Federal Register / Vol. 83, No. 118 / Tuesday, June 19, 2018 / Proposed Rules 28397 

CPSA. The only laboratories that are 

expected to provide such services are 

those that anticipate receiving sufficient 

revenue from providing the mandated 

testing to justify accepting the 

requirements as a business decision. 

Laboratories that do not expect to 

receive sufficient revenue from these 

services to justify accepting these 

requirements would not likely pursue 

accreditation for this purpose. Similarly, 

amending the part 1112 rule to include 

the NOR for stationary activity centers 

would not have a significant adverse 

impact on small laboratories. Moreover, 

based upon the number of laboratories 

in the United States that have applied 

for CPSC acceptance of the accreditation 

to test for conformance to other juvenile 

product standards, we expect that only 

a few laboratories will seek CPSC 

acceptance of their accreditation to test 

for conformance with the stationary 

activity center standard. Most of these 

laboratories will have already been 

accredited to test for conformance to 

other juvenile product standards and 

the only costs to them would be the cost 

of adding the stationary activity center 

standard to their scope of accreditation. 

As a consequence, the Commission 

certifies that the proposed notice 

requirements for the stationary activity 

center standard will not have a 

significant impact on a substantial 

number of small entities. 

XIII. Request for Comments 

This proposed rule begins a 

rulemaking proceeding under section 

104(b) of the CPSIA to issue a consumer 

product safety standard for stationary 

activity centers. We invite all interested 

persons to submit comments on any 

aspect of the proposed rule. 

In particular, the Commission invites 

comments on the necessity of additional 

requirements pertaining to the potential 

fraying of the support straps on SACs. 

Comments should be submitted in 

accordance with the instructions in the 

ADDRESSES section at the beginning of 

this notice. 

List of Subjects 

16 CFR Part 1112 

Administrative practice and 

procedure, Audit, Consumer protection, 

Reporting and recordkeeping 

requirements, Third party conformity 

assessment body. 

16 CFR Part 1238 

Consumer protection, Imports, 

Incorporation by reference, Infants and 

children, Labeling, Law enforcement, 

and Toys. 

For the reasons discussed in the 

preamble, the Commission proposes to 

amend Title 16 of the Code of Federal 

Regulations as follows: 

PART 1112—REQUIREMENTS 

PERTAINING TO THIRD PARTY 

CONFORMITY ASSESSMENT BODIES 

■ 1. The authority citation for part 1112 

continues to read as follows: 

Authority: 15 U.S.C. 2063; Pub. L. 110– 

314, section 3, 122 Stat. 3016, 3017 (2008). 

■ 2. Amend § 1112.15 by adding 

paragraphs (b)(45) through (47) to read 

as follows: 

§ 1112.15 When can a third party 

conformity assessment body apply for 

CPSC acceptance for a particular CPSC rule 

or test method? 

* * * * * 

(b) The CPSC has published the 

requirements for accreditation for third 

party conformity assessment bodies to 

assess conformity for the following 

CPSC rules or test methods: 

* * * * * 

(45) [Reserved] 

(46) [Reserved] 

(47) 16 CFR part 1238, Safety 

Standard for Stationary Activity 

Centers. 

* * * * * 

■ 3. Add part 1238 to read as follows: 

PART 1238—SAFETY STANDARD FOR 

STATIONARY ACTIVITY CENTERS 

Sec. 

1238.1 Scope. 

1238.2 Requirements for stationary activity 

centers. 

Authority: Sec. 104, Pub. L. 110–314, 122 

Stat. 3016 (15 U.S.C. 2056a). 

§ 1238.1 Scope. 

This part establishes a consumer 

product safety standard for stationary 

activity centers. 

§ 1238.2 Requirements for stationary 

activity centers. 

Each stationary activity center must 

comply with all applicable provisions of 

ASTM F2012–18 ε1, Standard Consumer 

Safety Specification for Stationary 

Activity Centers, approved on May 18, 

2018. The Director of the Federal 

Register approves this incorporation by 

reference in accordance with 5 U.S.C. 

552(a) and 1 CFR part 51. You may 

obtain a copy from ASTM International, 

100 Bar Harbor Drive, P.O. Box 0700, 

West Conshohocken, PA 19428; http:// 

www.astm.org/cpsc.htm. You may 

inspect a copy at the Office of the 

Secretary, U.S. Consumer Product 

Safety Commission, Room 820, 4330 

East West Highway, Bethesda, MD 

20814, telephone 301–504–7923, or at 

the National Archives and Records 

Administration (NARA). For 

information on the availability of this 

material at NARA, call 202–741–6030, 

or go to: http://www.archives.gov/ 

federal_register/code_of_

federalregulations/ibr_locations.html. 

Alberta E. Mills, 

Secretary, Consumer Product Safety 

Commission. 

[FR Doc. 2018–13024 Filed 6–18–18; 8:45 am] 

BILLING CODE 6355–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–131186–17] 

RIN 1545–BO05 

Proposed Removal of Temporary 

Regulations on a Partner’s Share of a 

Partnership Liability for Disguised Sale 

Purposes 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking; 

public hearing; partial withdrawal of 

notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations concerning how 

partnership liabilities are allocated for 

disguised sale purposes. The proposed 

regulations, if finalized, would replace 

existing temporary regulations with 

final regulations that were in effect prior 

to the temporary regulations. This 

document also partially withdraws 

proposed regulations cross-referencing 

the temporary regulations. These 

regulations affect partnerships and their 

partners. Finally, this document 

provides notice of a public hearing on 

these proposed regulations. 

DATES: Written or electronic comments 

must be received by July 19, 2018. 

A public hearing will be held at 10:00 

a.m. on August 21, 2018. Outlines of 

topics to be discussed at the public 

hearing must be received by August 3, 

2018. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–131186–17), Room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand-delivered Monday through 

Friday between the hours of 8 a.m. and 

4 p.m. to: CC:PA:LPD:PR (REG–131186– 

17), Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue NW, 

Washington, DC, or sent electronically, 


daltland on DSKBBV9HB2PROD with PROPOSALS
28398 Federal Register / Vol. 83, No. 118 / Tuesday, June 19, 2018 / Proposed Rules 

via the Federal eRulemaking Portal site 

at http://www.regulations.gov (indicate 

IRS and REG–131186–17). The public 

hearing will be held in the IRS 

Auditorium, Internal Revenue Service 

Building, 1111 Constitution Ave. NW, 

Washington, DC 20224. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Caroline E. Hay or Deane M. Burke at 

(202) 317–5279; concerning the 

submission of comments, the hearing, or 

to be placed on the building access list 

to attend the hearing, Regina L. Johnson 

at (202) 317–6901 (not toll-free 

numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

This document proposes amendments 

to the Income Tax Regulations (26 CFR 

part 1) under section 707 of the Internal 

Revenue Code (Code) regarding 

allocations of partnership liabilities for 

disguised sale purposes. Section 

707(a)(2)(B) generally provides that, 

under regulations prescribed by the 

Secretary of the Treasury (Secretary), 

related transfers to and by a partnership 

that, when viewed together, are more 

properly characterized as a sale or 

exchange of property, will be treated 

either as a transaction between the 

partnership and one who is not a 

partner or between two or more partners 

acting other than in their capacity as 

partners (generally referred to as 

‘‘disguised sales’’). 

The Department of the Treasury 

(Treasury Department) and the IRS 

published a notice of proposed 

rulemaking (REG–119305–11) in the 

Federal Register (79 FR 4826) on 

January 30, 2014, to amend the thenexisting regulations under section 707 

relating to disguised sales of property to 

or by a partnership and under section 

752 concerning the treatment of 

partnership liabilities (2014 Proposed 

Regulations). The 2014 Proposed 

Regulations provided certain technical 

rules intended to clarify the application 

of the disguised sale rules under section 

707 and also contained rules regarding 

the sharing of partnership recourse and 

nonrecourse liabilities under section 

752. A public hearing on the 2014 

Proposed Regulations was not requested 

or held, but the Treasury Department 

and the IRS received written comments. 

Based on a comment received on the 

2014 Proposed Regulations requesting 

that guidance under section 752 

regarding a partner’s share of 

partnership liabilities apply for 

disguised sale purposes, the Treasury 

Department and the IRS reconsidered 

the rules under § 1.707–5(a)(2) of the 

2014 Proposed Regulations for 

determining a partner’s share of 

partnership liabilities for purposes of 

section 707. 

On October 5, 2016, the Treasury 

Department and the IRS published in 

the Federal Register (81 FR 69282) final 

and temporary regulations (T.D. 9788) 

implementing a new rule concerning the 

allocation of liabilities for section 707 

purposes. On November 17, 2016, the 

Treasury Department and the IRS 

published in the Federal Register (81 

FR 80993 and 81 FR 80994) two 

correcting amendments to T.D. 9788 

(the temporary regulations as so 

corrected, 707 Temporary Regulations). 

T.D. 9788 also contained rules 

concerning the treatment of ‘‘bottom 

dollar payment obligations’’ (752 

Temporary Regulations). The 707 

Temporary Regulations were 

incorporated by cross reference in a 

notice of proposed rulemaking (REG– 

122855–15) published on October 5, 

2016, in the Federal Register (81 FR 

69301) (707 Proposed Regulations). That 

notice of proposed rulemaking also 

incorporated by cross reference the 752 

Temporary Regulations and included 

new proposed regulations under 

sections 704 and 752 (752 Proposed 

Regulations). Also on October 5, 2016, 

the Treasury Department and the IRS 

published final regulations under 

section 707 and § 1.752–3 (T.D. 9787) in 

the Federal Register (81 FR 6929). T.D. 

9787 was the subject of a correction 

notice published in the Federal Register 

(81 FR 80587) on November 16, 2016 

(the final regulations as so corrected, 

707 Final Regulations). 

The 707 Temporary Regulations, in 

response to the comment received on 

the 2014 Proposed Regulations, adopted 

an approach that requires a partner to 

apply the same percentage used to 

determine the partner’s share of excess 

nonrecourse liabilities under § 1.752– 

3(a)(3) (with certain limitations) in 

determining the partner’s share of all 

partnership liabilities for disguised sale 

purposes. Also in response to the 

comment, the 707 Temporary 

Regulations provide that a partner’s 

share of a partnership liability for 

section 707 purposes shall not exceed 

the partner’s share of the partnership 

liability under section 752 and 

applicable regulations. The 707 

Temporary Regulations reserve on the 

treatment, for disguised sale purposes, 

of an obligation that would be treated as 

a recourse liability under § 1.752–1(a)(1) 

or a nonrecourse liability under § 1.752– 

1(a)(2) if the liability was treated as a 

partnership liability for purposes of 

section 752. The Treasury Department 

and the IRS received comments 

supporting the approach taken in the 

707 Temporary Regulations, but also 

received comments expressing concern 

that a new approach was adopted by 

temporary regulations rather than in 

proposed regulations, which denied 

taxpayers the ability to provide 

comment prior to the 707 Temporary 

Regulations being effective. 

On April 21, 2017, the President 

issued Executive Order 13789 (E.O. 

13789), ‘‘Executive Order on Identifying 

and Reducing Tax Regulatory Burdens’’ 

(82 FR 19317, April 26, 2017), which 

directed the Secretary to review all 

significant tax regulations issued on or 

after January 1, 2016, and to take 

concrete action to alleviate the burdens 

of regulations that (i) impose an undue 

financial burden on U.S. taxpayers; (ii) 

add undue complexity to the Federal tax 

laws; or (iii) exceed the statutory 

authority of the IRS. E.O. 13789 further 

directed the Secretary to submit to the 

President within 60 days an interim 

report identifying regulations that meet 

these criteria. Notice 2017–38 (2017–30 

IRB 147 (July 24, 2017)) included the 

707 Temporary Regulations in a list of 

eight regulations identified by the 

Secretary in the interim report as 

meeting at least one of the first two 

criteria specified in E.O. 13789. 

E.O. 13789 further directed the 

Secretary to submit to the President and 

publish in the Federal Register a report 

recommending specific actions to 

mitigate the burden imposed by 

regulations identified in the interim 

report. On October 16, 2017, the 

Secretary published this second report 

in the Federal Register (82 FR 48013), 

‘‘Second Report to the President on 

Identifying and Reducing Tax 

Regulatory Burdens’’ (Second Report). 

The Second Report stated that, while 

the Treasury Department and the IRS 

believe that the 707 Temporary 

Regulations’ novel approach to 

addressing disguised sale treatment 

merits further study, the Treasury 

Department and the IRS agree with 

commenters that such a change should 

be studied systematically. The second 

report further stated that the Treasury 

Department and the IRS therefore would 

consider whether the 707 Temporary 

Regulations and the 707 Proposed 

Regulations should be removed and 

withdrawn, respectively, and the prior 

regulations reinstated. After further 

consideration, the Treasury Department 

and the IRS are withdrawing the 707 

Proposed Regulations and proposing to 

remove the 707 Temporary Regulations 

and reinstate the regulations under 

§ 1.707–5(a)(2) as in effect prior to the 

707 Temporary Regulations and as 


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contained in 26 CFR part 1 revised as of 

April 1, 2016 (Prior 707 Regulations). 

The Second Report also stated that the 

Treasury Department and the IRS 

believe that the 752 Temporary 

Regulations concerning bottom dollar 

payment obligations should be retained 

because, consistent with the view of a 

number of commenters, the 752 

Temporary Regulations are needed to 

prevent abuses and do not meaningfully 

increase regulatory burdens for the 

taxpayers affected. The Treasury 

Department and the IRS will continue to 

consider these issues and continue to 

request comments concerning the 752 

Proposed Regulations. The Second 

Report did not identify the 707 Final 

Regulations, which are not affected by 

this notice of proposed rulemaking. 

Explanation of Provisions 

In addition to withdrawing the 707 

Proposed Regulations, this notice of 

proposed rulemaking proposes to 

remove the 707 Temporary Regulations 

and reinstate the Prior 707 Regulations 

concerning the allocation of liabilities 

for disguised sale purposes. In 

determining a partners’ share of a 

partnership liability for disguised sale 

purposes, § 1.707–5(a)(2) of the Prior 

707 Regulations prescribed separate 

rules for a partnership’s recourse 

liability and a partnership’s nonrecourse 

liability. This notice of proposed 

rulemaking adopts those same rules. 

Under § 1.707–5(a)(2)(i) of the Prior 

707 Regulations and, if finalized, these 

proposed regulations, a partner’s share 

of a partnership’s recourse liability 

equals the partner’s share of the liability 

under section 752 and the regulations 

thereunder. A partnership liability is a 

recourse liability to the extent that the 

obligation is a recourse liability under 

§ 1.752–1(a)(1). 

Under § 1.707–5(a)(2)(ii) of the Prior 

707 Regulations and, if finalized, these 

proposed regulations, a partner’s share 

of a partnership’s nonrecourse liability 

is determined by applying the same 

percentage used to determine the 

partner’s share of the excess 

nonrecourse liability under § 1.752– 

3(a)(3). A partnership liability is a 

nonrecourse liability of the partnership 

to the extent that the obligation is a 

nonrecourse liability under § 1.752– 

1(a)(2). 

The 707 Final Regulations limited the 

available methods for determining a 

partner’s share of an excess nonrecourse 

liability under § 1.752–3(a)(3) for 

disguised sale purposes. Under the 707 

Final Regulations, a partner’s share of 

an excess nonrecourse liability for 

disguised sale purposes is determined 

only in accordance with the partner’s 

share of partnership profits and by 

taking into account all facts and 

circumstances relating to the economic 

arrangement of the partners. Thus, the 

significant item method, the alternative 

method, and the additional method as 

defined in § 1.752–3(a)(3) do not apply 

for purposes of determining a partner’s 

share of a partnership’s nonrecourse 

liability for disguised sale purposes. 

In addition, § 1.707–5(a)(2)(i) and (ii) 

of the Prior 707 Regulations provided 

that a partnership liability is a recourse 

or nonrecourse liability to the extent 

that the obligation would be a recourse 

liability under § 1.752–1(a)(1) or a 

nonrecourse liability under § 1.752– 

1(a)(2), respectively, if the liability was 

treated as a partnership liability for 

purposes of section 752 (§ 1.752–7 

contingent liabilities). This notice of 

proposed rulemaking reinstates these 

rules concerning § 1.752–7 contingent 

liabilities. However, as noted in the 

preamble to T.D. 9788, the Treasury 

Department and the IRS continue to 

believe additional guidance would be 

helpful in this area. The preamble to 

T.D. 9788 explained that, in many cases, 

§ 1.752–7 contingent liabilities may 

constitute qualified liabilities that 

would not be taken into account for 

purposes of determining a disguised 

sale. Some commenters on the 2014 

Proposed Regulations noted that there 

may be circumstances in which certain 

transfers of § 1.752–7 contingent 

liabilities to a partnership may be 

abusive. The Treasury Department and 

the IRS continue to study the issue of 

the effect of contingent liabilities with 

respect to section 707, as well as other 

sections of the Code. 

Finally, this notice of proposed 

rulemaking reinstates Examples 2, 3, 7, 

and 8 under § 1.707–5(f) of the Prior 707 

Regulations. However, language is 

added to Example 3 to reflect an 

amendment to § 1.707–5(a)(3) in the 707 

Final Regulations regarding an 

anticipated reduction in a partner’s 

share of a liability that is not subject to 

the entrepreneurial risks of partnership 

operations. 

Proposed Applicability Date 

The 707 Temporary Regulations are 

proposed to be removed thirty days 

following the date these regulations are 

published as final regulations in the 

Federal Register. The amendments to 

§ 1.707–5 are proposed to apply to any 

transaction with respect to which all 

transfers occur on or after thirty days 

following the date these regulations are 

published as final regulations in the 

Federal Register. However, a 

partnership and its partners may apply 

all the rules in these proposed 

regulations in lieu of the 707 Temporary 

Regulations to any transaction with 

respect to which all transfers occur on 

or after January 3, 2017. 

Special Analyses 

These proposed regulations are not 

subject to review under section 6(b) of 

Executive Order 12866 pursuant to the 

Memorandum of Agreement (April 11, 

2018) between the Department of the 

Treasury and the Office of Management 

and Budget regarding review of tax 

regulations. These proposed regulations 

are expected to be an Executive Order 

13771 deregulatory action. Details on 

the estimated cost savings of these 

proposed regulations will be provided 

in the final regulations. 

Because these proposed regulations 

do not impose a collection of 

information on small entities, the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) does not apply. Pursuant to 

section 7805(f) of the Code, this notice 

of proposed rulemaking has been 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 

Comments and Public Hearing 

Comments Concerning These Proposed 

Regulations 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

comments that are submitted timely to 

the IRS as prescribed in this preamble 

under the ADDRESSES heading. The 

Treasury Department and the IRS 

request comments on all aspects of the 

proposed rules. All comments will be 

available at http://www.regulations.gov 

or upon request. 

A public hearing has been scheduled 

for August 21, 2018, beginning at 10:00 

a.m. in the IRS Auditorium of the 

Internal Revenue Service Building, 1111 

Constitution Avenue NW, Washington, 

DC 20224. Due to building security 

procedures, visitors must enter at the 

Constitution Avenue entrance. In 

addition, all visitors must present photo 

identification to enter the building. 

Because of access restrictions, visitors 

will not be admitted beyond the 

immediate entrance area more than 15 

minutes before the hearing starts. For 

information about having your name 

placed on the building access list to 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

preamble. 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. Persons who wish 

to present oral comments at the hearing 

must submit a signed original and eight 


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28400 Federal Register / Vol. 83, No. 118 / Tuesday, June 19, 2018 / Proposed Rules 

(8) copies of written or electronic 

comments by July 19, 2018 and an 

outline of the topics to be discussed and 

the time to be devoted to each topic by 

August 3, 2018. A period of 10 minutes 

will be allotted to each person for 

making comments. An agenda showing 

the scheduling of the speakers will be 

prepared after the deadline for receiving 

outlines has passed. Copies of the 

agenda will be available free of charge 

at the hearing. 

Comments Concerning Approach in the 

707 Temporary Regulations 

As discussed in the Second Report, 

the Treasury Department and the IRS 

believe that the 707 Temporary 

Regulations’ novel approach (treating all 

liabilities as nonrecourse and allocating 

in accordance with § 1.752–3(a)(3) for 

disguised sale purposes) merits further 

study. The 707 Temporary Regulations 

explained that this approach reflects the 

overall economic arrangements of the 

partners as, in most cases, a partnership 

will satisfy its liabilities with 

partnership profits, the partnership’s 

assets do not become worthless, and the 

payment obligations of partners or 

related persons are not called upon. The 

Treasury Department and the IRS 

continue to study this issue and request 

comments on the approach adopted in 

the 707 Temporary Regulations. The 

request for comments in this paragraph 

on the approach of the 707 Temporary 

Regulations is not the subject of the 

scheduled public hearing. 

Drafting Information 

The principal authors of these 

proposed regulations are Caroline E. 

Hay and Deane M. Burke, Office of the 

Associate Chief Counsel (Passthroughs 

and Special Industries). However, other 

personnel from the Treasury 

Department and the IRS participated in 

their development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Partial Withdrawal of Notice of 

Proposed Rulemaking 

Accordingly, under the authority of 

26 U.S.C. 7805, §§ 1.707–5 and 1.707–9 

of the notice of proposed rulemaking 

(REG–122855–15) that was published in 

the Federal Register on October 5, 2016 

(81 FR 69301) are withdrawn. 

Proposed Amendments to the 

Regulations 

For the reasons stated in the 

preamble, 26 CFR part 1 is proposed to 

be amended as follows: 

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 1.707–5 is amended by 

revising paragraph (a)(2) and Examples 

2, 3, 7, and 8 in paragraph (f) to read as 

follows: 

§ 1.707–5 Disguised sales of property to 

partnership; special rules relating to 

liabilities. 

(a) * * * 

(2) Partner’s share of liability. A 

partner’s share of any liability of the 

partnership is determined under the 

following rules: 

(i) Recourse liability. A partner’s share 

of a recourse liability of the partnership 

equals the partner’s share of the liability 

under the rules of section 752 and the 

regulations thereunder. A partnership 

liability is a recourse liability to the 

extent that the obligation is a recourse 

liability under § 1.752–1(a)(1) or would 

be treated as a recourse liability under 

that section if it were treated as a 

partnership liability for purposes of that 

section. 

(ii) Nonrecourse liability. A partner’s 

share of a nonrecourse liability of the 

partnership is determined by applying 

the same percentage used to determine 

the partner’s share of the excess 

nonrecourse liability under § 1.752– 

3(a)(3). A partnership liability is a 

nonrecourse liability of the partnership 

to the extent that the obligation is a 

nonrecourse liability under § 1.752– 

1(a)(2) or would be a nonrecourse 

liability of the partnership under 

§ 1.752–1(a)(2) if it were treated as a 

partnership liability for purposes of that 

section. 

* * * * * 

(f) * * * 

Example 2. Partnership’s assumption of 

recourse liability encumbering transferred 

property. (i) C transfers property Y to a 

partnership. At the time of its transfer to the 

partnership, property Y has a fair market 

value of $10,000,000 and is subject to an 

$8,000,000 liability that C incurred, 

immediately before transferring property Y to 

the partnership, in order to finance other 

expenditures. Upon the transfer of property 

Y to the partnership, the partnership 

assumed the liability encumbering that 

property. The partnership assumed this 

liability solely to acquire property Y. Under 

section 752 and the regulations thereunder, 

immediately after the partnership’s 

assumption of the liability encumbering 

property Y, the liability is a recourse liability 

of the partnership and C’s share of that 

liability is $7,000,000. 

(ii) Under the facts of this example, the 

liability encumbering property Y is not a 

qualified liability. Accordingly, the 

partnership’s assumption of the liability 

results in a transfer of consideration to C in 

connection with C’s transfer of property Y to 

the partnership in the amount of $1,000,000 

(the excess of the liability assumed by the 

partnership ($8,000,000) over C’s share of the 

liability immediately after the assumption 

($7,000,000)). See paragraphs (a)(1) and (2) of 

this section. 

Example 3. Subsequent reduction of 

transferring partner’s share of liability. (i) 

The facts are the same as in Example 2. In 

addition, property Y is a fully leased office 

building, the rental income from property Y 

is sufficient to meet debt service, and the 

remaining term of the liability is ten years. 

It is anticipated that, three years after the 

partnership’s assumption of the liability, C’s 

share of the liability under section 752 will 

be reduced to zero because of a shift in the 

allocation of partnership losses pursuant to 

the terms of the partnership agreement. 

Under the partnership agreement, this shift 

in the allocation of partnership losses is 

dependent solely on the passage of time. 

(ii) Under paragraph (a)(3) of this section, 

if the reduction in C’s share of the liability 

was anticipated at the time of C’s transfer, 

was not subject to the entrepreneurial risks 

of partnership operations, and was part of a 

plan that has as one of its principal purposes 

minimizing the extent of sale treatment 

under § 1.707–3 (that is, a principal purpose 

of allocating a large percentage of losses to 

C in the first three years when losses were 

not likely to be realized was to minimize the 

extent to which C’s transfer would be treated 

as part of a sale), C’s share of the liability 

immediately after the assumption is treated 

as equal to C’s reduced share. 

* * * * * 

Example 7. Partnership’s assumptions of 

liabilities encumbering properties transferred 

pursuant to a plan. (i) Pursuant to a plan, G 

and H transfer property 1 and property 2, 

respectively, to an existing partnership in 

exchange for interests in the partnership. At 

the time the properties are transferred to the 

partnership, property 1 has a fair market 

value of $10,000 and an adjusted tax basis of 

$6,000, and property 2 has a fair market 

value of $10,000 and an adjusted tax basis of 

$4,000. At the time properties 1 and 2 are 

transferred to the partnership, a $6,000 

nonrecourse liability (liability 1) is secured 

by property 1 and a $7,000 recourse liability 

of F (liability 2) is secured by property 2. 

Properties 1 and 2 are transferred to the 

partnership, and the partnership takes 

subject to liability 1 and assumes liability 2. 

G and H incurred liabilities 1 and 2 

immediately prior to transferring properties 1 

and 2 to the partnership and used the 

proceeds for personal expenditures. The 

liabilities are not qualified liabilities. Assume 

that G and H are each allocated $2,000 of 

liability 1 in accordance with § 1.707– 

5(a)(2)(ii) (which determines a partner’s share 

of a nonrecourse liability). Assume further 

that G’s share of liability 2 is $3,500 and H’s 

share is $0 in accordance with § 1.707– 

5(a)(2)(i) (which determines a partner’s share 

of a recourse liability). 

(ii) G and H transferred properties 1 and 2 

to the partnership pursuant to a plan. 


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Accordingly, the partnership’s taking subject 

to liability 1 is treated as a transfer of only 

$500 of consideration to G (the amount by 

which liability 1 ($6,000) exceeds G’s share 

of liabilities 1 and 2 ($5,500)), and the 

partnership’s assumption of liability 2 is 

treated as a transfer of only $5,000 of 

consideration to H (the amount by which 

liability 2 ($7,000) exceeds H’s share of 

liabilities 1 and 2 ($2,000)). G is treated 

under the rule in § 1.707–3 as having sold 

$500 of the fair market value of property 1 

in exchange for the partnership’s taking 

subject to liability 1 and H is treated as 

having sold $5,000 of the fair market value 

of property 2 in exchange for the assumption 

of liability 2. 

Example 8. Partnership’s assumption of 

liability pursuant to a plan to avoid sale 

treatment of partnership assumption of 

another liability. (i) The facts are the same as 

in Example 7, except that— 

(A) H transferred the proceeds of liability 

2 to the partnership; and 

(B) H incurred liability 2 in an attempt to 

reduce the extent to which the partnership’s 

taking subject to liability 1 would be treated 

as a transfer of consideration to G (and 

thereby reduce the portion of G’s transfer of 

property 1 to the partnership that would be 

treated as part of a sale). 

(ii) Because the partnership assumed 

liability 2 with a principal purpose of 

reducing the extent to which the 

partnership’s taking subject to liability 1 

would be treated as a transfer of 

consideration to G, liability 2 is ignored in 

applying paragraph (a)(3) of this section. 

Accordingly, the partnership’s taking subject 

to liability 1 is treated as a transfer of $4,000 

of consideration to G (the amount by which 

liability 1 ($6,000) exceeds G’s share of 

liability 1 ($2,000)). On the other hand, the 

partnership’s assumption of liability 2 is not 

treated as a transfer of any consideration to 

H because H’s share of that liability equals 

$7,000 as a result of H’s transfer of $7,000 in 

money to the partnership. 

* * * * * 

§ 1.707–5T [Removed] 

■ Par. 3. Section 1.707–5T is removed. 

■ Par. 4. Section 1.707–9 is amended by 

revising paragraph (a)(4) and removing 

paragraph (a)(5). The revisions read as 

follows: 

§ 1.707–9 Effective dates and transitional 

rules. 

(a) * * * 

(4) Section 1.707–5(a)(2) and (f) 

Examples 2, 3, 7, and 8. (i) Section 

1.707–5(a)(2) and (f) Examples 2, 3, 7, 

and 8, as contained in 26 CFR part 1 

revised as of April 1, 2016, apply to any 

transaction with respect to which any 

transfers occur before January 3, 2017. 

(ii) For any transaction with respect to 

which all transfers occur on or after 

January 3, 2017, and any of such 

transfers occurs before the date that is 

thirty days after the date these 

regulations are published as final in the 

Federal Register, see § 1.707–9T(a)(5) as 

contained in 26 CFR part 1 revised as of 

April 1, 2017. 

(iii) Section 1.707–5(a)(2) and (f) 

Examples 2, 3, 7, and 8 apply to any 

transaction with respect to which all 

transfers occur on or after the date that 

is thirty days after the date these 

regulations are published as final in the 

Federal Register. 

* * * * * 

§ 1.707–9T [Removed] 

■ Par. 5. Section 1.707–9T is removed. 

Kirsten Wielobob, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2018–13129 Filed 6–18–18; 8:45 am] 

BILLING CODE 4830–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 26 

[EPA–HQ–ORD–2018–0280; FRL–9977–78] 

RIN 2080–AA13 

Notification of Submission to the 

Secretary of Agriculture; 

Harmonization of Regulations 

Safeguarding Human Test Subjects 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Notification of submission to 

the Secretary of Agriculture. 

SUMMARY: This document notifies the 

public as required by the Federal 

Insecticide, Fungicide, and Rodenticide 

Act (FIFRA) that the EPA Administrator 

has forwarded to the Secretary of the 

United States Department of Agriculture 

(USDA) a draft regulatory document 

concerning ‘‘Harmonize 40 CFR 26 

Subparts C, D, and K with Subpart A 

(the Common Rule)’’. The draft 

regulatory document is not available to 

the public until after it has been signed 

and made available by EPA. 

DATES: See Unit I. under SUPPLEMENTARY

INFORMATION. 

ADDRESSES: The docket for this action, 

identified by docket identification (ID) 

number EPA–HQ–ORD–2018–0280, is 

available at http://www.regulations.gov 

or at the Environmental Protection 

Agency Docket Center (EPA/DC), West 

William Jefferson Clinton Bldg., Rm. 

3334, 1301 Constitution Ave. NW, 

Washington, DC 20460–0001. The 

Public Reading Room is open from 8:30 

a.m. to 4:30 p.m., Monday through 

Friday, excluding legal holidays. The 

telephone number for the Public 

Reading Room is (202) 566–1744. Please 

review the visitor instructions and 

additional information about the docket 

available at http://www.epa.gov/ 

dockets. 

FOR FURTHER INFORMATION CONTACT: Greg 

Susanke, Office of the Science Advisor, 

Environmental Protection Agency, 1200 

Pennsylvania Ave. NW, Washington, DC 

20460–0001; telephone number: (202) 

564–0221; email address: staff_osa@

epa.gov. 

SUPPLEMENTARY INFORMATION: 

I. What action is EPA taking? 

Section 25(a)(2)(A) of FIFRA requires 

the EPA Administrator to provide the 

Secretary of USDA with a copy of any 

draft proposed rule at least 60 days 

before signing it in proposed form for 

publication in the Federal Register. The 

draft proposed rule is not available to 

the public until after it has been signed 

by EPA. If the Secretary of USDA 

comments in writing regarding the draft 

proposed rule within 30 days after 

receiving it, the EPA Administrator 

shall include the comments of the 

Secretary of USDA and the EPA 

Administrator’s response to those 

comments with the proposed rule that 

publishes in the Federal Register. If the 

Secretary of USDA does not comment in 

writing within 30 days after receiving 

the draft proposed rule, the EPA 

Administrator may sign the proposed 

rule for publication in the Federal 

Register any time after the 30-day 

period. 

II. Do any statutory and Executive 

Order reviews apply to this 

notification? 

No. This document is merely a 

notification of submission to the 

Secretary of USDA. As such, none of the 

regulatory assessment requirements 

apply to this document. 

List of Subjects in 40 CFR Part 26 

Environmental protection, 

Administrative practice and procedures, 

Human research, Pesticides and pests. 

Dated: June 4, 2018. 

Richard P. Keigwin, 

Director, Office of Pesticide Programs. 

[FR Doc. 2018–12708 Filed 6–18–18; 8:45 am] 

BILLING CODE 6560–50–P 


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