Residence and Source Rules involving U.S. Possessions and Other Conforming Changes; Correction

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Correcting amendment.

SUMMARY:

This document corrects temporary regulations (TD 9194) that were published in the Federal Register on Monday, April 11, 2005 (70 FR 18920). The temporary regulations provide rules under section 937(a) of the Internal Revenue Code (Code) for determining whether an individual is a bona fide resident of the following U.S. possessions: American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the United States Virgin Islands. The temporary regulations also provide rules under section 937(b) for determining whether income is derived from sources within a U.S. possession and whether income is effectively connected with the conduct of a trade or business within a U.S. possession. In addition, the temporary regulations provide updated guidance under certain other Code sections to reflect changes made by the Tax Reform Act of 1986 and by the American Jobs Creation Act of 2004.

DATES:

This correction is effective April 11, 2005.

FOR FURTHER INFORMATION CONTACT:

J. David Varley (202) 435-5165 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The temporary regulations (TD 9194) that is the subject of this correction are under section 937 of the Internal Revenue Code.

Need for Correction

As published, the temporary regulations (TD 9194) contains errors that may prove to be misleading and are in need of clarification.

List of Subjects

26 CFR Part 1

• Income taxes
• Reporting and recordkeeping requirements

26 CFR Part 301

• Employment taxes
• Estate taxes
• Excise taxes
• Gift taxes
• Income taxes
• Penalties
• Reporting and recordkeeping requirements

Correction of Publication

Accordingly, 26 CFR parts 1 and 301 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 * * *

1. Section 1.934-1T(d), Example 1, paragraph (iii), the formula is revised to read as follows: (20,000 + 10,000) × ((45,000 + 15,000) / (120,000))−10,000 x ((15,000) / (15,000 + 22,500)) = 30,000 × (.5) −10,000 × (.4) = 15,000 minus; 4,000 = $11,000

2. Section 1.935-1T(e)(1)(ii) is amended by removing the language “election filed” and adding the language “election is filed” in its place.

3. Section 1.937-1T(c)(4)(ii)(B) is amended by removing the language “(c)(4)(B)” and adding the language “(c)(4)(i)(B)” in its place.

4. Section 1.937-3T(b), second sentence, is amended by removing the language “under the rules of 1.937-2T)” and adding the language “under the rules of § 1.937-2T)” in its place.

PART 301—PROCEDURE AND ADMINISTRATION

Par. 2. The authority citation for part 301 continues to read, in part, as follows:

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

5. Section 301.7701(b)-1T is amended by removing the period at the end of the section heading and adding the language “(temporary).” in its place.