The temporary regulations (T.D. 9286) that is the subject of this document is under section 45G of the Internal Revenue Code.

As published, the temporary regulations (T.D. 9286) contain errors that may prove to be misleading and are in need of clarification.

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Accordingly, 26 CFR parts 1 and 602 are corrected by making the following correcting amendments:

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

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

Par. 2. Section 1.45G-0T is amended by removing the entry for § 1.45G-1T(e) and (e)(2) and redesignating the entries for § 1.45G-1T(e)(1) and § 1.45G-1T(e)(1)(i), (ii) and (iii) as the entries for (e), (e)(1), (e)(2) and (e)(3) respectively.

Par. 3. Section 1.45G-1T is amended by:

1. Removing paragraph (e)(2);

2. Redesignating paragraphs (e)(1)(i), (e)(1)(ii), and (e)(1)(iii) as paragraphs (e)(1), (e)(2), and (e)(3), respectively;

3. Revising paragraph (a), sixth sentence, paragraph (b)(9), paragraph (d)(6) Example 2.(ii), last sentence, paragraph headings (e), (e)(1), (e)(2) and (e)(3), paragraph (e)(2), second and fifth sentences, paragraph (e)(3), first sentence, Example 1.(i), third sentence, Example 1.(iii), second sentence, Example 2.(iii), fourth sentence, and paragraph (g)(3). The revisions read as follows:

(a) * * * Paragraph (e) of this section contains rules for adjusting basis for the amount of the RTMC claimed by an eligible taxpayer. * * *

(b) * * *

(9) Except as provided in paragraph (e)(2) of this section, railroad track is property described in STB property accounts 8 (ties), 9 (rails and other track material), and 11 (ballast) in 49 CFR part 1201, subpart A.

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(d) * * *

(6) * * *

Example 2. * * *

(ii) * * * Because O’s tentative amount of RTMC does not exceed O’s credit limitation amount for the taxable year ending March 31, 2007, O may claim a RMTC for the taxable year ending March 31, 2007, in the amount of $75,000.

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(e) Adjustments to basis— * * *

(1) In general. * * *

(2) Basis adjustment made to railroad track. * * * For purposes of section 45G(e)(3) and this paragraph (e)(2), the adjusted basis of any railroad track with respect to which the eligible taxpayer claims the RTMC is limited to the amount of QRTME, if any, that is required to be capitalized into the qualifying railroad structure or an intangible asset. * * * If all or some of the QRTME paid or incurred by an eligible taxpayer during the taxable year is capitalized under section 263(a) to more than one asset, whether tangible or intangible (for example, railroad track and bridges), the reduction to the basis of these assets under this paragraph (e)(2) is allocated among each of the assets subject to the reduction in proportion to the unadjusted basis of each asset at the time the QRTME is paid or incurred during that taxable year.

(3) Examples. The application of this paragraph (e) is illustrated by the following examples. * * *

Example 1. * * *

(i) * * * X uses the track maintenance allowance method for track structure expenditures (for further guidance, see Rev. Proc. 2002-65, 2002-2 C.B. 700, and § 601.601(d)(2)(ii)(b) of this chapter). * * *

(iii) * * * In accordance with paragraph (e)(2) of this section, X reduces the capitalized amount of $250,000 by the RTMC of $500,000 claimed by X for 2006, but not below zero. * * *

Example 2. * * *

(iii) * * * In accordance with paragraph (e)(2) of this section, Z reduces the capitalized amount of $1 million by the RTMC of $500,000 claimed by Z for 2006. * * *

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(g) * * *

(3) Special rules for 2005 returns. If a taxpayer’s Federal income tax return for a taxable year beginning after December 31, 2004, and ending before September 7, 2006, is filed before October 10, 2006, and the taxpayer is not filing an amended Federal income tax return for that taxable year pursuant to paragraph (g)(2) of this section before the taxpayer’s next filed original Federal income tax return, see paragraphs (d)(4)(iv) and (f)(7) of this section for the statements that must be attached to the taxpayer’s next filed original Federal income tax return.

Par. 4. The authority citation for part 602 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 5. In § 602.101, paragraph (b) is amended by revising the following entry in to the table to read as follows:

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(b) * * *