# Application to partnerships.
**AGENCY:**
Internal Revenue Service (IRS), Treasury.
**ACTION:**
Correcting amendments.
**SUMMARY:**
This document contains corrections to final regulations (TD 9353) that were published in the *Federal Register* on Tuesday, August 14, 2007 (72 FR 45346) relating to the application of section 1045 of the Internal Revenue Code to partnerships and their partners.
**DATES:**
This correction is effective October 10, 2007.
**FOR FURTHER INFORMATION CONTACT:**
Jian H. Grant at (202) 622-3050 (not a toll-free number).
**SUPPLEMENTARY INFORMATION:**
**Background**
The final regulations that are the subject of this correction are under section 1045 of the Internal Revenue Code.
**Need for Correction**
As published, final regulations (TD 9353) contain errors that may prove to be misleading and are in need of clarification.
**List of Subjects in 26 CFR Part 1**
Income taxes, Reporting and recordkeeping requirements.
**26 CFR Part 1**
**Correction of Publication**
Accordingly, 26 CFR part 1 is corrected by making the following 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 * * *
**26 CFR Part 1**
*Par. 2.* Section 1.1045-1 is amended by revising the last sentence of paragraph (c)(1)(i), the subtitle of paragraph (c)(2)(i), the first five sentences of paragraph (h)(3)(i) *Example 3.* (i), the fourth sentence of (h)(3)(i) *Example 5.* (v), and the first sentence of (h)(3)(i) *Example 12.* (ii) to read as follows:
§ 1.1045-1
(c) * * *
(1) * * *
(i) * * * A taxpayer other than a C corporation that sells QSB stock held for more than 6 months at the time of the sale may elect in accordance with paragraph (h) of this section to apply section 1045 if replacement QSB stock is purchased by a purchasing partnership (including a selling partnership).
(2) * * *
(i) *General rule.*
(h) * * *
(3) * * *
(i) * * *
*Example 3.* * * *
(i) On January 1, 2008, A, an individual, and B, an individual, each contribute $500 to UTP (upper-tier partnership) for equal partnership interests. On February 1, 2008, UTP and C, an individual, each contribute $1,000 to LTP (lower-tier partnership) for equal partnership interests. On March 1, 2008, LTP purchases QSB stock for $500. On April 1, 2008, D, an individual, joins UTP by contributing $500 to UTP for a 1/3 interest in UTP. On December 1, 2008, LTP sells the QSB stock for $2,000. * * *
*Example 5.* * * *
(v) * * * In accordance with the principles of § 1.743-1(j)(3), the amount of A's gain from the March 30, 2009, sale of replacement QSB1 stock in which A has a $200 negative basis adjustment equals $300 (A's share of PRS' gain from the sale of replacement QSB1 stock ($100), increased by the amount of A's negative basis adjustment for replacement QSB1 stock ($200)). * * *
*Example 12.* * * *
(ii) Because A purchased within 60 days of PRS' sale of the QSB stock, replacement QSB stock for a cost equal to A's share of the partnership's amount realized on the sale of the QSB stock, and because A made a valid election to apply section 1045 with respect to A's share of the gain from PRS' sale of the QSB stock, A does not recognize A's $100 distributive share of the gain from PRS' sale of the QSB stock. * * *
LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).