Regs on Leasing Listed Property

 [4380-01-u]

 ACTION: Temporary and final regulations.

 SUMMARY: This document contains temporary and final regulations relating to the treatment of lessees of luxury automobiles and other listed property. The rules in the final regulations are currently contained in temporary regulations, parts of which were published on April 12, 1990, and expire within three years of their issuance. These regulations affect lessees who lease luxury automobiles and other listed property and provide them with guidance concerning the amount to be included in gross income on account of the lease.

 DATES: These regulations are effective on January 1, 1987, and apply to listed property first leased after December 31, 1986.

 FOR FURTHER INFORMATION CONTACT: Bernard P. Harvey, (202) 622-3110 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

BACKGROUND

Section 1.280F-7T of the temporary Income Tax Regulations was first published in the Federal Register as T.D. 8218 in 53 FR 29880 (August 9, 1988) in response to changes to section 280F of the Internal Revenue Code (Code) made by the Tax Reform Act of 1986. These changes lowered the dollar limitations imposed by section 280F(a) on the depreciation for automobiles and changed the recovery periods used in determining depreciation deductions for listed property. The temporary regulations were amended by T.D. 8298 in 55 FR 13808 (April 12, 1990).

 Section 280F limits depreciation deductions for passenger automobiles and certain "listed property." In the case of leased property, the depreciation limitation does not apply, but there is an equivalent reduction in the lessee's tax benefits. The temporary regulations implement the rules relating to leased property by requiring lessees to include in gross income an amount substantially equivalent to the limitation on depreciation and providing rules for computing this amount.

 The provisions of the temporary regulations were published as a notice of proposed rulemaking in 57 FR 2862 (January 24, 1992). No comments were received on the proposed regulations, and no hearing was requested. Accordingly, the proposed regulations are adopted without change.

SPECIAL ANALYSES

 It has been determined that these rules are not major rules as defined in Executive Order 12291. Therefore, a Regulatory Impact Analysis is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to these regulations, and, therefore, a final Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Code, these regulations have been submitted to the Small Business Administration for comment on their impact on small business.

DRAFTING INFORMATION

 The principal author of these final regulations is Bernard P. Harvey of the Office of the Assistant Chief Counsel (Passthroughs and Special Industries), Internal Revenue Service. However, personnel from other offices of the Internal Revenue Service and Treasury Department participated in developing the regulations on matters of both substance and style.

LIST OF SUBJECTS

26 CFR 1.261-1 through 1.280H-1T

 Income taxes, Reporting and recordkeeping requirements.

Treasury Decision 8473

ADOPTION OF AMENDMENTS TO THE REGULATIONS

For the reasons set out in the preamble, 26 CFR part 1 is amended by adopting the rules in section 1.280F-7T as final regulations, by making conforming amendments to sections 1.280F-1T and 1.280F-5T, and by updating the authority citation as follows:

PART 1 -- INCOME TAX; TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 1953

Paragraph 1. The authority citation for part 1 is amended by removing the entry for "Section 1.280F-7T" and adding the following citations to read as follows:

Authority: 26 U.S.C. 7805 * * * Section 1.280F-1T also issued under 26 U.S.C. 280F. * * * Section 1.280F-7 also issued under 26 U.S.C. 280F(c).

SECTION 1.280F-1T (AMENDED)

Par. 2. Section 1.280F-1T is amended as follows:

1. The heading in the fourth column of the table of paragraph (b) is amended by removing "Sections 1.280F-5T and 1.280F-7T" and adding "Sections 1.280F-5T and 1.280F-7" in its place.

2. The last sentence in paragraph (c)(1) is amended by removing "Section 1.280F-7T" and adding "Section 1.280F-7" in its place.

3. The last sentence in paragraph (c)(3) is amended by removing "Section 1.280F-7T(a)" and adding "Section 1.280F-7(a)" in its place.

4. The authority citation following section 1.280F-1T is removed.

SECTION 1.280F-5T (AMENDED)

Par. 3. Section 1.280F-5T is amended as follows:

1. The last two sentences in paragraph (a) are amended by removing "section 1.280F-7T(a)" and "section 1.280F-7T(b)" and adding "section 1.280F-7(a)" and "section 1.280F-7(b)", in their respective places.

2. The last sentence in paragraph (f)(1) is amended by removing "section 1.280F-7T(b)" and adding "section 1.280F-7(b)" in its place.

3. The first sentence in the introductory text of paragraph (g) is amended by removing "section 1.280F-7T(b)" and adding "section 1.280F-7(b)" in its place.

SECTION 1.280F-7T (REDESIGNATED AS SECTION 1.280F-7)

Par. 4. Section 1.280F-7T is redesignated as section 1.280F-7 and the word "(temporary)" is removed from the section heading.