SUPPORTING STATEMENT
(REG 149524-03)

1.	 CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION

This collection of information is required to inform the IRS of partnerships electing to increase the basis of inventory to reflect any amount included in a partner’s income under section 1363(d).

2.	USE OF DATA              

The IRS to determine when a partnership elects to increase the basis of inventory to reflect any amount included in a partner’s income under section 1363(d).  
               
3.	USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN

We have no plans to offer electronic filing.  IRS publication, regulations, notices and letters are to be electronically enabled on an as practicable basis in accordance with the IRS Reform and Restructuring Act of 1998.	

4.	EFFORTS TO IDENTIFY DUPLICATION

We have attempted to eliminate duplication within the agency wherever possible.  

5.	METHODS TO MINIMIZE BURDEN ON SMALL BUSINESSES OR OTHER       SMALL ENTITIES

Not applicable.

6.	CONSEQUENCES OF LESS FREQUENT COLLECTION ON FEDERAL PROGRAMS OR POLICY ACTIVITIES

Not applicable.

7.	SPECIAL CIRCUMSTANCES REQUIRING DATA COLLECTION TO BE     INCONSISTENT WITH GUIDELINES IN 5 CFR 1320.5(d)(2)

Not applicable.

8.	CONSULTATION WITH INDIVIDUALS OUTSIDE OF THE AGENCY ON     AVAILABILITY OF DATA, FREQUENCY OF COLLECTION, CLARITY     OF INSTRUCTIONS AND FORMS, AND DATA ELEMENTS

The notice of proposed rulemaking was published in the Federal Register on August 13, 2004 (69 FR 50109).  A public hearing was held on December 8, 2004.  The final regulations were published in the Federal Register on July 12, 2005 (70 FR 39920).
In response to the Federal Register notice dated April 19, 2007 (72 FR 19767), we received no comments during the comment period regarding Regulation 149524-03.

9.	 EXPLANATION OF DECISION TO PROVIDE ANY PAYMENT OR GIFT TO     RESPONDENTS

Not applicable.

10.	ASSURANCE OF CONFIDENTIALITY OF RESPONSES

Generally, tax returns and tax return information are confidential as required by 26 USC 6103.

11.	JUSTIFICATION OF SENSITIVE QUESTIONS

Not applicable.

12.	ESTIMATED BURDEN OF INFORMATION COLLECTION

The collection of information in this proposed regulation is in §1.1363-2(e)(3).  This information is required to inform the IRS of partnerships electing to increase the basis of inventory to reflect any amount included in a partner’s income under section 1363(d).  Taxpayers elect to adjust the basis of their inventory and any look through partnership interest that it owns by attaching a statement to its original or amended income tax return for the first taxable year ending on or after the date of the S corporation election or transfer.  It is estimated that 100 taxpayers will submit a statement of election.  The estimated burden per respondent varies from 1 to 3 hours, with an estimated average of 2 hours.  The estimated annual reporting burden is 200 hours.

Estimates of the annualized cost to respondents for the hour burdens shown are not available at this time.

13.	ESTIMATED TOTAL ANNUAL COST BURDEN TO RESPONDENTS

As suggested by OMB, our Federal Register Notice dated  April 19, 2007 (72 FR 19767), requested public comments on estimates of cost burden that are not captured in the estimates of burden hours, i.e., estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.  However, we did not receive any response from taxpayers on this subject. As a result, estimates of the cost burdens are not available at this time.

14.	ESTIMATED ANNUALIZED COST TO THE FEDERAL GOVERNMENT

Not applicable.

15.	REASONS FOR CHANGE IN BURDEN

There is no change in the paperwork burden previously approved by OMB.  We are making this submission to renew the OMB approval.               

16.	PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION

Not applicable.

17.	REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS      INAPPROPRIATE

We believe that displaying the OMB expiration date is inappropriate because it could cause confusion by leading taxpayers to believe that the regulations sunset as of the expiration date.  Taxpayers are not likely to be aware that the Service intends to request renewal of the OMB approval and obtain a new expiration date before the old one expires.

18.	EXCEPTIONS TO THE CERTIFICATION STATEMENT ON OMB FORM 83-I

Not applicable.

Note:   The following paragraph applies to all of the collections of information in this submission:

	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.  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.