Rev Proc 2009-37

processes does not preclude classification
in the asset class that specifically applies
to the conversion of biomass to fuel.
Further, Taxpayer is primarily engaged in producing fuel grade ethanol
(liquid fuel) from corn (biomass) at this
facility. Under the “primary use” test of
§ 1.167(a)–11(b)(4)(iii)(b), Taxpayer’s
activity is described in asset class 49.5.
HOLDING
The proper asset class under Rev. Proc.
87–56 for depreciation of tangible assets used in converting corn to fuel grade
ethanol is asset class 49.5 (other than
§ 1250 property not described in asset
class 49.5 and assets classified in asset
classes 00.11 through 00.4 of Rev. Proc.
87–56).
PROSPECTIVE APPLICATION
Pursuant to § 7805(b)(8), the Internal
Revenue Service will not apply the holding in this revenue ruling to tangible assets
that are used in converting biomass to a liquid fuel such as fuel grade ethanol that a
taxpayer places in service before [INSERT
PUBLICATION DATE OF FINAL REVENUE RULING].
DRAFTING INFORMATION
The principal author of this notice is
Ruba Nasrallah of the Office of the Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Ms. Nasrallah at
(202) 622–4930 (not a toll-free call).

26 CFR 601.105: Examination of returns and claims
for refund, credit or abatement; determination of correct tax liability.
(Also Part I, § 108.)

Rev. Proc. 2009–37
SECTION 1. PURPOSE
.01 This revenue procedure provides
the exclusive procedures for taxpayers to
make an election to defer recognizing discharge of indebtedness income (“COD income”) under § 108(i) of the Internal Revenue Code.
.02 This revenue procedure also requires taxpayers making the § 108(i)

September 8, 2009

election to provide additional information
on returns beginning with the taxable year
following the taxable year for which the
taxpayer makes the election. This revenue
procedure describes the time and manner
of providing this additional information.
.03 The Internal Revenue Service and
Treasury Department intend to issue additional guidance under § 108(i) that may
include regulations addressing matters in
this revenue procedure. Taxpayers should
be aware that these regulations may be
retroactive. See § 7805(b)(2). This revenue procedure may be modified to provide procedures consistent with additional
guidance.
SECTION 2. BACKGROUND
.01 Section 108(i), Generally. Section 108(i) was added to the Code by
§ 1231 of the American Recovery and
Reinvestment Tax Act of 2009, Pub. L.
No. 111–5, 123 Stat. 338. In general,
§ 108(i) provides that, at the election
of a taxpayer, COD income realized in
connection with a reacquisition after
December 31, 2008, and before January
1, 2011, of an applicable debt instrument
is includible in gross income ratably
over a 5-taxable-year inclusion period,
beginning with the taxpayer’s fourth or
fifth taxable year following the taxable
year of the reacquisition. Generally, if a
taxpayer makes a § 108(i) election and
reacquires (or is treated as reacquiring) the
applicable debt instrument generating the
COD income for a new debt instrument
with original issue discount (“OID”),
then interest deductions for this OID also
are deferred, as provided in § 108(i)(2).
The OID deferral rule, however, does
not apply if the amount of OID is less
than a de minimis amount, as determined
under § 1273(a)(3) and § 1.1273–1(d) of
the Income Tax Regulations. The OID
deferral rule in § 108(i)(2) applies at the
entity level for a pass-through entity. For
example, a partnership (and therefore its
partners) may not deduct currently the OID
described in § 108(i)(2)(A)(i). A taxpayer
must take into account any item of income
or deduction deferred under § 108(i),
and not previously taken into account,
in the taxable year in which certain
events occur (such as the liquidation
of the taxpayer and upon other events
specified in administrative guidance).

309

See § 108(i)(5)(D). The rule regarding
acceleration of deferred COD income and
OID deductions also applies in the case
of certain dispositions by persons holding
ownership interests in pass-through
entities. Section 108(i)(5)(D)(ii). For
purposes of § 108(i), regulated investment
companies (as defined in § 851(a)) and
real estate investment trusts (as defined in
§ 856(a)) are not pass-through entities.
.02 Applicable Debt Instrument. Section 108(i)(3)(A) defines the term “applicable debt instrument” to mean any debt
instrument issued by a C corporation or
by any other person in connection with
the conduct of a trade or business by that
person. The term “debt instrument” means
any bond, debenture, note, certificate,
or any other instrument or contractual
arrangement constituting indebtedness
within the meaning of § 1275(a)(1). Section 108(i)(3)(B). For purposes of § 108(i),
in the case of an intercompany obligation
(as defined in § 1.1502–13(g)(2)(ii)), an
applicable debt instrument includes only
an instrument for which COD income is
realized upon the instrument’s deemed
satisfaction under § 1.1502–13(g)(5).
.03 Reacquisition. Section 108(i)(4)(A)
defines the term “reacquisition” to mean,
with respect to any applicable debt instrument, any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument, or a person related to the debtor
under § 108(e)(4). The term “acquisition” includes an acquisition of the debt
instrument for cash or other property, the
exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of
the debt instrument), the exchange of the
debt instrument for corporate stock or a
partnership interest, the contribution of the
debt instrument to capital, and the complete forgiveness of the indebtedness by
the holder of the debt instrument. See
§ 108(i)(4)(B). The term “acquisition” also
includes an indirect acquisition within the
meaning of § 1.108–2(c) if a direct acquisition of the debt instrument would qualify for an election under § 108(i). For example, if a corporation acquires debt of a
partnership that the partnership issued in
connection with its trade or business, and
the partnership and corporation become related within six months of the corporation’s acquisition of the debt, the indirect

2009–36 I.R.B.

acquisition is an acquisition for which an
election under § 108(i) may be made.
.04 General Requirements for the Section 108(i) Election. Section 108(i)(5)(B)
provides, in general, that a taxpayer makes
the § 108(i) election by including a statement that clearly identifies the applicable
debt instrument with the return of tax imposed for the taxable year in which the
reacquisition of the instrument occurs.
(For purposes of this revenue procedure, a
return of tax or income tax return includes
an information return, and a taxpayer includes a person that files an information
return.) The statement must include the
amount of income to which § 108(i)(1)
applies and other information the Service
may prescribe. Once made, a § 108(i) election is irrevocable and, except as provided
in section 7 of this revenue procedure,
may not be modified.
.05 Section 108(i) Elections Made by
Pass-through Entities. In the case of COD
income realized by a pass-through entity
from the reacquisition of an applicable
debt instrument, the pass-through entity makes the § 108(i) election. Section
108(i)(5)(B)(iii).
.06 Additional Information on Subsequent Years’ Returns. Section 108(i)(7)
authorizes the Service to issue guidance
necessary or appropriate for applying
§ 108(i), including requiring reporting the
election and other information on returns
of tax for subsequent taxable years.
.07 Exclusivity. Section 108(i)(5)(C)
provides that if a taxpayer elects to apply § 108(i) to an applicable debt instrument, § 108(a)(1)(A), (B), (C), and (D) do
not apply to COD income deferred under
§ 108(i).
.08 Allocation of Deferred COD Income on Partnership Indebtedness. Section 4.04(3) of this revenue procedure
describes how a partnership may elect under § 108(i) to defer a portion of the COD
income realized from the reacquisition of
an applicable debt instrument. If a partnership elects to defer all or any portion of
COD income realized from the reacquisition of an applicable debt instrument, all of
the COD income with respect to that debt
instrument, without regard to § 108(i), is
allocated to the partners in the partnership
immediately before the reacquisition in
the manner in which the income would be
included in the distributive shares of these

2009–36 I.R.B.

partners under § 704 and the regulations
thereunder, including § 1.704–1(b)(2)(iii).
Each partner’s share of this COD income is
the partner’s COD income amount (“COD
income amount”). The partner’s COD
income amount that is deferred under
§ 108(i) is the partner’s deferred amount
(“deferred amount”). The partner’s COD
income amount that is not deferred and
is included in the partner’s distributive
share of partnership income for the taxable
year of the partnership in which the reacquisition occurs is the partner’s included
amount (“included amount”).
.09 Partner’s Deferred § 752 Amount.
A decrease in a partner’s share of a partnership liability resulting from the reacquisition of an applicable debt instrument that
is not treated as a current distribution of
money to the partner under § 752 by reason of § 108(i)(6) is the partner’s deferred
§ 752 amount (“deferred § 752 amount”).
A partner’s deferred § 752 amount may not
exceed the lesser of (i) the partner’s deferred amount or (ii) gain that the partner
would recognize in the year of reacquisition under § 731 as a result of the reacquisition absent § 108(i)(6). To determine
the amount of gain the partner would recognize under clause (ii) of the preceding
sentence, the amount of any deemed distribution of money under § 752(b) resulting
from the decrease in the partner’s share of a
reacquired applicable debt instrument that
is treated as an advance or draw of money
under § 1.731–1(a)(1)(ii) is determined as
if no COD income resulting from the reacquisition of the applicable debt instrument
is deferred under § 108(i). See Rev. Rul.
92–97, 1992–2 C.B. 124, and Rev. Rul.
94–4, 1994–1 C.B. 195. A partner’s deferred § 752 amount is treated as a distribution of money to the partner under § 752
at the same time, and to the extent remaining in the same amount, as the partner recognizes the COD income deferred under
§ 108(i).
.10 Allocation of Deferred COD Income on S Corporation Indebtedness.
For purposes of § 108(i), an S corporation’s COD income deferred under
§ 108(i) is shared pro rata only among
those shareholders that are shareholders of
the S corporation immediately before the
reacquisition transaction.
.11 Deferred COD Income, Earnings
and Profits, and Alternative Minimum Taxable Income.

310

(1) In general. The Service and Treasury Department intend to issue regulations regarding the computation of a
corporation’s earnings and profits with respect to COD income and OID deductions
that are deferred under § 108(i). These
regulations generally will provide that
deferred COD income increases earnings
and profits in the taxable year that it is
realized and not in the taxable year or
years that the deferred COD income is
includible in gross income. OID deductions deferred under § 108(i) generally
will decrease earnings and profits in the
taxable year or years in which the deduction would be allowed without regard
to § 108(i). COD income and OID deductions that are deferred increase or
decrease adjusted current earnings under
§ 56(g)(4) in the taxable year or years that
the income or deduction is includible or
deductible in determining taxable income.
See § 1.56(g)–1(c)(1).
(2) Exceptions for certain special status corporations. The Service and Treasury Department intend to issue regulations providing that in the case of regulated
investment companies and real estate investment trusts, COD income deferred under § 108(i) generally increases earnings
and profits in the taxable year or years in
which the deferred COD income is includible in gross income and not in the year that
the deferred COD income is realized. OID
deductions deferred under § 108(i) generally decrease earnings and profits in the
taxable year or years that the deferred OID
deductions are deductible.
.12 Extension of Time to Make Election. Under § 301.9100–1 of the Procedure and Administration Regulations, the
Service may grant an extension of time to
make a regulatory election. An election
is a regulatory election if the due date is
prescribed by regulation or other published
guidance of general applicability. Section 301.9100–2(a) provides an automatic
12-month extension from the due date for
making certain regulatory elections.
SECTION 3. SCOPE
This revenue procedure applies to taxpayers that realize COD income from a
reacquisition after December 31, 2008,
and before January 1, 2011, of an applicable debt instrument, as provided in
§ 108(i).

September 8, 2009

SECTION 4. ELECTION
PROCEDURES
.01 In General.
(1) A taxpayer within the scope of this
revenue procedure makes the § 108(i) election by—
(a) Attaching a statement meeting the
requirements of section 4.05 of this revenue procedure to the taxpayer’s timely
filed (including extensions) original federal income tax return for the taxable year
in which the reacquisition of the applicable
debt instrument occurs, and
(b) If applicable, satisfying the additional requirements of section 4.07, 4.08,
4.09, or 4.10 of this revenue procedure.
(2) The Service grants an automatic extension of 12 months from the due date
prescribed in section 4.01(1)(a) of this revenue procedure for making the § 108(i)
election. The rules that apply to an automatic extension under § 301.9100–2(a) apply to this automatic extension.
.02 Section 108(i) Elections Made
by Members of Consolidated Groups.
The common parent of a consolidated
group makes the § 108(i) election on behalf of all members of the group. See
§ 1.1502–77(a).
.03 Aggregation Rule. A taxpayer
within the scope of this revenue procedure
may treat two or more applicable debt
instruments that are part of the same issue
and that are reacquired during the same
taxable year as one applicable debt instrument for purposes of this revenue procedure. A pass-through entity may not treat
two or more applicable debt instruments
as one applicable debt instrument under
this section 4.03 if the owners and their
ownership interests in the pass-through
entity immediately prior to the reacquisition of each applicable debt instrument are
not identical.
.04 Partial Elections.
(1) A taxpayer within the scope of this
revenue procedure may make an election
for any portion of COD income realized
from the reacquisition of any applicable
debt instrument. Thus, for example, if a
taxpayer realizes $100 of COD income
from the reacquisition of an applicable
debt instrument, the taxpayer may elect
under § 108(i)(1) to defer only $40 of the
$100 of COD income. The taxpayer may
exclude from income the portion of COD
income that the taxpayer does not elect to

September 8, 2009

defer under § 108(i) ($60 in this example)
under § 108(a)(1)(A), (B), (C), or (D), if
applicable.
(2) A taxpayer is not required to make
an election for the same portion of COD income arising from each applicable debt instrument that it reacquires, but may make
an election for different portions of COD
income arising from different applicable
debt instruments (whether or not part of the
same issue). Thus, for example, if a taxpayer realizes $100 of COD income from
the reacquisition of an applicable debt instrument (Instrument A) and $100 of COD
income from the reacquisition of a different applicable debt instrument (Instrument
B), the taxpayer may elect to defer all or
a portion of the COD income associated
with Instrument A and none or a different portion of the COD income associated
with Instrument B.
(3) A partnership that elects to defer
less than all of the COD income realized
from the reacquisition of an applicable
debt instrument may determine, in any
manner, the portion, if any, of a partner’s
COD income amount that is the partner’s
deferred amount and the portion, if any,
of a partner’s COD income amount that is
the partner’s included amount. Thus, for
example, one partner’s deferred amount
may be zero while another partner’s deferred amount may equal that partner’s
COD income amount (or any portion
thereof). A partner may exclude from income the partner’s included amount under
§ 108(a)(1)(A), (B), (C), or (D), if applicable. The provisions of this section 4.04(3)
apply for purposes of § 108(i) only and
are not intended as an interpretation of or
a change to existing law under § 704.
.05 Contents of Election Statement. A
statement meets the requirements of this
section 4.05 if the statement—
(1) Label. States “Section 108(i) Election” across the top.
(2) Required information. Provides, for
each applicable debt instrument the reacquisition of which generates COD income
that the taxpayer is electing to defer under
§ 108(i)—
(a) The name and taxpayer identification numbers, if any, of the issuer or issuers
of the applicable debt instrument;
(b) A general description of the applicable debt instrument (including the issue
and maturity dates) and, in the case of any
person other than a C corporation, a gen-

311

eral description of the person’s trade or
business to which the applicable debt instrument is connected;
(c) A general description of the reacquisition transaction or transactions generating the COD income (including the date(s)
of the transaction(s));
(d) The total amount of COD income
for the applicable debt instrument that results from the reacquisition (in the case of
a partnership, the aggregate of the partners’ COD income amounts) and a general description of the manner in which this
amount is calculated;
(e) The amount of COD income for
the applicable debt instrument that the taxpayer is electing to defer under § 108(i);
(f) In the case of a partnership, a list
of partners that have a deferred amount,
their identifying information and each
partner’s deferred amount; and in the case
of an S corporation, a list of shareholders
with COD income deferred under § 108(i),
their identifying information and each
shareholder’s share of the S corporation’s
deferred COD income; and
(g) In cases in which a new debt instrument is issued or deemed issued in exchange for the applicable debt instrument
(including exchanges under § 108(e)(4),
§ 108(i)(2)(B), and § 1.1001–3), the issuer’s name, the issuer’s taxpayer identification number, if any, a general description
of the new debt instrument and whether the
new debt instrument has OID, and if the
new debt instrument has OID, a schedule
of the OID that the issuer expects to accrue
each taxable year on the instrument and the
amount of OID that the issuer expects to
defer under § 108(i)(2) each taxable year.
.06 Supplemental information. The
statement described in section 4.05 of this
revenue procedure may specify for each
applicable debt instrument an amount
greater than the amount identified in section 4.05(2)(e) of this revenue procedure
that the taxpayer elects to defer under
§ 108(i) in the event the Service subsequently concludes that the taxpayer
understated the amount of COD income
described in section 4.05(2)(d) of this revenue procedure. This additional amount of
COD income the taxpayer elects to defer
may be described as the entire additional
COD income, or as a percentage of any
additional COD income. If the taxpayer is
a partnership, the partnership must specify
each partner’s share of the partnership’s

2009–36 I.R.B.

additional COD income that would be
deferred (the partner’s additional deferred
amount), which the partnership may describe for each partner as the partner’s
entire share of the partnership’s additional
COD income or as a percentage of the
partner’s share of the partnership’s additional COD income. If the taxpayer
is an S corporation, the S corporation
must specify each shareholder’s share
of the S corporation’s additional COD
income that would be deferred, which
the S corporation may describe for each
shareholder as the shareholder’s entire
share of the S corporation’s additional
COD income or as a percentage of the
shareholder’s share of the S corporation’s
additional COD income. In the case
of partnerships and S corporations, the
additional COD income and the portion
of additional COD income that would
be deferred are allocated or determined
as provided in sections 2.08, 2.10 and,
if applicable, 4.04(3) of this revenue
procedure, respectively, as if the additional
COD income was realized.
.07 Additional Requirements for Certain Partnerships Making a § 108(i) Election. The rules of this section 4.07 apply
to partnerships other than partnerships described in section 4.10 of this revenue procedure.
(1) Information filing on Schedule K–1
(Form 1065 and Form 1065–B). For the
taxable year in which the § 108(i) election is made, the partnership must report
on the Schedule K–1 (Form 1065 or Form
1065–B), Partner’s Share of Income, Deductions, Credits, etc., in the manner specified in the instructions to the forms, for
each partner § 108(i) information on an
aggregate basis for all applicable debt instruments for which a § 108(i) election
is made. Partnerships reporting § 108(i)
information on the 2008 Schedule K–1
(Form 1065 or Form 1065–B) must report
for each partner on an aggregate basis for
all applicable debt instruments for which a
§ 108(i) election is made:
(a) The partner’s deferred amount that
the partner must include in income in the
current taxable year under § 108(i)(1) or
§ 108(i)(5)(D)(i) or (ii), in box 11 (“other
income”) using code F for Schedule K–1
(Form 1065) or in box 9 (“other”) using
code U for Schedule K–1 (Form 1065–B);
(b) The partner’s share of the partnership’s OID deduction deferred under

2009–36 I.R.B.

§ 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under
§ 108(i)(2)(A)(ii) or § 108(i)(5)(D)(i) or
(ii), in box 13 (“other deductions”) using
code W for Schedule K–1 (Form 1065)
or in box 9 (“other”) using code U for
Schedule K–1 (Form 1065–B);
(c) The partner’s deferred amount that
has not been included in income in the
current or prior taxable years, in box 20
(“other information”) using code X for
Schedule K–1 (Form 1065) or in box 9
(“other”) using code U for Schedule K–1
(Form 1065–B);
(d) The partner’s share of the partnership’s OID deduction deferred under
§ 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years,
in box 20 (“other information”) using code
X for Schedule K–1 (Form 1065) or in
box 9 (“other”) using code U for Schedule
K–1 (Form 1065–B);
(e) The partner’s deferred § 752 amount
that is treated as a distribution of money to
the partner under § 752 in the current taxable year, in box 20 (“other information”)
using code X for Schedule K–1 (Form
1065) or in box 9 (“other”) using code U
for Schedule K–1 (Form 1065–B); and
(f) The partner’s deferred § 752 amount
remaining as of the end of the current taxable year, in box 20 (“other information”)
using code X for Schedule K–1 (Form
1065) or in box 9 (“other”) using code U
for Schedule K–1 (Form 1065–B).
(2) Election information statement provided to partners. The partnership must
attach to the Schedule K–1 (Form 1065
or Form 1065–B) provided to each partner
for the taxable year in which the § 108(i)
election is made a statement satisfying the
requirements of this section 4.07(2). The
partnership should not attach these statements to the Schedules K–1 that are filed
with the Service, but must retain these
statements, and each partner must retain
that partner’s statement, in their respective
books and records. A statement meets the
requirements of this section 4.07(2) if the
statement—
(a) Label. States “Section 108(i) Election Information Statement for Partners”
across the top.
(b) Required information. Clearly identifies for each applicable debt instrument
to which an election under § 108(i) applies—

312

(i) The partner’s COD income amount,
the partner’s deferred amount, and the
partner’s included amount;
(ii) The partner’s deferred amount
that the partner must include in income in the current taxable year under
§ 108(i)(5)(D)(i) or (ii);
(iii) The partner’s share of the partnership’s OID deduction deferred under
§ 108(i)(2)(A)(i) in the current taxable
year;
(iv) The partner’s share of the partnership’s OID deduction deferred under
§ 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under
§ 108(i)(5)(D)(i) or (ii);
(v) The partner’s share of each liability of the partnership described in section
4.05(2)(g) of this revenue procedure;
(vi) The partner’s share of the decrease
in the partnership liability that results from
the reacquisition of the applicable debt instrument;
(vii) The partner’s share of the decrease
in the partnership liability that results from
the reacquisition of the applicable debt instrument that is treated as a distribution of
money to the partner under § 752 in the
current taxable year;
(viii) The partner’s deferred § 752
amount as described in section 2.09 of this
revenue procedure;
(ix) The partner’s additional deferred
amount as described in section 4.06 of this
revenue procedure; and
(x) The date of the reacquisition transaction generating the COD income.
(c) If a partner fails to provide the written statement required by section 4.07(3)
of this revenue procedure, the partnership
must indicate that the amounts described
in section 4.07(2)(b)(vii) and (viii) of
this revenue procedure cannot be calculated because the partner did not provide
the information necessary to report these
amounts.
(3) Partner reporting requirements.
The partnership must make reasonable
efforts prior to making a § 108(i) election to secure from each partner with a
deferred amount for which it does not
have the information necessary to compute the partner’s basis in its partnership
interest (and its deferred § 752 amount as
described in section 2.09 of this revenue
procedure) a written statement signed under penalties of perjury that includes this
information. Each partner with a deferred

September 8, 2009

amount must provide this written statement to the partnership within 30 days
of the date of request by the partnership.
A partner’s failure to comply with this
reporting requirement does not invalidate
the partnership’s election under § 108(i)
for an applicable debt instrument only
if the partnership makes reasonable efforts before making the § 108(i) election
to obtain the written statement from the
partner and otherwise complies with the
requirements of section 4 of this revenue
procedure. If a partner provides its written
statement under this section 4.07(3) after
the partnership has provided to the partner
the Section 108(i) Election Information
Statement for Partners, the partnership
must provide to the partner a revised Section 108(i) Election Information Statement
for Partners reporting the information required under section 4.07(2)(b)(vii) and
(viii) of this revenue procedure and report
the partner’s deferred § 752 amount on
the partner’s Schedule K–1 (Form 1065
or Form 1065–B) in subsequent taxable
years.
.08 Additional Requirements for an
S Corporation Making a § 108(i) Election.
(1) Information filing on Schedule K–1
(Form 1120S). For the taxable year in
which the § 108(i) election is made, the
S corporation must report on the Schedule
K–1 (Form 1120S), Shareholder’s Share
of Income, Deductions, Credits, etc., in
the manner specified in the instructions to
the forms, for each shareholder § 108(i)
information on an aggregate basis for all
applicable debt instruments for which a
§ 108(i) election is made. S corporations
reporting § 108(i) information on the 2008
Schedule K–1 (Form 1120S) must report
for each shareholder, on an aggregate
basis for all applicable debt instruments
for which a § 108(i) election is made, the
shareholder’s share of the S corporation’s:
(a) COD income deferred under
§ 108(i) that the shareholder must include
in income in the current taxable year under
§ 108(i)(1) or § 108(i)(5)(D)(i) or (ii), in
box 10 (“other income”) using code E;
(b) OID deduction deferred under
§ 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under
§ 108(i)(2)(A)(ii), or § 108(i)(5)(D)(i) or
(ii), in box 12 (“other deductions”) using
code S;
(c) COD income deferred under
§ 108(i) that has not been included in in-

September 8, 2009

come in the current or prior taxable years,
in box 17 (“other information”) using code
T; and
(d) OID deduction deferred under
§ 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years,
in box 17 (“other information”) using code
T.
(2) Election information statement provided to shareholders. The S corporation
must attach to the Schedule K–1 (Form
1120S) provided to each shareholder for
the taxable year in which the § 108(i)
election is made, a statement satisfying
the requirements of this section 4.08(2).
The S corporation should not attach these
statements to the Schedules K–1 that are
filed with the Service, but must retain
these statements, and each shareholder
must retain that shareholder’s statement,
in their respective books and records. A
statement meets the requirements of this
section 4.08(2) if the statement—
(a) Label. States “Section 108(i) Election Information Statement for Shareholders” across the top.
(b) Required information. Clearly identifies for each applicable debt instrument
to which an election under § 108(i) applies,
the shareholder’s share of the S corporation’s—
(i) COD income that the S corporation
elects to defer under § 108(i);
(ii) COD income deferred under
§ 108(i) that the shareholder must include
in income in the current taxable year under
§ 108(i)(5)(D)(i) or (ii);
(iii) OID deduction deferred under
§ 108(i)(2)(A)(i) in the current taxable
year;
(iv) OID deduction deferred under
§ 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under
§ 108(i)(5)(D)(i) or (ii); and
(v) Additional COD income that would
be deferred as described in section 4.06 of
this revenue procedure.
.09 Section 108(i) Elections Made on
Behalf of Certain Foreign Corporations.
The controlling domestic shareholder(s)
(or common parent of the controlling
domestic shareholder(s), if applicable)
of a controlled foreign corporation or a
noncontrolled § 902 corporation not otherwise required to file a return of tax may
make the § 108(i) election on behalf of the
foreign corporation by satisfying the requirements of § 1.964–1(c)(3). Each con-

313

trolling domestic shareholder must attach
a statement identifying the foreign corporation and satisfying the requirements of
section 4.05 of this revenue procedure and,
if applicable, section 4.06 of this revenue
procedure, to its federal income tax return
for the taxable year ending within or with
the taxable year of the foreign corporation
for which the § 108(i) election is made.
.10 Section 108(i) Elections Made By
Certain Foreign Partnerships. The rules of
this section 4.10 apply to a foreign partnership making a § 108(i) election that is not
otherwise required to file a federal partnership return (“nonfiling foreign partnership”). See § 1.6031(a)–1(b).
(1) A nonfiling foreign partnership
making the election must attach a statement satisfying the requirements of section
4.05 of this revenue procedure and, if applicable, section 4.06 of this revenue procedure, to a partnership return satisfying
the requirements of § 1.6031(a)–1(b)(5)
it files with the Service. In addition, a
nonfiling foreign partnership must include
in the information required in section
4.05(2)(d) and (e) of this revenue procedure the aggregate amounts for all partners
as well as the aggregate amounts for all
U.S. persons (as defined in § 7701(a)(30))
and controlled foreign corporation(s) that
are partners with deferred amounts in the
nonfiling foreign partnership (“affected
partners”).
(2) The nonfiling foreign partnership
must make the election, in accordance with
§ 1.6031(a)–1(b)(5), by the date provided
in section 4.01(1)(a) of this revenue procedure, as if it had a filing obligation for the
taxable year in which the reacquisition of
the applicable debt instrument occurs.
(3) For each affected partner, the partnership must file with the Service a Schedule K–1 (Form 1065) and report on the
Schedule K–1 (Form 1065) for the affected
partner as provided in section 4.07(1) of
this revenue procedure. Except for this
§ 108(i) information, the partnership need
not complete Part III of the Schedule K–1
(Form 1065). The partnership must provide a copy of the respective Schedule
K–1 (Form 1065) to each affected partner and must also attach to the Schedule K–1 (Form 1065) provided to each affected partner a statement satisfying the requirements of section 4.07(2) of this revenue procedure by the date provided in
section 4.01(1)(a) of this revenue proce-

2009–36 I.R.B.

dure. The partnership should not attach
any statement described in section 4.07(2)
of this revenue procedure to the Schedules K–1 that are filed with the Service.
However, the partnership must retain the
statements provided to the affected partners, and each affected partner must retain
that partner’s statement, in their respective
books and records.
(4) The partnership and each affected
partner must satisfy the requirements of
section 4.07(3) of this revenue procedure.
.11 Protective § 108(i) Election.
(1) In general. A taxpayer may make
a protective election under § 108(i) for
an applicable debt instrument if the taxpayer concludes that a particular transaction does not result in the realization of
COD income, reports the transaction on
its federal income tax return in a manner
consistent with the taxpayer’s conclusion,
and would be within the scope of this revenue procedure if the taxpayer’s conclusion were incorrect. If the Service at any
time determines the taxpayer’s conclusion
that the particular transaction does not result in the realization of COD income is incorrect, the taxpayer’s protective election
is treated as a valid, irrevocable election
under § 108(i). Thus, if a taxpayer makes
a protective election, the Service subsequently may require the taxpayer to report
COD income deferred pursuant to the valid
and irrevocable protective election even if
the statute of limitations has expired for
the year in which the COD income was
realized and the protective election was
made. A taxpayer makes a protective election by attaching a statement satisfying the
requirements of this section 4.11(1) to the
taxpayer’s original federal income tax return within the period described in section
4.01(1)(a) of this revenue procedure. The
taxpayer also must attach the election to its
federal income tax return in each of the 8
or 9 taxable years, as applicable, following
the taxable year of the election. A statement meets the requirements of this section 4.11(1) if the statement—
(a) States “Section 108(i) Protective
Election” across the top;
(b) Provides the information required
under section 4.05(2)(a), (b), and (c) of this
revenue procedure;
(c) Provides that the amounts described
in sections 4.05(2)(d) and (e) of this revenue procedure are zero; and

2009–36 I.R.B.

(d) Provides the information described
in section 4.06 of this revenue procedure.
(2) Statements provided to shareholders
and partners.
(a) For each applicable debt instrument,
a partnership or S corporation that makes
a protective election must attach to the
Schedule K–1 (Form 1065, Form 1065–B,
or Form 1120S) it provides each of its partners or shareholders, as the case may be,
for the taxable year in which the protective election is made a statement containing the information described in section
4.11(1)(b) of this revenue procedure (an
S corporation need not provide its shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the
partner’s or shareholder’s share of the additional COD income that would be deferred as described in section 4.11(1)(d) of
this revenue procedure.
(b) The partnership or S corporation
should not attach the statements described
in this section 4.11(2) to the Schedules
K–1 that are filed with the Service but must
retain these statements, and each partner
and shareholder must retain that partner’s
or shareholder’s statement, in their respective books and records.
.12 Election-Year Reporting by Tiered
Pass-Through Entities.
(1) A partnership required to file a
U.S. partnership return other than under
§ 1.6031(a)–1(b)(5), or an S corporation, that receives a Schedule K–1 (Form
1065 or Form 1065–B) reflecting its share
of any items listed in section 4.07(1) of
this revenue procedure, must report on
the Schedules K–1 (Form 1065, Form
1065–B, or Form 1120S) to its partners
or shareholders, as the case may be, each
partner’s or shareholder’s share of those
items (an S corporation only reports to its
shareholders the items described in section 4.07(1)(a) through (d) of this revenue
procedure).
(2) If a partnership described in section 4.12(1) of this revenue procedure receives a statement described in sections
4.07(2) or 4.10(3) of this revenue procedure or this section 4.12(2), it must provide each of its partners a statement containing the partner’s share of each of the
items listed on each statement received by
the partnership, including the information
described in section 4.07(2)(b)(x) of this
revenue procedure. If an S corporation

314

receives a statement described in sections
4.07(2) or 4.10(3) of this revenue procedure or this section 4.12(2), it must provide
each of its shareholders a statement containing the shareholder’s share of each of
the items listed on each statement received
by the S corporation that are described in
section 4.07(2)(b)(i), (ii), (iii), (iv) and (ix)
of this revenue procedure. The partnership
or S corporation must attach this statement
or statements to the Schedule K–1 (Form
1065, Form 1065–B, or Form 1120S) that
it provides to each of its partners or shareholders, as the case may be, for the taxable year of the partnership or S corporation. The partnership or S corporation
should not attach these statements to the
Schedules K–1 that are filed with the Service but must retain these statements, and
each partner and shareholder must retain
that partner’s or shareholder’s statement,
in their respective books and records.
(3) A partnership that receives a statement described in this section 4 identifying
its COD income amount with respect to an
applicable debt instrument must allocate
its COD income amount, without regard
to § 108(i), to the partners in the partnership immediately before the reacquisition
transaction in the manner in which the
income would be included in the distributive shares of these partners under § 704
and the regulations thereunder, including
§ 1.704–1(b)(2)(iii). The partnership may
determine in any manner the portion, if
any, of a partner’s COD income amount
that is the partner’s deferred amount and
the portion, if any, of a partner’s COD
income amount that is the partner’s included amount. No partner’s deferred
amount with respect to an applicable debt
instrument may exceed its COD income
amount with respect to the applicable debt
instrument, and the aggregate of deferred
amounts of its partners with respect to an
applicable debt instrument must equal the
partnership’s deferred amount with respect
to the applicable debt instrument. The
partnership allocates amounts described in
section 4.06 of this revenue procedure under this section 4.12(3) as if the additional
COD income was realized.
(4) The deferred § 752 amount for partners in a partnership making a § 108(i)
election is calculated only for the partnership’s direct partners. No further adjustment to the deferred § 752 amount is made
to reflect the basis or other attributes of

September 8, 2009

partners that are indirect partners in the
partnership.
(5) If an S corporation receives a statement described in this section 4 identifying
its COD income amount, deferred amount,
included amount or additional COD income that would be deferred with respect
to an applicable debt instrument, these
amounts are shared pro rata only among
those shareholders that are shareholders in
the S corporation immediately before the
reacquisition transaction.
(6) This paragraph 4.12(6) provides the
rules for Category 1 and Category 2 filers of Form 8865, Return of U.S. Persons
With Respect to Certain Foreign Partnerships, as defined in the instructions for
Form 8865, if the foreign partnership, for
which the Category 1 or Category 2 filer
has a filing requirement, receives a Schedule K–1 (Form 1065 or Form 1065–B)
reflecting the partnership’s share of any
items listed in section 4.07(1) of this revenue procedure, or a statement described
in sections 4.07(2) or 4.10(3) of this revenue procedure (because the foreign partnership owns an interest directly or indirectly in another partnership in which an
election was made under § 108(i) with respect to that foreign partnership’s distributive share from the other entity).
(a) For each partner for whom the Category 1 filer is required to complete a
Schedule K–1 (Form 8865) (which includes the Category 1 filer itself), the
Category 1 filer must:
(i) Include the information described in
section 4.07(1) of this revenue procedure
in the Schedule K–1 (Form 8865) that the
Category 1 filer files with the Service and
completes for the partner;
(ii) Produce a statement containing the
partner’s share of the items listed on each
statement received by the partnership; and
(iii) Attach the statement described in
section 4.12(6)(a)(ii) of this revenue procedure to each Schedule K–1 (Form 8865)
that it is required to provide to a partner of
the foreign partnership.
(b) A Category 2 filer must include its
share of the information described in section 4.07(1) on the Schedule K–1 (Form
8865) that it is required to complete. Category 2 filers also must complete a statement containing their share of the items
listed on each statement received by the
partnership.

September 8, 2009

(c) The Category 1 and Category 2 filers
should not attach the statements described
in sections 4.12(6)(a)(ii) and 4.12(6)(b) of
this revenue procedure, respectively, to the
Schedules K–1 that are filed with the Service. However, Category 1 filers must retain the statements they complete and each
partner must retain its own statement, in
their respective books and records.
(7) If as a result of § 108(i)(5)(D)(ii), a
partner of a partnership described in section 4.12(1) of this revenue procedure or a
shareholder of an S corporation described
in section 4.12(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K–1 (Form 1065, Form 1065–B, or
Form 1120S) and statements provided to
the partner or shareholder pursuant to section 4.12(1) and (2) of this revenue procedure. Similar rules apply to Category 1 and
Category 2 filers (Form 8865) described in
section 4.12(6) of this revenue procedure.
(8) The provisions of section 4.12(2),
(3), (5) and (6) of this revenue procedure
also apply to a statement received that is
described in section 4.11(2) of this revenue
procedure, except that the information that
must be provided are those items described
in section 4.11(1)(b) of this revenue procedure (an S corporation need not provide its
shareholders with the date(s) of the transaction(s) that would constitute the reacquisition transaction or transactions) and the
share of the partner or shareholder in the
amounts described in section 4.11(1)(d) of
this revenue procedure.
SECTION 5. REQUIRED
INFORMATION STATEMENT
.01 Annual Information Statements.
Pursuant to § 108(i)(7)(B), a taxpayer that
makes an election under § 108(i) (except
for a protective election under section
4.11(1) of this revenue procedure) must attach a statement meeting the requirements
of section 5.02 of this revenue procedure
to its federal income tax return for each
taxable year beginning with the taxable
year following the taxable year for which
the taxpayer makes the election and ending with the first taxable year in which all
items deferred under § 108(i) have been
recognized.

315

.02 Contents of Statement. A statement
meets the requirements of this section 5.02
if the statement—
(1) Label. States “Section 108(i) Information Statement” across the top;
(2) Required information. Clearly identifies for each applicable debt instrument
to which an election under § 108(i) applies—
(a) COD income deferred under
§ 108(i) that is included in income in the
current taxable year under § 108(i)(1);
(b) COD income deferred under
§ 108(i) that is included in income in the
current taxable year under § 108(i)(5)(D),
including a description and date of
the acceleration event described in
§ 108(i)(5)(D);
(c) COD income deferred under
§ 108(i) that has not been included in income in the current or prior taxable years
(in the case of a partnership, the aggregate
of the partners’ deferred amounts that have
not been included in income in the current
or prior taxable years, and in the case of
an S corporation, the S corporation’s COD
income deferred under § 108(i) that has
not been included in income in the current
or prior taxable years);
(d) OID deduction deferred under
§ 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under
§ 108(i)(2)(A)(ii);
(e) OID deduction deferred under
§ 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under
§ 108(i)(5)(D); and
(f) OID deduction deferred under
§ 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years.
(3) Election attached. Includes a copy
of the election statement described in section 4.05 of this revenue procedure.
.03 Additional Annual Reporting Requirements for Certain Partnerships. The
rules of this section 5.03 apply to partnerships other than partnerships described in
section 5.05 of this revenue procedure.
(1) In general. A partnership that
makes an election under § 108(i) (except
for a protective election under section
4.11(1) of this revenue procedure) must
attach to its federal income tax returns the
statements required under section 5.01 of
this revenue procedure. In addition, for
each taxable year in which a statement is
required under section 5.01 of this revenue
procedure, the partnership must report on

2009–36 I.R.B.

the Schedule K–1 (Form 1065 or Form
1065–B) for each partner § 108(i) information in the manner described in section
4.07(1) of this revenue procedure.
(2) Annual information statements
provided to partners. The partnership
must attach to the Schedule K–1 (Form
1065) provided to each partner for each
taxable year in which a statement is required under section 5.01 of this revenue
procedure, a statement meeting the requirements of this section 5.03(2). The
partnership should not attach these statements to the Schedules K–1 that are filed
with the Service, but must retain these
statements, and each partner must retain
that partner’s statement, in their respective
books and records. A statement meets the
requirements of this section 5.03(2) if the
statement—
(a) Label. States “Section 108(i) Annual Information Statement for Partners”
across the top of the statement.
(b) Required information. Clearly identifies for each applicable debt instrument
to which a § 108(i) election applies—
(i) The partner’s deferred amount that
has not been included in income as of the
end of the prior taxable year;
(ii) The partner’s deferred amount that
the partner must include in income in the
current taxable year under § 108(i)(1);
(iii) The partner’s deferred amount
that the partner must include in income in the current taxable year under
§ 108(i)(5)(D)(i) or (ii);
(iv) The partner’s deferred amount that
has not been included in income in the current or prior taxable years;
(v) The partner’s share of the partnership’s OID deduction deferred under
§ 108(i)(2)(A)(i) in the current taxable
year;
(vi) The partner’s share of the partnership’s OID deduction deferred under
§ 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under
§ 108(i)(2)(A)(ii);
(vii) The partner’s share of the partnership’s OID deduction deferred under
§ 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under
§ 108(i)(5)(D)(i) or (ii);
(viii) The partner’s share of the partnership’s OID deduction deferred under
§ 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years;
and

2009–36 I.R.B.

(ix) The partner’s deferred § 752
amount that is treated as a distribution
of money to the partner under § 752 in
the current taxable year and any remaining deferred § 752 amount. If a partner
fails to provide the written statement required by section 4.07(3) of this revenue
procedure, the partnership must indicate
that the amounts described in this section 5.03(2)(b)(ix) cannot be calculated
because the partner did not provide the
information necessary to report these
amounts.
.04 Additional Annual Reporting Requirements for an S Corporation.
(1) In general. An S corporation that
makes an election under § 108(i) (except
for a protective election under section
4.11(1) of this revenue procedure) must
attach to its federal income tax returns the
statements required under section 5.01 of
this revenue procedure. In addition, for
each taxable year in which a statement is
required under section 5.01 of this revenue
procedure, the S corporation must report
on the Schedule K–1 (Form 1120S) for
each shareholder § 108(i) information in
the manner described in section 4.08(1) of
this revenue procedure.
(2) Annual information statements provided to shareholders. The S corporation
must attach to the Schedule K–1 (Form
1120S) provided to each shareholder for
each taxable year in which a statement
is required under section 5.01 of this
revenue procedure a statement meeting
the requirements of this section 5.04(2).
The S corporation should not attach these
statements to the Schedules K–1 that are
filed with the Service, but must retain
these statements, and each shareholder
must retain that shareholder’s statement,
in their respective books and records. A
statement meets the requirements of this
section 5.04(2) if the statement—
(a) Label. States “Section 108(i) Annual Information Statement for Shareholders” across the top;
(b) Required information. Clearly identifies for each applicable debt instrument
to which an election under § 108(i) applies,
the shareholder’s share of the S corporation’s—
(i) COD income deferred under § 108(i)
that has not been included in income as of
the end of the prior taxable year;
(ii) COD income deferred under
§ 108(i) that the shareholder must include

316

in income in the current taxable year under
§ 108(i)(1);
(iii) COD income deferred under
§ 108(i) that the shareholder must include
in income in the current taxable year under
§ 108(i)(5)(D)(i) or (ii);
(iv) COD income deferred under
§ 108(i) that has not been included in income in the current or prior taxable years;
(v) OID deduction deferred under
§ 108(i)(2)(A)(i) in the current taxable
year;
(vi) OID deduction deferred under
§ 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under
§ 108(i)(2)(A)(ii);
(vii) OID deduction deferred under
§ 108(i)(2)(A)(i) that is allowable as a deduction in the current taxable year under
§ 108(i)(5)(D)(i) or (ii); and
(viii) OID deduction deferred under
§ 108(i)(2)(A)(i) that has not been deducted in the current or prior taxable years.
.05 Additional Annual Reporting Requirements for Certain Foreign Partnerships.
(1) The rules of this section 5.05 apply
to nonfiling foreign partnerships.
(2) A nonfiling foreign partnership that
makes an election under § 108(i) (except
for a protective election under section
4.11(1) of this revenue procedure) must
file federal income tax returns with the
Service containing the information under
§ 1.6031(a)–1(b)(5) for each taxable year
in which a statement is required by section
5.01 of this revenue procedure.
(3) The nonfiling foreign partnership
must attach to its federal income tax returns the statements required under section
5.01 of this revenue procedure, but only for
that portion of the COD income allocated
to affected partners.
(4) For each taxable year in which a
statement is required under section 5.01
of this revenue procedure, the nonfiling
foreign partnership must provide each
affected partner a Schedule K–1 (Form
1065) reporting § 108(i) information in
the manner described in section 4.07(1)
of this revenue procedure. Except for
this § 108(i) information, the partnership
need not complete Part III of the Schedule
K–1 (Form 1065). The partnership must
provide each affected partner with a copy
of the Schedule K–1 (Form 1065) by the
date provided in § 1.6031(b)–1T(b). The
partnership must attach the Schedules K–1

September 8, 2009

(Form 1065) to the federal income tax
returns filed with the Service pursuant to
section 5.05(2) of this revenue procedure.
(5) For each taxable year for which a
statement is required under section 5.01
of this revenue procedure, the nonfiling
foreign partnership must attach to each
affected partner’s Schedule K–1 (Form
1065) a statement meeting the requirements of section 5.03(2) of this revenue
procedure. The partnership should not
attach these statements to the Schedules
K–1 that are filed with the Service, but
must retain the statements, and each partner must retain that partner’s statement, in
their respective books and records.
.06 Information Statements Made on
Behalf of Certain Foreign Corporations.
Each controlling domestic shareholder
must attach a statement identifying the
foreign corporation and meeting the requirements of section 5.02 of this revenue
procedure to the shareholder’s federal income tax return for each taxable year for
which a statement is required under section 5.01 of this revenue procedure.
.07 Additional Annual Reporting Requirements for Tiered Pass-Through Entities.
(1) A partnership required to file a
U.S. partnership return other than under
§ 1.6031(a)–1(b)(5), or an S corporation,
that receives a Schedule K–1 (Form 1065
or Form 1065–B) described in the second sentence of section 5.03(1) of this
revenue procedure reflecting its share of
any § 108(i) information must report on
the Schedules K–1 (Form 1065, Form
1065–B, or Form 1120S) to its partners
or shareholders, as the case may be, each
partner’s or shareholder’s share of those
items (an S corporation only reports to its
shareholders the items described in section 4.07(1)(a) through (d) of this revenue
procedure).
(2) If a partnership described in section
5.07(1) of this revenue procedure receives
a statement described in sections 5.03(2)
or 5.05(5) of this revenue procedure or
this section 5.07(2), it must provide each
of its partners a statement containing the
partner’s share of each of the items listed
on each statement received by the partnership. If an S corporation receives a
statement described in sections 5.03(2)
or 5.05(5) of this revenue procedure or
this section 5.07(2), it must provide each
of its shareholders a statement contain-

September 8, 2009

ing the shareholder’s share of each of the
items listed on each statement received
by the S corporation that are described
in section 5.03(2)(b)(i) through (viii) of
this revenue procedure. The partnership
or S corporation must attach the statement
or statements to the Schedule K–1 (Form
1065 or Form 1065–B) or Schedule K–1
(Form 1120S) that is provided to each of
its partners or shareholders, as the case
may be, for the taxable year of the partnership or S corporation. The partnership
or S corporation should not attach these
statements to the Schedules K–1 that are
filed with the Service, but must retain
these statements, and each partner and
shareholder must retain that partner’s or
shareholder’s statement, in their respective
books and records.
(3) This paragraph 5.07(3) provides
the rules for persons described in section
4.12(6) of this revenue procedure if the
foreign partnership, for which the Category 1 or 2 filer has a filing requirement,
receives a Schedule K–1 (Form 1065 or
Form 1065–B) reflecting the partnership’s
share of any items described in the second
sentence of section 5.03(1) of this revenue
procedure, or a statement described in
sections 5.03(2) or 5.05(5) of this revenue
procedure (because the foreign partnership owns an interest directly or indirectly
in another partnership in which an election was made under § 108(i) with respect
to that foreign partnership’s distributive
share from the other entity).
(a) For each partner for whom the Category 1 filer is required to complete a
Schedule K–1 (Form 8865) (which includes the Category 1 filer itself), the
Category 1 filer must:
(i) Include the information described in
section 4.07(1) of this revenue procedure
in the Schedule K–1 (Form 8865) that the
Category 1 filer files with the Service and
completes for the partner;
(ii) Produce a statement containing the
partner’s share of the items listed on each
statement received by the partnership; and
(iii) Attach the statement described in
section 5.07(3)(a)(ii) of this revenue procedure to each Schedule K–1 (Form 8865)
that it is required to provide to a partner of
the foreign partnership.
(b) A Category 2 filer must include its
share of the information described in section 4.07(1) on the Schedule K–1 (Form
8865) that it is required to complete. Cat-

317

egory 2 filers also must complete a statement containing their share of the items
listed on each statement received by the
partnership.
(c) The Category 1 and Category 2 filers
should not attach the statements described
in sections 5.07(3)(a)(ii) and 5.07(3)(b) of
this revenue procedure, respectively, to the
Schedules K–1 that are filed with the Service. However, Category 1 filers must retain the statements they complete and each
partner must retain its own statement, in
their respective books and records.
(4) If as a result of § 108(i)(5)(D)(ii), a
partner of a partnership described in section 5.07(1) of this revenue procedure or a
shareholder of an S corporation described
in section 5.07(1) of this revenue procedure must recognize items deferred under § 108(i), the partnership or S corporation must report these items on the Schedule K–1 (Form 1065, Form 1065–B, or
Form 1120S) and statements provided to
the partner or shareholder pursuant to section 5.07(1) and (2) of this revenue procedure. Similar rules apply to Category 1 and
Category 2 filers (Form 8865) described in
section 4.12(6) of this revenue procedure.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective
for reacquisitions of applicable debt instruments in taxable years ending after
December 31, 2008.
SECTION 7. TRANSITION RULE
.01 Noncomplying Election. Except as
otherwise provided in this section 7.01, the
Service will treat a § 108(i) election as effective if a taxpayer files an election with
the taxpayer’s federal income tax return
filed on or before September 16, 2009, using any reasonable procedure to make the
election. However, an election that does
not comply with section 4 of this revenue
procedure will not be effective unless the
taxpayer on or before November 16, 2009,
files an amended return for the taxable year
of the election and complies with the requirements of section 4 of this revenue
procedure.
.02 Modification of Election. A taxpayer that files a § 108(i) election on or
before September 16, 2009, may modify
that election by filing an amended return
on or before November 16, 2009 (for ex-

2009–36 I.R.B.

ample, to modify the amount of COD income the taxpayer elects to defer). To be
effective, a modification of an election described in the preceding sentence must satisfy the requirements for an election described in section 4 of this revenue procedure.
.03 Notations. A taxpayer that files
the amended return on paper must write
“Section 108(i) Election” on the top of
the first page. A taxpayer that files the
amended return electronically should indicate “Section 108(i) Election” on the return. See Publication 4163, Modernized
e-File (MeF) Information for Authorized
IRS e-file Providers for Business Returns
Tax Year 2008 for more details.
SECTION 8. PAPERWORK
REDUCTION ACT
The collection of information contained in this revenue procedure has been
reviewed and approved by the Office
of Management and Budget in accordance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–2147.
An agency may not conduct or sponsor,
and a person is not required to respond

2009–36 I.R.B.

to, a collection of information unless the
collection of information displays a valid
OMB control number.
The collection of information in this
revenue procedure is in sections 4, 5 and
7. This information is required to determine the amount of income and deductions a taxpayer elects to defer and to track
those amounts until the taxpayer has reported all deferred income and deductions
on the taxpayer’s tax return. This information will be used during examination
to verify that a taxpayer has correctly deferred income and deductions. The collection of information is required to obtain a benefit. The likely respondents are
C corporations, shareholders of S corporations, partners of partnerships, and other
individuals engaged in a trade or business,
that reacquire applicable debt instruments
in 2009 or 2010.
The estimated total annual reporting
burden is 300,000 hours. The estimated
annual burden per respondent varies from
1 to 8 hours, depending on individual circumstances, with an estimated average of
6 hours. The estimated number of respondents is 50,000.
Books or records relating to a collection
of information must be retained as long

318

as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and return information are confidential, as required by
§ 6103.
DRAFTING INFORMATION
The principal authors of this revenue procedure are Megan A. Stoner of
the Office of Associate Chief Counsel
(Passthroughs & Special Industries)
and Craig Wojay of the Office of
Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding this revenue procedure, contact
Megan A. Stoner at (202) 622–3070
for questions involving partnerships and
S corporations, William E. Blanchard at
(202) 622–3950 for questions involving
OID, Ronald M. Gootzeit at (202)
622–3860 for questions involving foreign
entities, Robert Rhyne at (202) 622–7790
for questions involving earnings and
profits and consolidated groups, and
Craig Wojay at (202) 622–4920 for
questions on § 108(i) generally (not
toll-free calls).

September 8, 2009