Statutory Mergers and Consolidations, 23855 [06-3886]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 71, Number 79 (Tuesday, April 25, 2006)]
[Rules and Regulations]
[Page 23855]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-3886]



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Federal Register / Vol. 71, No. 79 / Tuesday, April 25, 2006 / Rules 
and Regulations

[[Page 23855]]



DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9259]
RIN 1545-BF36


Statutory Mergers and Consolidations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document amends final regulations concerning statutory 
mergers and consolidations under section 368(a)(1)(A) of the Internal 
Revenue Code. These regulations affect corporations engaging in 
statutory mergers and consolidations, and their shareholders. This 
amendment provides transitional relief for certain transactions 
initiated before January 23, 2006.

DATES: Effective Date: These regulations are effective January 23, 
2006.
    Applicability Date: For dates of applicability, see Sec.  1.368-
2(b)(1)(v).

FOR FURTHER INFORMATION CONTACT: Richard M. Heinecke, (202) 622-7930 
(not a toll free-number).

SUPPLEMENTARY INFORMATION: 

Background

    The IRS and Treasury Department published final regulations (TD 
9242) in the Federal Register on January 26, 2006 (71 FR 4259) 
concerning statutory mergers and consolidations under section 
368(a)(1)(A) of the Internal Revenue Code. These regulations, Sec.  
1.368-2(b), generally apply to transactions occurring on or after 
January 23, 2006. Temporary regulations, Sec.  1.368-2T(b), generally 
applied to transactions occurring in the three years preceding that 
date (see Sec.  1.368-2T as contained in 26 CFR part 1, revised April 
1, 2005).
    This amendment provides transitional relief for certain 
transactions initiated before January 23, 2006. Parties to transactions 
within the scope of the relief may elect to apply the prior temporary 
regulations instead of the new final regulations. Certain parties must 
adopt consistent treatment to obtain this relief. This election 
requirement will be satisfied if none of the specified parties adopts 
inconsistent treatment.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. This Treasury 
decision provides certain taxpayers with an alternative means of 
compliance with respect to section 368(a)(1)(A). Accordingly, it has 
been determined, pursuant to 5 U.S.C. 553(b)(B), that prior notice and 
public procedure is unnecessary and contrary to the public interest. 
For this reason, it has also been determined, pursuant to 5 U.S.C. 
553(d)(1) and (3), that a delayed effective date is not required. 
Because no notice of proposed rulemaking is required, the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to 
section 7805(f) of the Internal Revenue Code, these regulations were 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Drafting Information

    The principal author of these final regulations is Richard M. 
Heinecke of the Office of the Associate Chief Counsel (Corporate). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read, in 
part, as follows:

    Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.368-2 is amended by revising paragraph (b)(1)(v) to 
read as follows:


Sec.  1.368-2  Definition of terms.

* * * * *
    (b)(1) * * *
    (v) Effective date--(A) In general. This paragraph (b)(1) applies 
to transactions occurring on or after January 23, 2006. For rules 
regarding statutory mergers or consolidation occurring before January 
23, 2006, see Sec.  1.368-2T as contained in 26 CFR part 1, revised 
April 1, 2005, and Sec.  1.368-2(b)(1) as in effect before January 24, 
2003 (see 26 CFR part 1, revised April 1, 2002).
    (B) Transitional rule. A taxpayer may elect to apply the provisions 
of Sec.  1.368-2T(b) as contained in 26 CFR part 1, revised April 1, 
2005 (the temporary regulations), instead of the provisions of this 
paragraph (b), to a transaction that occurs on or after January 23, 
2006, pursuant to a written agreement which is (subject to customary 
conditions) binding on January 22, 2006, and at all times thereafter, 
or pursuant to a tender offer announced prior to January 23, 2006. 
However, the combining entity of the transferor unit, the combining 
entity of the transferee unit, any controlling corporation of the 
combining entity of the transferee unit if stock thereof is provided as 
consideration in the transaction, and any direct or indirect transferee 
of transferred basis property from any of the foregoing, may not elect 
to apply the provisions of the temporary regulations unless all such 
taxpayers elect to apply the provisions of the temporary regulations.
* * * * *

Cono R. Namorato,
Acting Deputy Commissioner for Services and Enforcement.
    Approved: April 17, 2006.
Eric Solomon,
Acting Deputy Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 06-3886 Filed 4-24-06; 8:45 am]
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