26 C.F.R. § 1.1061-0

Current through September 30, 2024

Section 1.1061-0 - Table of contents

This section lists the captions that appear in §§ 1.1061-1 through 1.1061-6 .

§ 1.1061-1 Section 1061 definitions.

(a) Definitions.

(b) Applicability date.

§ 1.1061-2 Applicable partnership interests and applicable trades or businesses.

(a) API rules and examples.

(1) Rules.

(i) An API remains an API.

(ii) Application of section 1061 to Unrealized API Gains and Losses.

(iii) API Gains and Losses retain their character.

(iv) Substantial services by the Owner Taxpayer, Passthrough Taxpayer or any Related Person.

(v) Grantor trusts and entities disregarded as separate from their owners.

(2) Examples.

(b) Application of the ATB Activity Test.

(1) In general.

(i) Rules for applying the ATB Activity Test.

(A) Aggregate Specified Actions taken into account.

(B) Raising or Returning Capital Actions and Investing or Developing Actions are not both required to be taken in each taxable year.

(C) Combined conduct by multiple related entities taken into account.

(ii) Developing Specified Assets.

(iii) Partnerships.

(2) Examples.

(c) Applicability date.

§ 1.1061-3 Exceptions to the definition of an API.

(a) A partnership interest held by an employee of another entity not conducting an ATB.

(b) Partnership interest held by a corporation.

(1) In general.

(2) Treatment of interests held by an S corporation or a qualified electing fund.

(c) Capital Interest Gains and Losses.

(1) In general.

(2) Capital Interest Gains and Losses defined.

(3) General rules for determining Capital Interest Allocations.

(i) Commensurate with capital contributed.

(ii) In a similar manner.

(A) Relevant factors.

(B) Clear identification requirement.

(iii) Reinvestment of API Gain.

(iv) Unrelated Non-Service Partner requirement.

(v) Proceeds of certain loans not taken into account for Capital Interest Allocation purposes.

(A) General rule.

(B) Recourse liability.

(vi) Items that are not included in Capital Interest Allocations.

(4) Capital Interest Disposition Amounts.

(i) In general.

(ii) Determination of the Capital Interest Disposition Amount.

(5) Capital Interest Allocations made by a Passthrough Entity that is an API Holder.

(6) Examples.

(d) Partnership interest acquired by purchase by an unrelated person.

(1) Acquirer not a Related Person.

(2) Section 1061(d) not applicable.

(3) Acquirer not a service provider.

(e) [Reserved]

(f) Applicability date.

(1) General rule.

(2) Partnership interest held by an S corporation.

(3) Partnership interest held by a PFIC with respect to which the shareholder has a QEF election in effect.

§ 1.1061-4 Section 1061 computations.

(a) Computations.

(1) Recharacterization Amount.

(2) One Year Gain Amount and Three Year Gain Amount.

(i) One Year Gain Amount.

(ii) Three Year Gain Amount.

(3) API One Year Distributive Share Amount and API Three Year Distributive Share Amount.

(i) API One Year Distributive Share Amount.

(ii) API Three Year Distributive Share Amount.

(4) API One Year Disposition Amount and API Three Year Disposition Amount.

(i) API One Year Disposition Amount.

(ii) API Three Year Disposition Amount.

(b) Special rules for calculating the One Year Gain Amount and the Three Year Gain Amount.

(1) One Year Gain Amount equals zero or less.

(2) Three Year Gain Amount equals zero or less.

(3) One Year Gain Amount less than Three Year Gain Amount.

(4) Installment sale gain.

(5) Special rules for capital gain dividends from regulated investment companies (RICs) and real estate investment trusts (REITs).

(i) API One Year Distributive Share Amount.

(ii) API Three Year Distributive Share Amount.

(iii) Loss on sale or exchange of stock.

(6) Pro rata share of qualified electing fund (QEF) net capital gain.

(i) One year QEF net capital gain.

(ii) Three year QEF net capital gain adjustment.

(7) Items not taken into account for purposes of section 1061.

(8) Holding period determination.

(i) Determination of holding period for purposes of the Three Year Gain Amount.

(ii) Relevant holding period.

(9) Lookthrough Rule for certain API dispositions.

(i) Determination that the Lookthrough Rule applies.

(A) In general.

(B) Determination that the Lookthrough Rule applies to the disposition of a Passthrough Interest.

(ii) Application of the Lookthrough Rule.

(10) Section 83.

(c) Examples.

(1) Recharacterization rules.

(2) Special rules examples.

(d) Applicability date.

§ 1.1061-5 Section 1061(d) transfers to related persons.

(a) In general.

(b) Transfer.

(c) Section 1061(d) Recharacterization Amount.

(d) Special rules.

(e) Section 1061(d) Related Person.

(f) Examples.

(g) Applicability date.

§ 1.1061-6 Reporting rules.

(a) Owner Taxpayer filing requirements.

(1) In general.

(2) Failure to obtain information.

(b) Passthrough Entity filing requirements and reporting.

(1) Requirement to file information with the IRS and to furnish information to API Holder.

(2) Requirement to request, furnish, and file information in tiered structures.

(i) Requirement to request information.

(ii) Requirement to furnish and file information.

(iii) Timing of requesting and furnishing information.

(A) Requesting information.

(B) Furnishing information.

(iv) Manner of requesting information.

(v) Recordkeeping requirement.

(vi) Passthrough Entity is not furnished information to meet its reporting obligations under paragraph (b)(1) of this section.

(vii) Filing requirements.

(viii) Penalties.

(c) Regulated investment company (RIC) and real estate investment trust (REIT) reporting.

(1) Section 1061 disclosures.

(i) One Year Amounts Disclosure.

(ii) Three Year Amounts Disclosure.

(2) Pro rata disclosures.

(3) Report to shareholders.

(d) Qualified electing fund (QEF) reporting.

(e) Applicability date.

26 C.F.R. §1.1061-0

T.D. 9945, 86 FR 5480, Jan. 19, 2021

T.D. 9945, 86 FR 5480, 1/19/2021