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Announcement 2009-40


Announcement 2009-40 contains corrections to REG-143686-07 providing guidance regarding the recovery of stock basis in distributions under Section 301 and transactions that are treated as dividends to which Section 301 applies, as well as guidance regarding the determination of gain and the basis of stock or securities received in exchange for, or with respect to, stock or securities in certain transactions.

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									    (5) * * *                                                   Example 2. * * *                                       in paragraph (m)(2)(vi) of this section no
    (iii) * * *                                                 (iii) * * * Therefore, the present value of the non-   later than September 2, 2009.
    Example 4. * * *                                        routine residual divisional profit in USP’s territory
                                                            is $39,243X and in CFC’s territory is $19,622X (for        *****
    (i) The facts are the same as in Example 1 except
                                                            simplicity of calculation in this example, all financial
that P does not own proprietary software and P and S
use a method for determining the arm’s length amount        flows are assumed to occur at the beginning of each                                 LaNita Van Dyke,
                                                            period).                                                                       Chief, Publications and
of the PCT Payment for the P-Cap patent rights dif-
                                                                (iv) * * * Consequently, the present value of the                              Regulations Branch,
ferent from the method used in Example 1.
                                                            arm’s length amount of the PCT payments that USP
*****                                                       should pay to FS for FS’s platform contribution is
                                                                                                                                         Legal Processing Division,
 (iii) * * * See §1.482–4(c)(4). * * *                      $10,007X (.255 x $39,243X). * * * Consequently,                                Associate Chief Counsel
                                                            the present value of the arm’s length amount of the                     (Procedure and Administration).
*****                                                       PCT payments that FS should pay to USP for USP’s
   (c) * * *                                                platform contribution is $12,362 (.63 x $19,622X).         (Filed by the Office of the Federal Register on March 4, 2009,
                                                                                                                       8:45 a.m., and published in the issue of the Federal Register
   (3) * * * For purposes of                                Therefore, FS is required to make a net payment to         for March 5, 2009, 74 F.R. 9570)
                                                            USP with a present value of $2,355X ($12,362X -
§1.482–1(b)(2)(ii) and paragraph (a)(2) of
this section, a PCT must be identified by
the controlled participants as a particular                 *****                                                      The Allocation of
type of transaction (for example, a license                  (k) * * *                                                 Consideration and Allocation
for royalty payments). See paragraph                         (1) * * *
(k)(2)(ii)(H) of this section. * * *
                                                                                                                       and Recovery of Basis
                                                             (iv) * * *
                                                                                                                       in Transactions Involving
*****                                                        (B) * * *
   (g) * * *                                                    Example 1. The contractual provisions recorded         Corporate Stock or Securities;
   (4) * * *                                                upon formation of an arrangement that purports to          Correction
                                                            be a CSA provide that PCT payments with respect
   (i) * * *                                                to a particular platform contribution will consist of
   (E) * * * For converting to another form                 payments contingent on sales. * * *
                                                                                                                       Announcement 2009–40
of payment, see generally §1.482–7T(h)                          Example 2. An arrangement that purports to be
                                                            a CSA provides that PCT payments with respect to           AGENCY: Internal Revenue Service
(Form of payment rules).
                                                            a particular platform contribution shall be contingent     (IRS), Treasury.
   (F) * * *
                                                            payments equal to 10% of sales of products that in-
   (1) * * * See, for example,                              corporate cost shared intangibles. * * *                   ACTION: Correction to notice of pro-
§1.482–7T(g)(2)(v)(B)(1) (Discount rate                        (i) The contingent payment terms with                   posed rulemaking.
variation between realistic alternatives).                  respect to the platform contribution do not
***                                                         have economic substance because the con-                   SUMMARY: This document contains a
*****                                                       trolled participants did not act in accor-                 correction to a notice of proposed rule-
    (vi) * * * For purposes of this para-                   dance with their upfront risk allocation; or               making (REG–143686–07, 2009–8 I.R.B.
graph (g)(4), any routine contributions that                                                                           579) that was published in the Federal
are platform or operating contributions, the                *****                                                      Register on Wednesday, January 21,
valuation and PCT Payments for which are                        (3) * * *                                              2009 (74 FR 3509) providing guidance
determined and made independently of the                        (ii) * * * For purposes of this section,               regarding the recovery of stock basis
income method, are treated similarly to                     the controlled participants may not rely                   in distributions under section 301 and
cost contributions and operating cost con-                  solely upon financial accounting to estab-                 transactions that are treated as dividends
tributions, respectively. * * *                             lish satisfaction of the accounting require-               to which section 301 applies, as well as
                                                            ments of this paragraph (k)(3). * * *                      guidance regarding the determination of
*****                                                           (4) * * *                                              gain and the basis of stock or securities
 (7) * * *                                                      (i) * * * Each controlled participant                  receive
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