(a) through (b) [Reserved]. For further guidance, see §1.199-2(a) through (b).

(c) Acquisitions, dispositions, and short taxable years—(1) Allocation of wages between more than one taxpayer. For purposes of computing the section 199 deduction of a taxpayer, in the case of an acquisition or disposition (as defined in paragraph (c)(3)(i) of this section) of a trade or business (as defined in paragraph (c)(3)(ii) of this section) that causes more than one taxpayer to be an employer of the employees of the acquired or disposed of trade or business during the calendar year, the W-2 wages of the taxpayer for the calendar year of the acquisition or disposition are allocated between each taxpayer based on the period during which the employees of the acquired or disposed of trade or business were employed by the taxpayer, regardless of which permissible method is used for reporting W-2 wages on Form W-2, “Wage and Tax Statement.” For this purpose, the period of employment is determined consistently with the principles for determining whether an individual is an employee described in §1.199-2(a)(1).

(2) Short taxable years. If a taxpayer has a short taxable year that does not contain a calendar year ending during such short taxable year, wages paid to employees for employment by such taxpayer during the short taxable year are treated as W-2 wages for such short taxable year for purposes of §1.199-2(a)(1) (if the wages would otherwise meet the requirements to be W-2 wages under §1.199-2 but for the requirement that a calendar year must end during the short taxable year).

(3) Operating rules—(i) Acquisition or disposition. For purposes of this paragraph (c), the term acquisition or disposition includes an incorporation, a formation, a liquidation, a reorganization, or a purchase or sale of assets.

(ii) Trade or business. For purposes of this paragraph (c), the term trade or business includes a trade or business, the major portion of a trade or business, or the major portion of a separate unit of a trade or business.

(iii) Application to section 199 only. The provisions of this section apply solely for purposes of section 199 of the Internal Revenue Code.

(d) through (e) [Reserved]. For further guidance, see §1.199-2(d) through (e).

[T.D. 9731, 80 FR 51941, Aug. 27, 2015]