E8-27024. Section 1367 Regarding Open Account Debt; Correction

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Correcting amendment.

SUMMARY:

This document contains corrections to final regulations (TD 9428) that were published in the Federal Register on Monday, October 20, 2008 (73 FR62199) relating to the treatment of open account debt between S corporations and their shareholders. These final regulations provide rules regarding the definition of open account debt and the adjustments in basis of any indebtedness of an S corporation to a shareholder under section 1367(b)(2) of the Internal Revenue Code for shareholder advances and repayments on advances of open account debt. The regulations affect shareholders of S corporations and are necessary to provide guidance needed to comply with the applicable tax law.

DATES:

Effective Date: This correction is effective November 14, 2008, and is applicable on October 20, 2008.

FOR FURTHER INFORMATION CONTACT:

Stacy L. Short or Deane M. Burke, [phone] (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are the subjects of this document are under section 1367 of the Internal Revenue Code.

Need for Correction

As published, final regulations (TD 9428) contain errors that may prove to be misleading and are in need of clarification.

List of Subjects in 26 CFR Part 1

• Income taxes
• Reporting and recordkeeping requirements

Correction of Publication

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

PART 1—INCOME TAXES

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

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

Par. 2. Section 1.1367-2(e) is amended by revising the title of paragraph Example 6.

and the first sentence of paragraph Example 7. (i) to read as follows:

§ 1.1367-2

Adjustments to basis of indebtedness to shareholder.

* * * * *

(e) * * *

Example 6. The $25,000 aggregate principal amount applies to each shareholder. * * *

* * * * *

Example 7. * * *

(i) The facts are the same as in Example 6, in addition to which, on December 31, 2009, A's basis in the open account debt is reduced under paragraph (b) of this section to $8,000. * * *

* * * * *

LaNita Van Dyke,

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