Notice 2005-32

Part III. Administrative, Procedural, and Miscellaneous
Interim Rules and Procedures
for Partnerships Under
Section 833 of the American
Jobs Creation Act of 2004
Notice 2005–32
Section 1. PURPOSE
The American Jobs Creation Act of
2004, P.L. 108–357, 118 Stat. 1418 (the
Act), was enacted on October 22, 2004.
The Treasury Department and the Internal
Revenue Service intend to issue regulations implementing §§ 833 and 834 of the
Act, which amended §§ 704, 734, 743,
and 6031 of the Internal Revenue Code.
This notice provides interim procedures
for partnerships and their partners to comply with the mandatory basis provisions of
§§ 734 and 743, as amended by the Act.
This notice also provides interim procedures for electing investment partnerships
(EIPs) and their partners to comply with
§§ 743(e) and 6031(f), as provided in
§ 833(b) of the Act.
Section 2. BACKGROUND
Section 833(c) of the Act requires basis
adjustments to be made following certain
distributions from partnerships for which
no § 754 election is in effect. As amended
by § 833(c) of the Act, § 734(a) and (b)
requires a partnership to reduce its basis
in partnership property upon a distribution
of partnership property after October 22,
2004, if there is a “substantial basis reduction.” Under § 734(d), there is a substantial
basis reduction if a downward adjustment
of more than $250,000 would be made to
the basis of partnership assets if a section
754 election were in effect at the time of
the distribution. EIPs, like other partnerships, are required to make any basis adjustments that are required under § 734
upon the distribution of partnership property.
Section 833(b) of the Act requires basis adjustments to be made following certain transfers of interests in partnerships
for which no § 754 election is in effect. As
amended by § 833(b) of the Act, § 743(a)
and (b) requires a partnership to reduce
the basis of partnership property upon a

April 18, 2005

transfer after October 22, 2004, of an interest in the partnership by sale or exchange
or upon the death of a partner, if, at the
time of the relevant transfer, the partnership has a “substantial built-in loss.” Section 743(d)(1) provides that, for purposes
of § 743, a partnership has a substantial
built-in loss with respect to a transfer of a
partnership interest if the partnership’s adjusted basis in the partnership’s property
exceeds by more than $250,000 the fair
market value of the property.
Section 833(b) of the Act also provides that an EIP is not treated as having
a substantial built-in loss, and thus is not
required to make basis adjustments to
partnership property, with respect to any
transfer of a partnership interest occurring
while an election to be treated as an EIP
is in effect. In lieu of the partnership basis adjustments otherwise required under
§ 743, a partner-level loss disallowance
rule applies. Section 743(e)(2) provides
that, in the case of a transfer of an interest in an EIP, the transferee partner’s
distributive share of the losses, without
regard to gains, from the sale or exchange
of partnership property is not allowed,
except to the extent that it is established
that the losses exceed the loss recognized
on the transfer of the partnership interest
by the transferor partner (or by a prior
transferor to the extent not fully offset by
a prior disallowance under § 743(e)(2)).
Under § 743(e)(3), losses disallowed under this rule do not decrease the transferee
partner’s basis in its partnership interest.
Section 743(e) is to be applied without
regard to any termination of the partnership under § 708(b)(1)(B). In the case of a
basis reduction to property distributed to
the transferee partner in a nonliquidating
distribution, § 743(e)(5) provides that the
amount of the transferor’s recognized loss
taken into account under § 743(e)(2) is reduced by the amount of the basis reduction
under § 732(a)(2).
Section 743(e)(6), as added by the
Act, provides that an EIP means any
partnership if (A) the partnership makes
an election to have § 743(e) apply, (B)
the partnership would be an investment
company under section 3(a)(1)(A) of the
Investment Company Act of 1940 but
for an exemption under paragraph (1) or

895

(7) of section 3(c) of such Act, (C) the
partnership has never been engaged in a
trade or business, (D) substantially all of
the assets of the partnership are held for
investment, (E) at least 95 percent of the
assets contributed to the partnership consist of money, (F) no assets contributed
to the partnership had an adjusted basis
in excess of fair market value at the time
of contribution, (G) all partnership interests of the partnership are issued by the
partnership pursuant to a private offering
before the date which is 24 months after
the date of the first capital contribution to
the partnership, (H) the partnership agreement of the partnership has substantive
restrictions on each partner’s ability to
cause a redemption of the partner’s interest, and (I) the partnership agreement of
the partnership provides for a term that
is not in excess of 15 years. However, in
the case of an EIP which is in existence
on June 4, 2004, § 743(e)(6)(H) does not
apply to the partnership, and § 743(e)(6)(I)
is applied by substituting “20 years” for
“15 years”.
Section 743(e)(7) provides that the Secretary shall prescribe regulations as may
be appropriate to carry out the purposes of
§ 743(e), including regulations for applying § 743(e) to tiered partnerships.
Section 6031(f) provides that in the case
of any EIP, the information required under
§ 6031(b) to be furnished to any partner
to whom § 743(e)(2) applies shall include
information as is necessary to enable the
partner to compute the amount of losses
disallowed under § 743(e).
Section 3. INTERIM PROCEDURES
RELATING TO BASIS ADJUSTMENTS
REQUIRED UNDER § 833 OF THE
ACT
Sections 1.734–1(d) and 1.743–1(k) of
the Income Tax Regulations require partnerships and partners to provide certain
statements following distributions with respect to partnership interests, and transfers
of partnership interests, in partnerships for
which an election under § 754 is in effect. The Treasury Department and the
Service intend to amend the regulations
under §§ 734 and 743 to require partnerships and partners to provide statements,
similar to those contained in §§ 1.734–1(d)

2005–16 I.R.B.

and 1.743–1(k), following any distributions and transfers that trigger basis adjustments under § 833(b) or (c) of the Act.
Until further guidance is provided,
partnerships that are required to reduce
the bases of partnership properties under
§ 833(c) of the Act must comply with
§ 1.734–1(d) as if an election under § 754
were in effect at the time of the relevant
distribution. Partnerships that are required
to reduce the bases of partnership properties under § 833(b) of the Act must comply
with § 1.743–1(k)(1) as if an election under § 754 were in effect at the time of
the relevant transfer. The transferee of an
interest in a partnership that is required to
reduce the bases of partnership properties
under § 833(b) of the Act must comply
with § 1.743–1(k)(2), within the time prescribed under § 1.743–1(k)(2) (or, if later,
by May 19, 2005), as if an election under
§ 754 were in effect at the time of the
relevant transfer. In addition, partnerships
that are required to reduce the bases of
partnership properties under § 833(b) of
the Act may rely on, and must comply
with, § 1.743–1(k)(3), (4), and (5) as if an
election under § 754 were in effect at the
time of the relevant transfer.
Section 4. INTERIM PROCEDURES
FOR EIP ELECTION
Until further guidance is provided, a
partnership must make the election to
be treated as an EIP by attaching a written statement to an original or amended
partnership return for the taxable year
for which the election is effective. The
statement must (i) set forth the name,
address, and tax identification number
of the partnership making the election,
(ii) contain a representation that the partnership is eligible to make the election
under § 743(e)(6)(A), and (iii) contain a
declaration that the partnership elects under § 743(e) to be treated as an EIP. If a
partnership has filed a return with respect
to a taxable year that includes October 22,
2004, and desires to elect to be treated
as an EIP for transfers after October 22,
2004, but did not attach a statement satisfying the requirements of this paragraph,
then the partnership must file an amended
return with a statement satisfying those
requirements.
For the election to be valid, the original or amended return must be filed not

2005–16 I.R.B.

later than six months after the time prescribed by § 1.6031(a)–1(e) of the Procedure and Administration Regulations (excluding extensions thereof) for filing the
return for the taxable year for which the
election is effective. Once an election is
made, it is effective for all succeeding taxable years, unless terminated or revoked,
as described below. In the case of an election filed for the partnership’s taxable year
that includes October 22, 2004, the election is effective for all transfers occurring
after October 22, 2004. In all other cases,
the election is effective for all transfers
during the partnership’s taxable year for
which the election is effective. A partnership that has an election under § 754
in effect is ineligible to make an election
to be treated as an EIP. If the partnership
is not otherwise required to file a partnership return, the election to be an EIP shall
be made in accordance with the rules of
§ 1.6031(a)–1(b)(5).
The election to be treated as an EIP
shall terminate if the partnership fails to
meet the definition of an EIP. In this case,
the partnership will become subject to the
mandatory basis adjustment rules with respect to the first transfer of a partnership
interest that occurs after the partnership
ceases to meet the definition of an EIP and
to each subsequent transfer. An EIP also
may terminate its election to be treated as
an EIP without the consent of the Commissioner by filing an election under § 754.
In this case, the partnership will become
subject to the mandatory basis adjustment
rules with respect to the first transfer of a
partnership interest that occurs after the effective date of the election under § 754.
In all other cases, except as provided in
future guidance, a partnership having an
election in effect to be treated as an EIP
may revoke the election only with the consent of the Commissioner. The application
for consent to revoke the election must be
submitted to the Service in the form of a
letter ruling request. If an election to be
treated as an EIP is terminated, any losses
that are subsequently allocated to a partner
to whom a partnership interest was transferred while the EIP election was in effect
shall remain subject to disallowance under
§ 743(e)(2).

Section 5. INTERIM REPORTING
REQUIREMENTS
A. Transferor Partner Required to Provide
Information to Transferee Partner and
Partnership
Until further guidance is provided, if a
partnership interest in an EIP is transferred
in a sale or exchange or upon the death of
a partner, the transferor (or, in the case of
a partner who dies, the partner’s executor,
personal representative, or other successor
in interest) must notify the transferee and
the EIP in writing. The notice must be
provided within 30 days after the date on
which the transferor partner (or the executor, personal representative or other successor in interest) receives Schedule K–1
from the EIP for the partnership’s taxable
year in which the transfer occurred (or, if
later, by May 19, 2005). The notice must
be signed under penalties of perjury and
must include (i) the name, address, and tax
identification number of the transferor, (ii)
the name, address, and tax identification
number of the transferee (if ascertainable),
(iii) the name of the partnership, (iv) the
date of the transfer (and, in the case of the
death of a partner, the date of the death of
the partner), (v) the amount of loss, if any,
recognized by the transferor on the transfer
of the interest, together with the computation of the loss, (vi) the amount of losses, if
any, recognized by any prior transferors to
the extent the losses were subject to disallowance under § 743(e)(2) in the hands of a
prior transferee and have not been offset by
prior loss disallowances under § 743(e)(2),
and (vii) any other information necessary
for the transferee to compute the amount
of loss disallowed under § 743(e)(2). If the
transferor is a nominee (within the meaning of § 1.6031(c)–1T), then the nominee,
and not the beneficial owner of the transferred interest, must supply the information to the transferee of the interest and to
the EIP.
The transferee and the EIP shall retain
the notice described in this Section 5.A as
long as the contents thereof may become
material in the administration of any internal revenue law.
B. Distributive Shares of Partnership
Items of EIP
Because the amount of losses disallowed under § 743(e) is determined with-

896

April 18, 2005

out regard to gains, an EIP is required to
separately state on Schedule K and K–1
of the partnership’s return (Form 1065) all
allocations of losses to all of its partners
under § 1.702–1(a)(8)(ii), including losses
that, in the absence of § 743(e), could
be netted against gains at the partnership
level. If a partnership has filed a return
with respect to a taxable year that includes
October 22, 2004, in which gain and losses
were not separately stated, the EIP must,
prior to the expiration of the period for
making an EIP election for that year, file
an amended return in which gains and
losses are separately stated. If a partnership’s election to be treated as an EIP is
terminated, the partnership must continue
to state such gains and losses separately
in future returns relating to any period
during which the partnership has one or
more transferee partners that are subject
to § 743(e)(2). If an EIP is not required
to file a partnership return, the transferee
of a partnership interest in the EIP may be
required to provide to the Service similar
information regarding the partner’s distributive share of gross gains and losses of
the EIP under § 1.6031(a)–1(b)(4).
C. Partnership Required to Provide
Annual Statements to Partners
Until further guidance is provided, an
EIP must provide the following statement
to all of its partners. The statement shall
be attached to every statement provided to
a partner or nominee under § 6031(b) that
is issued with respect to any taxable year
for which an election to be treated as an
EIP is in effect (whether or not the election is in effect for the entire taxable year).
If an EIP has provided statements under
§ 6031(b) with respect to a taxable year
that includes October 22, 2004, and elects
to be treated as an EIP for that year, but
did not include the statements required by
this section 5.C., then the EIP must provide
amended statements under § 6031(b), prior
to the expiration of the period for making
an EIP election for that year, which do include the required statements.
Notice of Election. This partnership
has elected to be treated as an electing
investment partnership under section
743(e) of the Internal Revenue Code.
Information for Transferors. If you
transfer an interest in this part-

April 18, 2005

nership to another person, Notice
2005–32, 2005–16 I.R.B. 895, provides that you must, within 30 days
after receiving a Schedule K–1 from
this partnership for the taxable year
that includes the date of the transfer,
provide the transferee with certain
information, including the amount,
if any, of loss that you recognized on
the transfer of the partnership interest, and the amount of losses, if any,
recognized by prior transferors with
respect to the same interest. See Notice 2005–32 for more information.
Information for Transferees. If an
interest in this partnership is transferred to you, section 743(e)(2) requires that you reduce your distributive share of losses from this
partnership, determined without regard to gains from this partnership,
to the extent of any losses recognized
by the transferor partner when that
partner transferred the partnership
interest to you (and to the extent
of other losses recognized on prior
transfers of the same partnership
interest that have not been offset
by prior loss disallowances). Each
year, you must reduce your share of
losses as reported to you by this partnership by the amount of any loss
recognized by the transferor partner
(or any prior transferor to the extent
not already offset by prior loss disallowances) until you have reduced
your share of partnership losses by
the total amount of losses required
to be disallowed. If the transferor
partner, or its legal representative
in the case of a transfer by death,
fails to provide you with the required
statement, you must treat all losses
allocated from the EIP as disallowed
under § 743(e)(2) unless you obtain,
from the EIP or otherwise, the information necessary to determine
the proper amount of losses disallowed under § 743(e)(2). See Notice
2005–32 for more information.
D. Effects of Failure to Notify Transferee
Partner
If the transferor partner, or its legal representative in the case of a transfer by
death, fails to provide the transferee part-

897

ner with the statement required by Section
5.A of this notice with respect to a transfer of an interest in the EIP, the transferee
partner must treat all losses allocated from
the EIP as disallowed under § 743(e)(2)
unless the transferee partner obtains, from
the EIP or otherwise, the information necessary to determine the proper amount of
losses disallowed under § 743(e)(2). If the
transferee does not have the information
necessary to determine the proper amount
of losses disallowed under § 743(e)(2), but
does have information sufficient to determine the maximum amount of losses that
could be disallowed, then the transferee
may treat the amount of losses disallowed
under § 743(e)(2) as being equal to that
maximum amount. For example, if the
transferee is able to ascertain the adjusted
basis that a prior transferor had in its partnership interest, but is not able to ascertain the amount realized by that transferor,
the transferee may assume, for purposes
of calculating the amount of losses disallowed under § 743(e)(2), that the sales
price when the prior transferor sold its interest was zero. If, following the filing of
a return pursuant to the previous sentence,
the transferor partner or the EIP provides
the required information to the transferee
partner, the transferee partner should make
appropriate adjustments in an amended return for the year of the loss allocation from
the EIP in accordance with § 6511 or other
applicable rules.
Section 6. CHARACTER OF LOSSES
DISALLOWED UNDER § 743(e)(2)
Until further guidance is issued, if
an EIP allocates losses with a different
character from the sale or exchange of
property to the transferee (such as ordinary or § 1231 losses and capital losses)
and the losses allocated to that partner are
limited by § 743(e)(2), then a proportionate amount of the losses disallowed under
§ 743(e)(2) shall consist of each loss of a
separate character that is allocated to the
transferee partner.
Section 7. TRADES OR BUSINESSES
OF LOWER-TIER PARTNERSHIPS
As noted above, a partnership that is
engaged in a trade or business, or that has
previously engaged in a trade or business,
is not eligible to elect to be treated as an

2005–16 I.R.B.

EIP. The Treasury Department and the
Service are studying the conditions under
which a partnership (“upper-tier partnership”) that holds interests in one or more
partnerships (“lower-tier partnerships”)
that are engaged in a trade or business
should be treated as engaged in a trade or
business.
Until further guidance is issued, an upper-tier partnership will not be treated as
engaged in the trade or business of a lowertier partnership if, at all times during the
period in which the upper-tier partnership
owns an interest in the lower-tier partnership, the adjusted basis of its interest in
the lower-tier partnership is less than 25
percent of the total capital that is required
to be contributed to the upper-tier partnership by its partners during the entire term
of the upper-tier partnership. This notice
does not address the situation in which the
upper-tier partnership’s adjusted basis in
its lower-tier partnership interest is, at any
time, 25 percent or more of the total capital that is required to be contributed to the
upper-tier partnership by its partners during the entire term of the upper-tier partnership.
The Treasury Department and the Service specifically request comments on
rules that may be appropriate for future
guidance. Factors that may be relevant in
future guidance in determining whether an
upper-tier partnership is treated as engaged
in a trade or business that is conducted by a
lower-tier partnership include (i) the relative amount of the upper-tier partnership’s
investment in the lower-tier partnership
as compared to the total capital that is
required to be contributed to the upper-tier
partnership by its partners during the entire term of the upper-tier partnership, (ii)
the degree to which the upper-tier partnership participates in the management of
the lower-tier partnership’s activities, and
(iii) the motivations for the formation of
the upper-tier partnership in making the
investments in the lower-tier partnership.
The Treasury Department and the Service may adopt rules in future guidance
that are more restrictive than the safe harbor provided for above. If a partnership
that qualifies as an EIP under the safe harbor does not qualify as an EIP under future
guidance, the partnership’s election to be
treated as an EIP will terminate for transfers occurring on or after the date on which
such future guidance becomes effective.

2005–16 I.R.B.

Section 8. EXAMPLES
A. Transfer of Partnership Interest
PRS is a partnership which does not have an election under § 754 in effect. PRS has no liabilities.
The fair market value of PRS’s assets is $4 million
and the adjusted basis of PRS’s assets is $4.3 million.
Under § 743(d), PRS has a substantial built-in loss
because the adjusted basis of the partnership property exceeds the fair market value of the partnership
property by more than $250,000. A, a partner of
PRS, sells a 25 percent partnership interest in PRS
to B for its fair market value of $1 million. Under
§ 743(b), an adjustment is required to the adjusted basis of PRS’s assets with respect to B. Under Section
3 of this notice, B must provide the written notice described in § 1.743–1(k)(2) to PRS within 30 days after
the sale, and PRS must attach the statement described
in § 1.743–1(k)(1) to the partnership return for the
year of the transfer.
B. Distribution of Partnership Property
A and B each contribute $2.5 million and C contributes $5 million to a newly formed partnership,
PRS, which does not have an election under § 754
in effect. PRS has no liabilities. PRS purchases LMN
stock for $3 million and XYZ stock for $7 million.
The value of each stock declines to $1 million. PRS
distributes LMN stock to C in complete liquidation of
C’s interest in PRS. Under § 732(b), the basis of LMN
stock in C’s hands is $5 million and C would recognize a loss of $4 million if the LMN stock were sold
for $1 million. There is a substantial basis reduction
within the meaning of § 734(d), because the $2 million increase in the adjusted basis of LMN stock (described in § 734(b)(2)(B)) is greater than $250,000.
Under § 734(b), PRS is required to decrease the basis
of XYZ stock by $2 million (the amount by which the
basis of LMN stock was increased), leaving a basis of
$5 million remaining in the XYZ stock. Under Section 3 of this notice, PRS must attach the statement
described in § 1.734–1(d) to the partnership return for
the year of the distribution.
C. EIP
(i) PRS is a domestic partnership with a calendar
year taxable year that desires to elect to be treated
as an EIP for 2004 and all succeeding taxable years.
PRS and all of its partners have a calendar year taxable year. PRS has no liabilities. Other than the making of the election, PRS meets all other requirements
to be an EIP under § 743(e)(6). PRS elects to be
treated as an EIP by attaching a statement to its income tax return for 2004 in accordance with Section
4 of this notice.
(ii) Between October 22 and December 31, 2004,
the only transfer of a partnership interest in PRS
occurred on November 30, 2004, when A transferred
a 10 percent partnership interest to C. The purchase
price for the 10 percent partnership interest was
$3,000,000. A’s adjusted basis in A’s partnership
interest on December 31, 2003, was $3,000,000.
In 2004, the partnership’s only items of income,
gain, loss, and deduction are $3 million of long-term
capital gain and $2 million of long-term capital loss.
Because PRS has elected to be treated as an EIP, PRS
must separately state this gain and loss on its return
in accordance with Section 5.B of this notice.
(iii) If A had remained a partner for the entire
year, A’s distributive share of the partnership’s items
would have been $300,000 of long-term capital gain

898

and $200,000 of long-term capital loss. Assume that
under § 706, A’s distributive share of these items
are properly determined to be 334/365 of each of
these amounts, or $274,521 of long-term capital
gain and $183,014 of long-term capital loss, and that
C’s distributive shares of these items are properly
determined to be 31/365 of each of these amounts,
or $25,479 of long-term capital gain and $16,986 of
long-term capital loss.
(iv) PRS must provide a statement to all of its
partners in accordance with Section 5.C of this notice. The statement must be attached to each partner’s
Schedule K–1 for PRS’s taxable year ending December 31, 2004. Assume that A receives A’s Schedule
K–1 on March 12, 2005. Within 30 days after receiving this Schedule K–1, A must provide statements to
C and EIP as described in Section 5.A of this notice.
(v) The adjusted basis in A’s partnership interest on November 30, 2004, $3,091,507, equals A’s
adjusted basis on December 31, 2003, $3,000,000,
plus A’s distributive share of partnership gain in 2004,
$274,521, less A’s distributive share of partnership
loss in 2004, $183,014. The amount of loss recognized by A on the sale of A’s partnership interest is
$91,507, which equals the adjusted basis in A’s partnership interest on the date of the sale, $3,091,507,
less the amount realized by A, $3,000,000. Thus,
the first $91,507 of gross loss allocated to C is disallowed under § 743(e)(2). The entire amount of C’s
long-term capital loss in 2004, $16,986, is disallowed
under § 743(e)(2). The first $74,521 of any gross loss
allocated to C in future years will also be disallowed
under § 743(e)(2), regardless of whether PRS is an
EIP in those future years.
(vi) C’s adjusted basis as of December 31, 2004,
is $3,025,479, the sum of C’s purchase price paid for
A’s interest, $3,000,000, plus the distributive share
of gain allocated to C, $25,479. Under § 743(e)(3),
the $16,986 loss allocated to C, but disallowed under
§ 743(e)(2), does not reduce the basis of C’s partnership interest.

Section 9. REQUEST FOR COMMENTS
The Treasury Department and the Service intend to issue further guidance implementing §§ 833 and 834 of the Act,
including guidance addressing the application of these provisions to tiered
partnership structures. Comments are requested concerning the scope and content
of this guidance. In particular, comments
are requested concerning the application
of these provisions to tiered partnerships
and the reporting obligations that should
be imposed on tiered partnerships and
their partners. As stated earlier, comments
are also requested on the rules provided in
Section 7 of this notice. Comments should
be submitted in writing on or before July
19, 2005, and should include a reference to Notice 2005–32. Comments may
be submitted to CC:PA:LPD:PR (Notice
2005–32), Room 5226, Internal Revenue
Service, PO Box 7604, Ben Franklin

April 18, 2005

Station, Washington, DC 20044. Alternatively, comments may be submitted electronically via the following e-mail address:
[email protected].
Please include “Notice 2005–32” in the
subject line of any electronic communications.
Submissions may be hand delivered
Monday through Friday between the hours
of 8 a.m. and 5 p.m. to CC:PA:LPD:PR
(Notice 2005–32), Courier’s Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW, Washington, DC 20224.
PAPERWORK REDUCTION ACT
The collections of information contained in this notice have 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 1545–1939.
An agency may not conduct or sponsor,
and a person is not required to respond

to, a collection of information unless the
collection of information displays a valid
OMB control number.
The collections of information in this
notice are in Sections 3, 4, and 5. This
information is required, and will be used,
to assure compliance with the new provisions of the American Jobs Creation Act of
2004. The collections of information are
required to obtain a benefit or are mandatory. The likely respondents are individuals and businesses or other for-profit institutions.
The estimated total annual reporting
burden and/or recordkeeping burden is
552,100 hours.
The estimated annual average burden
per respondent/recordkeeper varies from is
0.05 hours to 3 hours, depending on individual circumstances, with an estimated
average of 2.07 hours.
The estimated number of respondents
and/or recordkeepers is 266,400.

The estimated annual frequency of responses (used for reporting requirements
only) is various.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
DRAFTING INFORMATION
The principal author of this notice is
Sean I. Kahng of the Office of Associate
Chief Counsel (Passthroughs & Special Industries). However, other personnel from
the Treasury Department and the Service
participated in its development. For further information regarding this notice, contact Mr. Kahng at (202) 622–3050 (not a
toll-free call).

NOTE: This revenue procedure will be reproduced as IRS Publication 4436, General Rules and Specifications for Substitute
Form 941 and Schedule B (Form 941).

Rev. Proc. 2005–21
TABLE OF CONTENTS
SECTION 1 – PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 899
SECTION 2 – WHAT’S NEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900
SECTION 3 – GENERAL REQUIREMENTS FOR REPRODUCING IRS OFFICIAL FORM 941 AND
SCHEDULE B (FORM 941) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900
SECTION 4 – REPRODUCING FORM 941 AND SCHEDULE B (FORM 941) FOR SOFTWARE-GENERATED
PAPER FORMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 901
SECTION 5 – OMB REQUIREMENTS FOR SUBSTITUTE FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 901
SECTION 6 – REPRODUCIBLE COPIES OF FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 902
SECTION 7 – EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 902

Section 1 – Purpose
.01 The purpose of this publication is to provide general rules and specifications from the Internal Revenue Service (IRS) for
paper and computer-generated substitutes for the newly revised January 2005 version of Form 941, Employer’s Quarterly Federal Tax
Return, and Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors.
.02 This publication provides measurements and printing specifications for substitute Form 941 and Schedule B (Form 941). If
you need more in-depth information on who must complete the forms and how to complete them, see the Instructions for Form 941
and Publication 15 (Circular E), Employer’s Tax Guide, or visit the IRS website at www.irs.gov.
.03 Forms should not be submitted to the IRS for specific approval. If you are uncertain of any specification and want it clarified,
you may submit a letter citing the specification and your understanding of the specification, and enclose an example of the form (if
appropriate) to:

April 18, 2005

899

2005–16 I.R.B.