.01 of this revenue procedure and continues to be subject to the
40-year recovery period under the ADS. X Corporation is treated as placing in service its excess basis
of $10,000 ($986,040-$976,040) in the residential
rental property, in January 2017 and as depreciating
such property under the GDS before January 1, 2018.
Accordingly, this residential rental property with an
excess basis of $10,000 is within the scope of section
3.01 of this revenue procedure and is subject to the
30-year recovery period under the ADS beginning in
the 2018 taxable year, which is the election year.
SECTION 4. CHANGE IN METHOD
OF COMPUTING DEPRECIATION
FOR RESIDENTIAL RENTAL
PROPERTY HELD BY AN
ELECTING REAL PROPERTY
TRADE OR BUSINESS
.01 Impermissible method to permissible method of determining depreciation.
(1) In general. Beginning with the
election year, an electing real property
trade or business within the scope of section 3 of this revenue procedure must depreciate residential rental property within
the scope of section 3 of this revenue procedure in accordance with the ADS using
a 30-year recovery period. For such property, a change in use occurs under § 168(i)
(5) and § 1.168(i)-4(d) for the election
year and depreciation for the election year
and each subsequent taxable year is determined in accordance with § 1.168(i)-4(d)
(4) or § 1.168(i)-4(d)(5)(ii)(B), as applicable. If an electing real property trade
or business within the scope of section
3 of this revenue procedure does not depreciate residential rental property within the scope of section 3 of this revenue
procedure under the ADS using a 30-year
recovery period for the election year and
the subsequent taxable year in accordance
with § 1.168(i)-4(d)(4) or § 1.168(i)-4(d)
(5)(ii)(B), as applicable, then that trade
or business has adopted an impermissible
method of accounting for depreciation
for that residential rental property. As a
result, a change from that impermissible
method of accounting to a method of accounting for depreciation under which the
electing real property trade or business
Bulletin No. 2021–27
determines depreciation for the residential rental property in accordance with
§ 1.168(i)-4(d)(4) or § 1.168(i)-4(d)(5)(ii)
(B), as applicable, by using the straightline method, the 30-year recovery period,
and the mid-month convention under the
ADS is a change in method of accounting
under § 446(e). See § 1.446-1(e)(2)(ii)(d)
(2)(i). An electing real property trade or
business within the scope of section 3 of
this revenue procedure may change from
the impermissible method of determining
depreciation to the permissible method of
determining depreciation for residential
rental property within the scope of section
3 of this revenue procedure in accordance
with section 4.04 of this revenue procedure.
(2) Electing real property trade or business has not adopted a method of accounting for the residential rental property. For
residential rental property that is within
the scope of section 3 of this revenue procedure and held by a trade or business that
is within the scope of section 3 of this revenue procedure and that made the election
under § 163(j)(7)(B) and the regulations
thereunder for the taxable year immediately preceding the year of change, as defined
in section 3.19 of Rev. Proc. 2015-13 (1year residential rental property), the electing real property trade or business may
change from the impermissible method of
determining depreciation to the permissible method of determining depreciation
for the 1-year residential rental property.
This change may be accomplished by filing a Form 3115 in accordance with section 4.04(2) of this revenue procedure,
provided the § 481(a) adjustment reported
on the Form 3115 includes the amount of
any adjustment attributable to all property, including the 1-year residential rental
property, subject to the Form 3115. Alternatively, the electing real property trade or
business may change its depreciation for
the 1-year residential rental property by
filing an amended Federal income tax return or information return, or an AAR, as
applicable, for the election year provided
the amended Federal income tax return or
information return, or AAR, as applicable,
is filed prior to the date the electing real
property trade or business files its Federal income tax return or information return
for the taxable year succeeding the election year.
Bulletin No. 2021–27
.02 Impermissible method to permissible method of general asset account treatment.
(1) In general. If the residential rental
property is within the scope of section 3
of this revenue procedure and is included in a general asset account, an electing
real property trade or business within the
scope of section 3 of this revenue procedure must change to the general asset
account treatment for such property provided in § 1.168(i)-1(h)(2) for the election
year. If an electing real property trade or
business within the scope of section 3 of
this revenue procedure does not change
to such general asset account treatment
for the election year and the subsequent
taxable year, then that trade or business
has adopted an impermissible method of
accounting for general asset account treatment of that residential rental property. As
a result, a change from that impermissible
method of accounting to the method of accounting provided in § 1.168(i)-1(h)(2) is
a change in method of accounting under
§ 446(e). See § 1.446-1(e)(2)(ii)(d)(2)(vi).
An electing real property trade or business
within the scope of section 3 of this revenue procedure may make this change in
method of accounting for residential rental property within the scope of section 3 of
this revenue procedure in accordance with
section 4.04 of this revenue procedure.
(2) Ordering rules. If, for the same taxable year, an electing real property trade
or business within the scope of section
3 of this revenue procedure makes the
change in method of accounting described
in section 4.01 of this revenue procedure
and also makes the change in method of
accounting described in this section 4.02
for the same residential rental property,
the taxpayer applies the change in method
of accounting described in section 4.01 of
this revenue procedure first.
(3) Electing real property trade or
business has not adopted a method of accounting for the residential rental property. For residential rental property that is
within the scope of section 3 of this revenue procedure, is included in a general
asset account, and is held by a trade or
business that is within the scope of section
3 of this revenue procedure and that made
the election under § 163(j)(7)(B) and
the regulations thereunder in the taxable
year immediately preceding the year of
9
change, as defined in section 3.19 of Rev.
Proc. 2015-13 (1-year residential rental
property), the electing real property trade
or business may change to the method of
accounting provided in § 1.168(i)-1(h)(2)
for the 1-year residential rental property.
This change is accomplished by filing
a Form 3115 in accordance with section
4.04(2) of this revenue procedure. Alternatively, the electing real property trade
or business may change to the method of
accounting provided in § 1.168(i)-1(h)(2)
for the 1-year residential rental property
by filing an amended Federal income tax
return or information return, or an AAR, as
applicable, for the election year provided
the amended Federal income tax return or
information return, or AAR, as applicable,
is filed prior to the date the electing real
property trade or business files its Federal tax return or information return for the
taxable year succeeding the election year.
.03 Retroactive change in method of
accounting. The Commissioner allows
an electing real property trade or business within the scope of section 3 of this
revenue procedure to make the change in
methods of accounting described in sections 4.01(1) and 4.02(1) of this revenue
procedure retroactively for residential
rental property within the scope of section
3 of this revenue procedure under section
4.04(1) of this revenue procedure for a
limited period of time, provided the electing real property trade or business files the
amended Federal income tax return(s) or
information return(s), or AAR(s), as applicable, within the time and manner provided in section 4.04(1) of this revenue procedure. A Form 3115 is not required to be
filed with such amended Federal income
tax return(s) or information return(s), or
AAR(s).
.04 Changing to the permissible method
of determining depreciation. The electing
real property trade or business within the
scope of section 3 of this revenue procedure may change from the impermissible
methods of accounting to the permissible
methods of accounting described in sections 4.01(1) and 4.02(1) of this revenue
procedure for residential rental property
within the scope of section 3 of this revenue procedure by filing either:
(1) Except as provided in Rev. Proc.
2021-29, 2021-27 I.R.B. 12, released on
www.irs.gov on June 17, 2021, regarding
July 6, 2021
the time to file amended returns by a partnership subject to the centralized partnership audit regime enacted as part of the
Bipartisan Budget Act of 2015 (BBA partnership), an amended Federal income tax
return or amended Form 1065 for the election year on or before April 15, 2022, but
in no event later than the applicable period
of limitations on assessment for the taxable year for which the amended return is
being filed. In the case of a BBA partnership that chooses not to file an amended
Form 1065 as permitted under Rev. Proc.
2021-29 or that cannot file an amended
Form 1065 because the date for doing so
has expired under Rev. Proc. 2021-29, the
BBA partnership may file an AAR for the
election year on or before April 15, 2022,
but in no event later than the applicable
period of limitations on making adjustments under § 6235 for the reviewed
year as defined in § 301.6241-1(a)(8) of
the Procedure and Administration Regulations. This amended return or Form
1065, or AAR, must include the adjustment to taxable income for the change in
determining depreciation of the residential
rental property and any collateral adjustments to taxable income or to tax liability.
Such collateral adjustments also must be
made on original or amended Federal income tax returns or Forms 1065, or AARs,
for any affected succeeding taxable years.
If the residential rental property is included in a general asset account, the taxpayer also must make the adjustments in
§ 1.168(i)-1(h)(2)(ii) and (iii)(B); or
(2) A Form 3115 under the automatic change procedures or non-automatic
change procedures, as applicable, in Rev.
Proc. 2015-13 (or any successor). If the
electing real property trade or business is
eligible to make this method change under
the automatic change procedures-(a) The method change described in
section 4.01 of this revenue procedure is
described in section 6.05 of Rev. Proc.
2019-43, 2019-48 I.R.B. 1107 (or any
successor), as modified by section 5.02 of
this revenue procedure. The § 481(a) adjustment for such method change as of the
first day of the year of change is calculated
as though the change in use occurred for
the residential rental property in the election year; and
(b) The method change described in
section 4.02 of this revenue procedure is
July 6, 2021
described in section 6.04 of Rev. Proc.
2019-43 (or any successor), as modified
by section 5.02 of this revenue procedure.
This change is made on a modified cut-off
basis, as defined in § 1.446-1(e)(2)(ii)(d)
(5)(iii).
SECTION 5. MODIFICATION TO
REV. PROC. 2019-43
.01 In general. Section 6.04 of Rev.
Proc. 2019-43 provides the procedures
for obtaining automatic consent to change
the method of accounting for general asset account treatment of MACRS property
due to a change in the use. Section 6.05
of Rev. Proc. 2019-43 provides the procedures for obtaining automatic consent to
change the method of accounting for depreciation due to a change in the use of
MACRS property.
.02 Modifications to existing automatic
changes.
(1) Section 6.01(1)(c)(viii) of Rev.
Proc. 2019-43 is modified to read as follows:
(viii) any depreciable property for
which the use changes in the hands of
the same taxpayer. See § 1.446-1(e)
(2)(ii)(d)(3)(ii). But see sections 6.04
and 6.05 of this revenue procedure for
changing to the methods of accounting
provided in § 1.168(i)-1(c)(2)(ii)(I) or
§ 1.168(i)-1(h)(2), and § 1.168(i)-4, respectively. However, an original Form
3115 for a change in method of accounting described in section 6.04 of this revenue procedure and section 4.02 of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5, may
be filed under this section 6.01 instead
of section 6.04 of this revenue procedure
if the original Form 3115 was filed before June 17, 2021, and such change was
made on a modified cut-off basis pursuant to section 6.04(3)(a) of this revenue
procedure. Also, an original Form 3115
for a change in method of accounting
described in section 6.05 of this revenue procedure and section 4.01 of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5, may be
filed under this section 6.01 instead of
section 6.05 of this revenue procedure if
the original Form 3115 was filed before
June 17, 2021, and the § 481(a) adjustment for such change was determined in
accordance with section 6.05(4) of this
revenue procedure.
10
(2) Section 6.04 of Rev. Proc. 201943, as modified by section 6.02(2) of Rev.
Proc. 2020-25, 2020-19 I.R.B. 785, is
modified as follows:
(a) Section 6.04(1)(b) is redesignated
as section 6.04(1)(c).
(b) New section 6.04(1)(b) is added to
read as follows:
(b) Taxpayer has not adopted a method of accounting for the item of property. If a taxpayer does not satisfy section
6.04(1)(a) of this revenue procedure for
an item of MACRS property because a
change in the use of this item of MACRS
property occurred in the taxable year immediately preceding the year of change
(1-year change in use property), the taxpayer may change from the impermissible method for general asset account
treatment to the permissible method
provided in § 1.168(i)-1(c)(2)(ii)(I) or
§ 1.168(i)-1(h)(2) for the 1-year change
in use property by filing a Form 3115.
Alternatively, the taxpayer may change
from the impermissible method for general asset account treatment to the permissible method provided in § 1.168(i)1(c)(2)(ii)(I) or § 1.168(i)-1(h)(2) for a
1-year change in use property by filing
an amended Federal income tax return or
information return, or an administrative
adjustment request under § 6227 (AAR),
as applicable, for the year of change in
the use of such property provided such
filing occurs prior to the date the taxpayer files its Federal income tax return or
information return for the taxable year
succeeding the year of change in the use
of such property.
(c) Redesignated section 6.04(1)(c) is
modified to read as follows:
(c) Inapplicability.
(i) The change described in section
6.04(1)(a) of this revenue procedure does
not apply to any property to which section 4.05 of Rev. Proc. 2020-22, 2020-18
I.R.B. 745, applies unless the taxpayer
and property are within the scope of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5. (See sections 4.02 and 4.03 of Rev. Proc. 2020-22,
as applicable, for making such change for
such property.); and
(ii) The change described in section
6.04(1)(a) of this revenue procedure does
not apply to any property to which section 5.04 of Rev. Proc. 2020-22, 202018 I.R.B. 745, applies. (See section 5.02
Bulletin No. 2021–27
of Rev. Proc. 2020-22 for making such
change for such property.).
(d) Sections 6.04(2) through (5) are redesignated as sections 6.04(3) through (6).
(e) New section 6.04(2) is added to
read as follows:
(2) Certain eligibility rules inapplicable.
(a) In general. The eligibility rule in
section 5.01(1)(d) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a taxpayer making this change.
(b) Special rule. The eligibility rule in
section 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a taxpayer within the scope of section 3 of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5, making
this change for any residential rental property within the scope of section 3 of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5, for a taxable year beginning in 2019, 2020, 2021,
or 2022.
(f) Redesignated section 6.04(3)(b) is
modified to read as follows:
(b) Reduced filing requirement for qualified small taxpayers. A qualified small
taxpayer, as defined in section 6.01(4)(b)
of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2018) to
make this change:
(i) The identification section of page 1
(above Part I);
(ii) The signature section at the bottom
of page 1;
(iii) Part I;
(iv) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(v) Part IV, line 25; and
(vi) Schedule E, all lines except lines 1,
4c, 5, 6, 7b, and 7c.
(g) Redesignated section 6.04(4) is
modified to read as follows:
(4) Concurrent automatic change.
(a) A taxpayer making this change for
more than one asset for the same year of
change should file a single Form 3115 for
all such assets.
(b) A taxpayer making this change
and a change under section 6.05, section
6.12(3)(b), and/or section 6.15 of this
revenue procedure for the same year of
change should file a single Form 3115
for all such changes and must enter the
designated automatic accounting method
change numbers for the changes on the
appropriate line on the Form 3115. See
Bulletin No. 2021–27
section 6.03(1)(b) of Rev. Proc. 2015-13
for information on making concurrent
changes.
(3) Section 6.05 of Rev. Proc. 201943, as modified by section 6.02(3) of Rev.
Proc. 2020-25, is modified as follows:
(a) Section 6.05(1)(b) is redesignated
as section 6.05(1)(c).
(b) New section 6.05(1)(b) is added to
read as follows:
(b) Taxpayer has not adopted a method of accounting for the item of property. If a taxpayer does not satisfy section
6.05(1)(a)(i) of this revenue procedure
for an item of MACRS property because a change in the use of this item of
MACRS property occurred in the taxable
year immediately preceding the year of
change (1-year change in use property), the taxpayer may change from the
impermissible method of determining
depreciation to the permissible method
of determining depreciation provided in
§ 1.168(i)-4 for the 1-year change in use
property by filing a Form 3115 for this
change, provided the § 481(a) adjustment
reported on the Form 3115 includes the
amount of any adjustment that is attributable to all property (including the 1-year
change in use property) subject to the
Form 3115. Alternatively, the taxpayer may change from the impermissible
method of determining depreciation to
the permissible method of determining
depreciation provided in § 1.168(i)-4 for
a 1-year change in use property by filing
an amended Federal income tax return or
information return, or an administrative
adjustment request under § 6227 (AAR),
as applicable, for the year of change in
the use of such property provided such
filing occurs prior to the date the taxpayer files its Federal income tax return or
information return for the taxable year
succeeding the year of change in the use
of such property.
(c) Redesignated section 6.05(1)(c) is
modified to read as follows:
(c) Inapplicability.
(i) The change described in section
6.05(1)(a)(i) of this revenue procedure
does not apply to any property to which
section 4.05 of Rev. Proc. 2020-22, 202018 I.R.B. 745, applies unless the taxpayer
and property are within the scope of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5. (See sections 4.02 and 4.03 of Rev. Proc. 2020-22,
11
as applicable, for making such change for
such property.);
(ii) The change described in section
6.05(1)(a)(i) of this revenue procedure
does not apply to any property to which
section 5.04 of Rev. Proc. 2020-22, 202018 I.R.B. 745, applies. (See section 5.02
of Rev. Proc. 2020-22 for making such
change for such property.); and
(iii) The change described in this section 6.05 does not apply to any property
that is not owned by the taxpayer at the
beginning of the year of change.
(d) Sections 6.05(2) through (6) are redesignated as sections 6.05(3) through (7).
(e) New section 6.05(2) is added to
read as follows:
(2) Certain eligibility rules inapplicable.
(a) In general. The eligibility rule in
section 5.01(1)(d) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a taxpayer making this change.
(b) Special rule. The eligibility rule in
section 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a taxpayer within the scope of section 3 of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5, making
this change for any residential rental property within the scope of section 3 of Rev.
Proc. 2021-28, 2021-27 I.R.B. 5, for a taxable year beginning in 2019, 2020, 2021,
or 2022.
(f) Redesignated section 6.05(3) is
modified to read as follows:
(3) Reduced filing requirement for qualified small taxpayers. A qualified small
taxpayer, as defined in section 6.01(4)(b)
of this revenue procedure, is required to
complete only the following information
on Form 3115 (Rev. December 2018) to
make this change:
(a) The identification section of page 1
(above Part I);
(b) The signature section at the bottom
of page 1;
(c) Part I;
(d) Part II, all lines except lines 13,
15b, 16, 17, and 19;
(e) Part IV, all lines except line 25; and
(f) Schedule E, all lines except lines 1,
4c, 5, 6, 7b, and 7c.
(g) Redesignated section 6.05(5) is
modified to read as follows:
(5) Concurrent automatic change.
(a) A taxpayer making this change for
more than one asset for the same year of
change should file a single Form 3115
July 6, 2021
for all such assets and provide a single
net § 481(a) adjustment for all the changes included in that Form 3115. If one or
more of the changes in that single Form
3115 generate a negative § 481(a) adjustment and other changes in that same Form
3115 generate a positive § 481(a) adjustment, the taxpayer may provide a single
negative § 481(a) adjustment for all the
changes that are included in that Form
3115 generating such adjustment and a
single positive § 481(a) adjustment for all
the changes that are included in that Form
3115 generating such adjustment.
(b) A taxpayer making this change and a
change under section 6.04, section 6.12(3)
(b), and/or section 6.15 of this revenue
procedure for the same year of change
should file a single Form 3115 for all such
changes and must enter the designated automatic accounting method change numbers for the changes on the appropriate
line on the Form 3115. See section 6.03(1)
(b) of Rev. Proc. 2015-13 for information
on making concurrent changes.
SECTION 6. MODIFICATION TO
REV. PROC. 2019-08
New section 4.01(3) of Rev. Proc.
2019-08 is added to read as follows:
(3) Residential rental property held by
an electing real property trade or business.
Notwithstanding section 4.01(1) of this revenue procedure, the recovery period under
the table in § 168(g)(2)(C) for taxable years
beginning after December 31, 2017, is 30
years for residential rental property that:
(a) was placed in service by (i) the taxpayer before January 1, 2018, or (ii) the
transferor of the residential rental property
before January 1, 2018, if the acquisition
of such property by the transferee-taxpayer is subject to § 168(i)(7),
(b) is held by an electing real property
trade or business as defined in § 163(j)(7)
(B) and the regulations thereunder, and
(c) was not subject to § 168(g)(1)(A),
(B), (C), (D), or (E) prior to January 1,
2018, in the hands of (i) the taxpayer or
(ii) the transferor if the acquisition of such
property by the transferee-taxpayer is subject to § 168(i)(7).
See Rev. Proc. 2021-28, 2021-27
I.R.B. 5, for further guidance. In particular, see section 3.03 of Rev. Proc. 2021-28
regarding the rules applicable to acquisi-
July 6, 2021
tions of residential rental property subject
to § 168(i)(7).
SECTION 7. EFFECT ON OTHER
DOCUMENTS
.01 Section 4.01 of Rev. Proc. 2019-08
is modified.
.02 Sections 6.01, 6.04, and 6.05 of
Rev. Proc. 2019-43 are modified.
SECTION 8. EFFECTIVE DATE
This revenue procedure is effective
June 17, 2021.
SECTION 9. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Jaime C. Park of the Office
of Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding this revenue procedure contact
Patrick Clinton at (202) 317-4651 (not a
toll-free number).
26 CFR 601.601. Rules and regulations.
(Also Part I, §§ 6031, 6222, 6227.)
Rev. Proc. 2021-29
SECTION 1. PURPOSE
This revenue procedure allows eligible partnerships to file amended partnership returns for taxable years beginning in
2018, 2019, and 2020 using a Form 1065,
U.S. Return of Partnership Income (Form
1065), with the “Amended Return” box
checked, and issue an amended Schedule
K-1, Partner’s Share of Income, Deductions, Credits, etc. (Schedule K-1), to each
of its partners. The option to file amended
returns only applies to partnerships satisfying the requirements of section 3 of this
revenue procedure.
SECTION 2. BACKGROUND
.01 Section 1101(a) of the Bipartisan
Budget Act of 2015 (BBA), P.L. 114-74,
Title XI (November 2, 2015), replaced subchapter C of chapter 63 of subtitle F of the
Internal Revenue Code (Code) effective for
partnership taxable years beginning after
12
December 31, 2017. Prior to the enactment
of the BBA, subchapter C of chapter 63
contained the unified partnership audit and
litigation rules enacted by the Tax Equity
and Fiscal Responsibility Act of 1982 (TEFRA), P.L. 97–248 (September 3, 1982),
that were commonly referred to as the
TEFRA partnership procedures. Section
1101(c) of the BBA replaced the TEFRA
partnership procedures with a centralized
partnership audit regime that, in general,
determines, assesses, and collects tax at the
partnership level. The centralized partnership audit procedures enacted by the BBA
are found at sections 6221 through 6241 of
the Code. The centralized partnership audit
procedures apply to all partnerships, unless
the partnership makes a valid election under section 6221(b) not to have those procedures apply. Partnerships subject to the
centralized partnership audit regime are
referred to as BBA partnerships.
.02 Section 6031(a) of the Code requires every partnership to file a return for
each taxable year stating the items of its
gross income and the deductions allowable by subtitle A of the Code and such
other information as required by forms
and regulations, including information
about the partners in the partnership. For
a partnership, the return required by section 6031(a) is Form 1065, which includes
Schedules K-1. A Schedule K-1 reports a
partner’s name, taxpayer identification
number, and distributive share of partnership-related items and other information related to the partner’s interest in the
partnership. Section 6031(b) requires that
a partnership required to file a return under section 6031(a) furnish a copy of the
Schedule K-1 to each partner that includes
such information as may be required to be
shown by regulations. In general, section
6031(b) also prohibits BBA partnerships
from amending the information required
to be furnished to their partners after the
due date of the return, unless specifically
provided by the Secretary of the Treasury
or her delegate. This revenue procedure
exercises that authority to allow a BBA
partnership to file an amended partnership
return and furnish amended Schedules
K-1 under the circumstances described in
this revenue procedure.
.03 Section 6222(a) of the Code requires partners in a BBA partnership to
treat partnership-related items, as defined
Bulletin No. 2021–27
in section 6241 and the corresponding
regulations, consistently on the partner’s
return with how the BBA partnership
treated such items on its return. This consistency requirement generally applies to
all partners. Consistent treatment with
the partnership generally requires that
partners in a BBA partnership file their
returns consistent with the information
reported to them on the Schedule K-1.
.04 Section 202 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020
(TCDTRA) was enacted as part of Title II
of Division EE of the Consolidated Appropriations Act, 2021, Pub. L. No. 116260, 134 Stat. 1182 (December 27, 2020).
Section 202 of the TCDTRA retroactively
allows a recovery period of 30 years under the alternative depreciation system
(ADS) in section 168(g) of the Code for
certain residential rental property, as defined in section 168(e)(2)(A) of the Code,
placed in service before January 1, 2018,
held by an electing real property trade or
business as defined in section 163(j)(7)(B)
of the Code, and not previously subject to
the ADS. This revenue procedure explains
how a BBA partnership that wishes to
change its recovery period under section
168(g) of the Code for such property in accordance with section 202 of the TCDTRA
may do so without filing an administrative
adjustment request (AAR) under section
6227 of the Code. This revenue procedure
is intended to be implemented in tandem
with Revenue Procedure 2021-28, 202127 I.R.B. 5, released on June 17, 2021.
.05 This revenue procedure allows
BBA partnerships the option to file an
amended return instead of an AAR,
though it does not prevent a partnership
from filing an AAR to obtain the benefits
of the TCDTRA or any other tax benefits to which the partnership is entitled. A
BBA partnership that files an amended return pursuant to this revenue procedure is
still subject to the centralized partnership
audit procedures enacted by the BBA.
SECTION 3. AMENDED RETURN
OPTION PROVIDED TO ELIGIBLE
BBA PARTNERSHIPS FOR THE
2018, 2019, AND 2020 TAXABLE
YEARS
.01 Scope. The filing and furnishing
option provided by section 3.02 of this
Bulletin No. 2021–27
revenue procedure applies to BBA partnerships described in section 3.03 of this
revenue procedure for the taxable years
described in section 3.04 of this revenue
procedure.
.02 Option to file amended return.
BBA partnerships that filed a Form 1065
and furnished all required Schedules K-1
for the taxable years beginning in 2018,
2019, or 2020 and did so prior to the issuance of this revenue procedure may
file amended partnership returns and furnish corresponding Schedules K-1 on or
before October 15, 2021. The amended
returns must take into account tax changes under section 202 of the TCDTRA,
but eligible BBA partnerships under section 3.03 of this revenue procedure may
make any changes on their amended returns.
.03 Eligible BBA partnerships.
(1) The filing and furnishing option
provided in section 3.02 of this revenue
procedure is available only to BBA partnerships that filed Forms 1065 and furnished Schedules K-1 for the partnership
taxable years beginning in 2018, 2019, or
2020 and did so prior to the issuance of
this revenue procedure. The filing and furnishing option in section 3.02 of the revenue procedure is only available to:
(a) BBA partnerships within the scope
of section 3 of Rev. Proc. 2021-28 that
have residential rental property within the
scope of section 3 of Rev. Proc. 2021-28
and that choose to change either or both
of their method of depreciation or general
asset account treatment for such property
by filing an amended Form 1065 in accordance with procedures in sections 4.01(2),
4.02(3), or 4.04(1) of Rev. Proc. 2021-28
as applicable, or
(b) BBA partnerships within the scope
of section 3.01(1) of Revenue Procedure
2020-22, 2020-18 I.R.B. 745, that choose
to make a late section 163(j)(7) election
by filing an amended Form 1065 in accordance with procedures in section 4 of Rev.
Proc. 2020-22.
(2) For purposes of section 6222, the
amended return replaces any prior return
(including any AAR filed by the partnership) for the taxable year for purposes of
determining the partnership’s treatment
of partnership-related items. See section
4.03 of this revenue procedure for a special rule regarding partnerships who have
13
previously filed AARs for an affected taxable year.
.04 Eligible taxable years. The filing
and furnishing option provided in this revenue procedure applies only to partnership
taxable years that began in 2018, 2019, or
2020.
SECTION 4. PROCEDURE
.01 Filing requirements. To take advantage of the option to file an amended
return provided by section 3 of this revenue procedure, a BBA partnership must
file a Form 1065 (with the “Amended
Return” box checked) and furnish corresponding amended Schedules K-1. The
BBA partnership must clearly indicate
the application of this revenue procedure
on the amended return and write “FILED
PURSUANT TO REV PROC 2021-29”
at the top of the amended return and attach a statement with each Schedule K-1
furnished to its partners with the same
notation. The BBA partnership may file
electronically or by mail but filing electronically may allow for faster processing
of the amended return.
.02 Special rule for BBA partnerships
whose returns are under examination. If
a BBA partnership is currently under examination for a taxable year beginning in
2018, 2019, or 2020 and wishes to take
advantage of the option to file an amended
return provided by section 3 of this revenue procedure, the partnership may only
do so if the partnership sends notice in
writing to the revenue agent coordinating
the partnership’s examination that the partnership seeks to use the amended return
option described in this revenue procedure
prior to or contemporaneously with filing
the amended return as described in section 4.01 of this revenue procedure. The
partnership must also provide the revenue
agent with a copy of the amended return
upon filing.
.03 Special rule for BBA partnerships
who have previously filed an AAR. If a
BBA partnership has previously filed an
AAR and wishes to file an amended return
pursuant to this revenue procedure for the
same taxable year, the partnership should
use the items as adjusted in the AAR,
where applicable, in lieu of any reporting
from the originally filed partnership return.
July 6, 2021
.04 Coordination with Notice 201946. If, under Notice 2019-46, 2019-37
I.R.B. 695, a partnership has applied
the rules of the proposed GILTI regulations under proposed §1.951A-5 of the
Income Tax Regulations for its taxable
years ending before June 22, 2019 (Form
1065, Form 8992, U.S Shareholder Calculation of Global Intangible Low-Taxed
Income (GILTI), and Schedules K-1),
the partnership may continue to apply
the rules of proposed §1.951A-5 for purposes of filing an amended Form 1065
for taxable years to which Notice 2019-
July 6, 2021
46 applies under this revenue procedure
if the partnership furnishes amended
Schedules K-1 consistent with those proposed regulations and provides appropriate notifications to its partners under
the principles of section 5.01 of Notice
2019-46 within the period described in
section 3.02 of this revenue procedure.
Nothing in this revenue procedure
changes a partnership’s obligation to
provide information described in section
5.02 of Notice 2019-46. If a partnership
applies the final GILTI regulations under
§1.951A-1(e), any amended Schedules
14
K-1 issued under this revenue procedure
must be consistent with those final regulations.
SECTION 5. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Joy E. Gerdy Zogby of the
Office of the Associate Chief Counsel
(Procedure and Administration). For further information, please contact 202-3174927 (not a toll-free number).
Bulletin No. 2021–27
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 published 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 applied 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 confusion. It
is not used where a position in a prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously published 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 published ruling that is not considered determinative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings 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
period of time in separate rulings. If the
new ruling does more than restate the substance 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 rulings 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 material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
Bulletin No. 2021–27
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.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
i
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.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
July 6, 2021
Numerical Finding List1
Bulletin 2021–27
Notices:
2021-39, 2021-27 I.R.B. 3
Revenue Procedures:
2021-28, 2021-27 I.R.B. 5
2021-29, 2021-27 I.R.B. 12
Revenue Rulings:
2021-12, 2021-27 I.R.B. 1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2021–27 through 2021–52 is in Internal Revenue Bulletin
2021–52, dated December 27, 2021.
1
July 6, 2021
ii
Bulletin No. 2021–27
Finding List of Current Actions on
Previously Published Items1
Bulletin 2021–27
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2021–27 through 2021–52 is in Internal Revenue Bulletin
2021–52, dated December 27, 2021.
1
Bulletin No. 2021–27
iii
July 6, 2021
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.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.