This document contains a temporary regulation that provides the time and manner for making an election to treat the sale or exchange of musical compositions or copyrights in musical works created by the taxpayer (or received by the taxpayer from the works' creator in a transferred basis transaction) as the sale or exchange of a capital asset. The regulation reflects changes to the law made by the Tax Increase Prevention and Reconciliation Act of 2005 and the Tax Relief and Health Care Act of 2006. The regulation affects taxpayers making the election under section 1221(b)(3) of the Internal Revenue Code (Code) to treat gain or loss from such a sale or exchange as capital gain or loss. The text of this temporary regulation also serves as the text of the proposed regulation (REG-153589-06) set forth in the Proposed Rules section of this issue of the Federal Register.