Guidance Necessary to Facilitate Business Electronic Filing and Burden Reduction, 30591-30608 [06-4873]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 71, Number 103 (Tuesday, May 30, 2006)]
[Rules and Regulations]
[Pages 30591-30608]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-4873]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 9264]
RIN 1545-BF26


Guidance Necessary to Facilitate Business Electronic Filing and 
Burden Reduction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: These regulations affect taxpayers that file Federal income 
tax returns. They simplify, clarify, or eliminate reporting burdens and 
also eliminate regulatory impediments to the electronic filing of 
certain statements that taxpayers are required to include on or with 
their Federal income tax returns. The text of the temporary regulations 
also serves as the text of the proposed regulations set forth in the 
notice of proposed rulemaking on this subject in the Proposed Rules 
section in this issue of the Federal Register.

DATES: Effective Date: These regulations are effective on May 30, 2006.
    Applicability Date: For dates of applicability, see Sec. Sec.  
1.302-2T(d), 1.302-4T(h), 1.331-1T(f), 1.332-6T(e), 1.338-10T(c), 
1.351-3T(f), 1.355-5T(e), 1.368-3T(e), 1.381(b)-1T(e), 1.382-8T(j)(4), 
1.382-11T(b), 1.1081-11T(f), 1.1221-2T(j), 1.1502-13T(m), 1.1502-
31T(j), 1.1502-32T(j), 1.1502-33T(k), 1.1502-35T(k), 1.1502-76T(d), 
1.1502-95T(g), 1.1563-1T(e), 1.1563-3T(e) and 1.6012-2T(k). The 
applicability of these regulations will expire on May 26, 2009.

FOR FURTHER INFORMATION CONTACT: Grid Glyer, (202) 622-7930 (not a 
toll-free number).

SUPPLEMENTARY INFORMATON:

Paperwork Reduction Act

    These temporary regulations are being issued without prior notice 
and public procedure pursuant to the Administrative Procedure Act (5 
U.S.C. 553). For this reason, the collection of information contained 
in these regulations has been reviewed and, pending receipt and 
evaluation of public comments, approved by the Office of Management and 
Budget under control number 1545-2019. Responses to this collection of 
information are mandatory.
    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 control number.
    For further information concerning this collection of information, 
and where to submit comments on the collection of information and the 
accuracy of the estimated burden, and suggestions for reducing this 
burden, please refer to the preamble to the cross-referencing notice of 
proposed rulemaking published in the Proposed Rules section of this 
issue of the Federal Register.
    Books and 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.

Background

    This Treasury Decision amends Treasury regulations under sections 
279, 302, 331, 332, 338, 351, 355, 368, 381, 382, 1081, 1221, 1502, 
1563, and 6012 of the Internal Revenue Code (Code) that require 
taxpayers to include a statement on or with their Federal income tax 
returns. In some cases, these statements are the method by which 
taxpayers elect (or elect out of) a particular income tax treatment. In 
other cases, these statements are the method by which taxpayers report 
that they undertook a particular type of transaction. In both cases, 
these regulations often require taxpayers to include detailed amounts 
of information in these statements, or do

[[Page 30592]]

not clearly specify the required information.
    In addition, many of these regulations present impediments that 
prevent corporate taxpayers from submitting these statements as part of 
an electronically filed Federal income tax return (e-filing). Some of 
these regulations, for example, impede e-filing by requiring taxpayers 
to sign a statement and include it on or with the taxpayer's income tax 
return. Others require a taxpayer to include third-party signatures on 
such statements or require taxpayers to attach documents, or 
information supplied by a third party.

Explanation of Provisions

1. Reporting Requirements That Were Simplified, Clarified, or 
Eliminated

A. Regulations for Which the Reporting Requirements Were Simplified or 
Clarified
    Some regulations require a taxpayer to include a statement on or 
with its return if it undertakes certain types of transactions. In some 
cases, these regulations require the taxpayer to submit detailed 
information about the particular transaction with its return. In other 
cases, the scope of the reporting requirement was unclear. The IRS and 
Treasury Department believe that it is not useful to require taxpayers 
to attach all of this information to their returns. Accordingly, these 
regulations simplify and clarify the reporting requirements under 
several provisions.
B. Regulations for Which the Reporting Requirements Were Eliminated
    Some regulations require that all shareholders and security holders 
that receive stock or securities in certain distributions or exchanges 
file statements providing information about that distribution or 
exchange. See, e.g., Sec. Sec.  1.355-5(b) and 1.368-3(b). The IRS and 
Treasury Department have determined that for most shareholders and 
security holders these statements are no longer necessary. Accordingly, 
these temporary regulations only require that a ``significant holder'' 
file such statement. In the case of stock, a significant holder is a 
holder of stock of a corporation if at the time of the distribution or 
exchange such holder owns at least: (1) 5% (by vote or value) of the 
total outstanding stock of such corporation if the stock owned by such 
holder is publicly traded, or (2) 1% (by vote or value) of the total 
outstanding stock of such corporation if the stock owned by such holder 
is not publicly traded. See, e.g., Sec. Sec.  1.355-5T(b) and 1.368-
3T(b). These regulations use the definition of publicly traded stock 
found elsewhere in the regulations. See, e.g., Sec. Sec.  1.1092(d)-
1(b), 1.1273-2(f) and 54.4975-7(b)(1)(iv).
    In the case of securities, a significant holder is a holder of 
securities of a corporation if at the time of the distribution or 
exchange such holder owns securities with a basis of $1,000,000 or 
more.

2. Regulations That Present Impediments to E-filing

    As described in this preamble in paragraphs 2.A. and 2.B., certain 
regulations impose reporting requirements that are impediments to e-
filing. The IRS and Treasury Department are issuing these temporary 
regulations to eliminate such impediments without altering the 
substantive requirements of the current regulations.
A. Statements Required To Be Signed by the Taxpayer
    Some regulations require a taxpayer to include a statement on or 
with its return in order to make an election, or notify the IRS that 
the taxpayer is undertaking a transaction authorized by that provision. 
In the case of elections, the current regulations often require the 
taxpayer to sign such statement. In these circumstances, the 
requirement that the taxpayer sign the statement is an impediment to e-
filing and superfluous. By signing the return, a taxpayer is attesting 
to the validity of the Form 1120 as well as all of the attachments. 
Accordingly, for these types of statements, the underlying regulations 
are amended to eliminate the requirement that such statements be 
signed.
B. Statements Required To Be Signed by Both the Taxpayer and a Third 
Party
    Some regulations require that the taxpayer and another person sign 
a statement, and that the taxpayer include such jointly signed 
statement on or with its return. In some cases, the taxpayer is 
required to provide a copy of this statement, or other information, to 
the other person and that person is required to include such copy or 
information on or with its return.
    These requirements are impediments to e-filing. However, in such 
cases, the joint signature requirement cannot simply be eliminated 
because, in the absence of that requirement, the taxpayer and the other 
person might take inconsistent positions. Therefore, these regulations 
amend the provisions with a joint signature requirement to require the 
taxpayer and the other person to include a statement on or with its 
return indicating that it has entered into an agreement with the other 
party addressing the substantive matters covered by the statement 
required under the current regulations. These agreements will contain 
the same information as the jointly signed statements required by the 
current regulations. Each party will be required to retain either the 
original or a copy of this agreement as part of its records. See Sec.  
1.6001-1(e).
C. Section 1561
    Section 1561(a) provides that the component members of a controlled 
group of corporations are limited to using the amounts of the tax 
benefit items described therein in the same manner as if they were one 
corporation. Section 1561(a) generally provides that such amounts shall 
be divided equally among such members. However, section 1561(a) also 
provides that if such members adopt an apportionment plan, they are 
then permitted to allocate such amounts among themselves unequally. 
Section 1.1561-3(b) provides the mechanism by which such members may 
consent to an apportionment plan.
    Section 1.1561-3(b) presents impediments to e-filing. However, the 
IRS and Treasury Department have determined that these impediments 
cannot be eliminated without also addressing certain substantive issues 
present in these regulations. Addressing these issues is beyond the 
scope of this project. Therefore, these issues will be addressed in 
separate guidance that the IRS and Treasury Department expect to 
publish later this year.

3. Requirement That Taxpayers Provide the Fair Market Value and Basis 
of Assets or Stock

    Certain of these regulations require taxpayers to provide in their 
reporting statement the fair market value and basis of assets or stock 
distributed or exchanged in a transaction. The IRS and Treasury 
Department recognize that, in some cases, a taxpayer may not 
conveniently be able to provide a precise valuation of property 
exchanged or distributed in a transaction that is not taxable in the 
current year. In those cases, for the purposes of these statements, the 
IRS and Treasury Department will accept a taxpayer's good faith 
estimate of such fair market value.
    Similarly, the IRS and Treasury Department recognize that there are 
occasionally situations where a taxpayer may not be able to precisely 
determine its basis in a taxable year in which that basis would not be 
relevant to determining the taxpayer's taxable income. As in the case 
of fair market value, for purposes of these statements,

[[Page 30593]]

the IRS and Treasury Department will in these situations accept a 
taxpayer's good faith estimate of such basis.

4. Election To Restore Value Under Sec.  1.382-8

    In the case of a controlled group of corporations, Sec.  1.382-8 
provides that, for purposes of determining the section 382 limitation, 
the value of the stock of each component member of the controlled group 
of which the loss corporation is a component member on the change date 
must be reduced by the value of the stock of any other component member 
that such component member directly owns immediately after an ownership 
change. However, the component member's value may be increased by the 
amount of value that such other component member elects to restore.
    The IRS and Treasury Department are aware that taxpayers generally 
elect to restore value from component members that are foreign 
corporations. The IRS and Treasury Department are also aware that 
taxpayers occasionally fail to make the election timely and must file a 
request for relief under Sec.  301.9100-1. Therefore, to reduce 
unnecessary elections and section 9100 requests, Sec.  1.382-8T(h)(2) 
will deem foreign component members to elect to restore full value to 
other component members under Sec.  1.382-8. Nevertheless, should such 
members not wish to restore the full amount of such value, they may 
elect not to restore all or part of such value. Further, a foreign 
component member that has items treated as connected with the conduct 
of a trade or business in the United States that it takes into account 
in determining its value under section 382(e)(3) is not subject to this 
deemed election.
    The IRS and Treasury Department request comments regarding the 
scope and application of this deemed election to restore value.

5. Recordkeeping Requirement

    The IRS and Treasury Department emphasize that although the amount 
of information that a taxpayer is required to include on or with its 
return has, in most cases, decreased, the taxpayer's recordkeeping 
requirement remains unchanged. Certain of these regulations illustrate 
the type of information taxpayers are recommended to keep in order to 
substantiate their reporting position.

6. Rev. Proc. 2006-21

    Contemporaneously with the issuance of these temporary regulations, 
the IRS and Treasury Department are releasing Rev. Proc. 2006-21 to 
remove e-filing impediments and reduce reporting requirements currently 
found in Rev. Proc. 89-56, 1989-2 C.B. 643, Rev. Proc. 90-39, 1990-2 
C.B. 365, and Rev. Proc. 2002-32, 2002-1 C.B. 959. Each revenue 
procedure provides a method for consolidated taxpayers to request a 
specified consent or waiver from the Commissioner without submitting a 
request for a private letter ruling. In particular, Rev. Proc. 89-56 
permits taxpayers to request a consent to use a 52-53 week tax year, 
Rev. Proc. 90-39 permits taxpayers to request a consent to change the 
method for allocating tax liability to members for earnings and profits 
purposes, and Rev. Proc. 2002-32 permits taxpayers to request a waiver 
of the 60-month limitation on reconsolidation.

7. Section 1.1502-35

    These regulations also include a revision to Sec.  1.1502-35 that 
is not related to electronic filing or reporting requirements. The 
revision corrects an error in the determination of the time period 
during which suspended losses are reduced under that section. 
Specifically, these regulations provide that this time period ends on 
the day before the first date on which the subsidiary (and any 
successor) is not a member of the group.

Special Analysis

    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. For the 
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), 
refer to the Special Analyses section of the preamble to the cross-
reference notice of proposed rulemaking published in the Proposed Rules 
section in this issue of the Federal Register. Pursuant to section 
7805(f) of the Code, these temporary regulations will be 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 regulations is Grid Glyer, Office of 
Associate Chief Counsel (Corporate). However, other personnel from the 
IRS and Treasury Department participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding 
entries in numerical order to read, in part, as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.338-10T also issued under 26 U.S.C. 338.* * *
    Section 1.1221-2T also issued under 26 U.S.C. 1502.* * *
    Section 1.1502-13T also issued under 26 U.S.C. 1502.* * *
    Section 1.1502-31T also issued under 26 U.S.C. 1502.* * *
    Section 1.1502-32T also issued under 26 U.S.C. 1502.* * *
    Section 1.1502-33T also issued under 26 U.S.C. 1502.* * *
    Section 1.1502-35T also issued under 26 U.S.C. 1502.* * *
    Section 1.1502-76T also issued under 26 U.S.C. 1502.* * *
    Section 1.1502-95T also issued under 26 U.S.C. 1502.* * *


0
Par. 2. Section 1.279-5 is amended by removing paragraph (h).

0
Par. 3. Section 1.302-2 is amended by:
0
1. Redesignating paragraph (b) as paragraph (b)(1).
0
2. Revising newly designated paragraph (b)(1).
0
3. Adding paragraphs (b)(2) and (d).
    The additions and revisions read as follows:


Sec.  1.302-2  Redemptions not taxable as dividends.

* * * * *
    (b)(1) The question whether a distribution in redemption of stock 
of a shareholder is not essentially equivalent to a dividend under 
section 302(b)(1) depends upon the facts and circumstances of each 
case. One of the facts to be considered in making this determination is 
the constructive stock ownership of such shareholder under section 
318(a). All distributions in pro rata redemptions of a part of the 
stock of a corporation generally will be treated as distributions under 
section 301 if the corporation has only one class of stock outstanding. 
However, for distributions in partial liquidation, see section 302(e). 
The redemption of all of one class of stock (except section 306 stock) 
either at one time or in a series of redemptions generally will be 
considered as a distribution under section 301 if all

[[Page 30594]]

classes of stock outstanding at the time of the redemption are held in 
the same proportion. Distributions in redemption of stock may be 
treated as distributions under section 301 regardless of the provisions 
of the stock certificate and regardless of whether all stock being 
redeemed was acquired by the stockholders from whom the stock was 
redeemed by purchase or otherwise.
    (2) [Reserved]. For further guidance, see Sec.  1.302-2T(b)(2).
* * * * *
    (d) [Reserved]. For further guidance, see Sec.  1.302-2T(d)(1).

0
Par. 4. Section 1.302-2T is added to read as follows:


Sec.  1.302-2T  Redemptions not taxable as dividends (temporary).

    (a) through (b)(1) [Reserved]. For further guidance, see Sec.  
1.302-2(a) through (b)(1).
    (2) Unless paragraph (d) of Sec.  1.331-1T applies, every 
significant holder that transfers stock to the issuing corporation in 
exchange for property from such corporation must include on or with 
such holder's return for the taxable year of such exchange a statement 
entitled, ``STATEMENT PURSUANT TO Sec.  1.302-2T(b)(2) BY [INSERT NAME 
AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT 
HOLDER OF THE STOCK OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER 
(IF ANY) OF ISSUING CORPORATION].'' If a significant holder is a 
controlled foreign corporation (within the meaning of section 957), 
each United States shareholder (within the meaning of section 951(b)) 
with respect thereto must include this statement on or with its return. 
The statement must include--
    (i) The fair market value and basis of the stock transferred by the 
significant holder to the issuing corporation; and
    (ii) A description of the property received by the significant 
holder from the issuing corporation.
    (3) Definitions. For purposes of this section:
    (i) Significant holder means any person that, immediately before 
the exchange--
    (A) Owned at least five percent (by vote or value) of the total 
outstanding stock of the issuing corporation if the stock owned by such 
person is publicly traded; or
    (B) Owned at least one percent (by vote or value) of the total 
outstanding stock of the issuing corporation if the stock owned by such 
person is not publicly traded.
    (ii) Publicly traded stock means stock that is listed on--
    (A) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (B) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).
    (iii) Issuing corporation means the corporation that issued the 
shares of stock, some or all of which were transferred by a significant 
holder to such corporation in the exchange described in paragraph 
(b)(2) of this section.
    (4) Cross reference. See section 6043 of the Code for requirements 
relating to a return by a liquidating corporation.
    (c) [Reserved]. For further guidance, see Sec.  1.302-2(c).
    (d) Effective date--(1) Applicability date. This section applies to 
any original Federal income tax return (including any amended return 
filed on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006.
    (2) Expiration date. The applicability of this section will expire 
on May 26, 2009.

0
Par. 5. Section 1.302-4 is amended by revising paragraph (a) and adding 
paragraph (h) to read as follows:


Sec.  1.302-4  Termination of shareholder's interest.

    (a) [Reserved]. For further guidance, see Sec.  1.302-4T(a).
* * * * *
    (h) [Reserved]. For further guidance, see Sec.  1.302-4T(h)(1).
0
Par. 6. Section 1.302-4T is added to read as follows:


Sec.  1.302-4T  Termination of shareholder's interest (temporary).

    (a) The agreement specified in section 302(c)(2)(A)(iii) shall be 
in the form of a statement entitled, ``STATEMENT PURSUANT TO SECTION 
302(c)(2)(A)(iii) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER 
(IF ANY) OF TAXPAYER OR RELATED PERSON, AS THE CASE MAY BE], A 
DISTRIBUTEE (OR RELATED PERSON) OF [INSERT NAME AND EMPLOYER 
IDENTIFICATION NUMBER (IF ANY) OF DISTRIBUTING CORPORATION].'' The 
distributee must include such statement on or with the distributee's 
first return for the taxable year in which the distribution described 
in section 302(b)(3) occurs. If the distributee is a controlled foreign 
corporation (within the meaning of section 957), each United States 
shareholder (within the meaning of section 951(b)) with respect thereto 
must include this statement on or with its return. The distributee must 
represent in the statement--
    (1) THE DISTRIBUTEE (OR RELATED PERSON) HAS NOT ACQUIRED, OTHER 
THAN BY BEQUEST OR INHERITANCE, ANY INTEREST IN THE CORPORATION (AS 
DESCRIBED IN SECTION 302(c)(2)(A)(i)) SINCE THE DISTRIBUTION; and
    (2) THE DISTRIBUTEE (OR RELATED PERSON) WILL NOTIFY THE INTERNAL 
REVENUE SERVICE OF ANY ACQUISITION, OTHER THAN BY BEQUEST OR 
INHERITANCE, OF SUCH AN INTEREST IN THE CORPORATION WITHIN 30 DAYS 
AFTER THE ACQUISITION, IF THE ACQUISITION OCCURS WITHIN 10 YEARS FROM 
THE DATE OF THE DISTRIBUTION.
    (b) through (g) [Reserved]. For further guidance, see Sec.  1.302-
4(b) through (g).
    (h) Effective date--(1) Applicability date. This section applies to 
any original Federal income tax return (including any amended return 
filed on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006.
    (2) Expiration date. The applicability of this section will expire 
on May 26, 2009.

0
Par. 7. Section 1.331-1 is amended by revising paragraph (d) and adding 
paragraph (f) to read as follows:


Sec.  1.331-1  Corporate liquidations.

* * * * *
    (d) [Reserved]. For further guidance, see Sec.  1.331-1T(d).
* * * * *
    (f) [Reserved]. For further guidance, see Sec.  1.331-1T(f)(1).

0
Par. 8. Section 1.331-1T is added to read as follows:


Sec.  1.331-1T  Corporate liquidations (temporary).

    (a) through (c) [Reserved]. For further guidance, see Sec.  1.331-
1(a) through (c).
    (d) Reporting requirement-- (1) General rule. Every significant 
holder that transfers stock to the issuing corporation in exchange for 
property from such corporation must include on or with such holder's 
return for the year of such exchange the statement described in 
paragraph (d)(2) of this section unless--
    (i) The property is part of a distribution made pursuant to a 
corporate resolution reciting that the distribution is made in complete 
liquidation of the corporation; and
    (ii) The issuing corporation is completely liquidated and dissolved 
within one year after the distribution.

[[Page 30595]]

    (2) Statement. If required by paragraph (d)(1) of this section, a 
significant holder must include on or with such holder's return a 
statement entitled, ``STATEMENT PURSUANT TO Sec.  1.331-1T(d) BY 
[INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], 
A SIGNIFICANT HOLDER OF THE STOCK OF [INSERT NAME AND EMPLOYER 
IDENTIFICATION NUMBER (IF ANY) OF ISSUING CORPORATION].'' If a 
significant holder is a controlled foreign corporation (within the 
meaning of section 957), each United States shareholder (within the 
meaning of section 951(b)) with respect thereto must include this 
statement on or with its return. The statement must include--
    (i) The fair market value and basis of the stock transferred by the 
significant holder to the issuing corporation; and
    (ii) A description of the property received by the significant 
holder from the issuing corporation.
    (3) Definitions. For purposes of this section:
    (i) Significant holder means any person that, immediately before 
the exchange--
    (A) Owned at least five percent (by vote or value) of the total 
outstanding stock of the issuing corporation if the stock owned by such 
person is publicly traded; or
    (B) Owned at least one percent (by vote or value) of the total 
outstanding stock of the issuing corporation if the stock owned by such 
person is not publicly traded.
    (ii) Publicly traded stock means stock that is listed on--
    (A) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (B) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).
    (iii) Issuing corporation means the corporation that issued the 
shares of stock, some or all of which were transferred by a significant 
holder to such corporation in the exchange described in paragraph 
(d)(1) of this section.
    (4) Cross reference. See section 6043 of the Code for requirements 
relating to a return by a liquidating corporation.
    (e) [Reserved]. For further guidance, see Sec.  1.331-1(e).
    (f) Effective date--(1) Applicability date. This section applies to 
any original Federal income tax return (including any amended return 
filed on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006.
    (2) Expiration date. The applicability of this section will expire 
on May 26, 2009.


Sec.  1.332-6  [Removed]

0
Par. 9. Section 1.332-6 is removed.

0
Par. 10. Section 1.332-6T is added to read as follows:
    Sec.  1.332-6T Records to be kept and information to be filed with 
return (temporary).
    (a) Statement filed by recipient corporation. If any recipient 
corporation received a liquidating distribution from the liquidating 
corporation pursuant to a plan (whether or not that recipient 
corporation has received or will receive other such distributions from 
the liquidating corporation in other tax years as part of the same 
plan) during the current tax year, such recipient corporation must 
include a statement entitled, ``STATEMENT PURSUANT TO SECTION 332 BY 
[INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], 
A CORPORATION RECEIVING A LIQUIDATING DISTRIBUTION,'' on or with its 
return for such year. If any recipient corporation is a controlled 
foreign corporation (within the meaning of section 957), each United 
States shareholder (within the meaning of section 951(b)) with respect 
thereto must include this statement on or with its return. The 
statement must include--
    (1) The name and employer identification number (if any) of the 
liquidating corporation;
    (2) The date(s) of all distribution(s) (whether or not pursuant to 
the plan) by the liquidating corporation during the current tax year;
    (3) The aggregate fair market value and basis, determined 
immediately before the liquidation, of all of the assets of the 
liquidating corporation that have been or will be transferred to any 
recipient corporation;
    (4) The date and control number of any private letter ruling(s) 
issued by the Internal Revenue Service in connection with the 
liquidation;
    (5) The following representation: THE PLAN OF COMPLETE LIQUIDATION 
WAS ADOPTED ON [INSERT DATE (mm/dd/yyyy)]; and
    (6) A representation by such recipient corporation either that--
    (i) THE LIQUIDATION WAS COMPLETED ON [INSERT DATE (mm/dd/yyyy)]; or
    (ii) THE LIQUIDATION IS NOT COMPLETE AND THE TAXPAYER HAS TIMELY 
FILED [INSERT EITHER FORM 952, ``Consent To Extend the Time to Assess 
Tax Under Section 332(b),'' OR NUMBER AND NAME OF THE SUCCESSOR FORM].
    (b) Filings by the liquidating corporation. The liquidating 
corporation must timely file Form 966, ``Corporate Dissolution or 
Liquidation,'' (or its successor form) and its final Federal corporate 
income tax return. See also section 6043 of the Code.
    (c) Definitions. For purposes of this section:
    (1) Plan means the plan of complete liquidation within the meaning 
of section 332.
    (2) Recipient corporation means the corporation described in 
section 332(b)(1).
    (3) Liquidating corporation means the corporation that makes a 
distribution of property to a recipient corporation pursuant to the 
plan.
    (4) Liquidating distribution means a distribution of property made 
by the liquidating corporation to a recipient corporation pursuant to 
the plan.
    (d) Substantiation information. Under Sec.  1.6001-1(e), taxpayers 
are required to retain their permanent records and make such records 
available to any authorized Internal Revenue Service officers and 
employees. In connection with a liquidation described in this section, 
these records should specifically include information regarding the 
amount, basis, and fair market value of all distributed property, and 
relevant facts regarding any liabilities assumed or extinguished as 
part of such liquidation.
    (e) Effective date-- (1) Applicability date. This section applies 
to any original Federal income tax return (including any amended return 
filed on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006.
    (2) Expiration date. The applicability of this section will expire 
on May 26, 2009.

0
Par. 11. Section 1.338-0 is amended by revising the entry for Sec.  
1.338-10(a)(4)(iii) and adding entries for Sec.  1.338-10(c) and Sec.  
1.338-10T to read as follows:


Sec.  1.338-0  Outline of topics.

* * * * *


Sec.  1.338-10  Filing of returns.

    (a) * * *
    (4) * * *
    (iii) [Reserved]
* * * * *
    (c) [Reserved]


Sec.  1.338-10T  Filing of returns (temporary).

    (a)(1) through (a)(4)(ii) [Reserved]
    (iii) Procedure for filing a combined return.

[[Page 30596]]

    (a)(4)(iv) through (b) [Reserved]
    (c) Effective date.
    (1) Applicability date.
    (2) Expiration date.
* * * * *

0
Par. 12. Section 1.338-10 is amended by revising paragraph (a)(4)(iii) 
and adding paragraph (c) to read as follows:


Sec.  1.338-10  Filing of returns.

    (a) * * *
    (4) * * *
    (iii) [Reserved]. For further guidance, see Sec.  1.338-
10T(a)(4)(iii).
* * * * *
    (c) [Reserved]. For further guidance, see Sec.  1.338-10T(c)(1).

0
Par. 13. Section 1.338-10T is added to read as follows:


Sec.  1.338-10T  Filing of returns (temporary).

    (a)(1) through (a)(4)(ii) [Reserved]. For further guidance, see 
Sec.  1.338-10(a)(1) through (a)(4)(ii).
    (iii) Procedure for filing a combined return. A combined return is 
made by filing a single corporation income tax return in lieu of 
separate deemed sale returns for all targets required to be included in 
the combined return. The combined return reflects the deemed asset 
sales of all targets required to be included in the combined return. If 
the targets included in the combined return constitute a single 
affiliated group within the meaning of section 1504(a), the income tax 
return is signed by an officer of the common parent of that group. 
Otherwise, the return must be signed by an officer of each target 
included in the combined return. Rules similar to the rules in Sec.  
1.1502-75(j) apply for purposes of preparing the combined return. The 
combined return must include a statement entitled, ``ELECTION TO FILE A 
COMBINED RETURN UNDER SECTION 338(h)(15).'' The statement must 
include--
    (A) The name, address, and employer identification number of each 
target required to be included in the combined return; and
    (B) The following declaration: EACH TARGET IDENTIFIED IN THIS 
ELECTION TO FILE A COMBINED RETURN CONSENTS TO THE FILING OF A COMBINED 
RETURN.
    (a)(4)(iv) through (b) [Reserved]. For further guidance, see Sec.  
1.338-10(a)(4)(iv) through (b).
    (c) Effective date--(1) Applicability date. This section applies to 
any original Federal income tax return (including any amended return 
filed on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006.
    (2) Expiration date. The applicability of this section will expire 
on May 26, 2009.


Sec.  1.351-3  [Removed]

0
Par. 14. Section 1.351-3 is removed.

0
Par. 15. Section 1.351-3T is added to read as follows:


Sec.  1.351-3T  Records to be kept and information to be filed 
(temporary).

    (a) Significant transferor. Every significant transferor must 
include a statement entitled, ``STATEMENT PURSUANT TO Sec.  1.351-3T(a) 
BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF 
TAXPAYER], A SIGNIFICANT TRANSFEROR,'' on or with such transferor's 
income tax return for the taxable year of the section 351 exchange. If 
a significant transferor is a controlled foreign corporation (within 
the meaning of section 957), each United States shareholder (within the 
meaning of section 951(b)) with respect thereto must include this 
statement on or with its return. The statement must include--
    (1) The name and employer identification number (if any) of the 
transferee corporation;
    (2) The date(s) of the transfer(s) of assets;
    (3) The aggregate fair market value and basis, determined 
immediately before the exchange, of the property transferred by such 
transferor in the exchange; and
    (4) The date and control number of any private letter ruling(s) 
issued by the Internal Revenue Service in connection with the section 
351 exchange.
    (b) Transferee corporation. Except as provided in paragraph (c) of 
this section, every transferee corporation must include a statement 
entitled, ``STATEMENT PURSUANT TO Sec.  1.351-3T(b) BY [INSERT NAME AND 
EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A TRANSFEREE 
CORPORATION,'' on or with its income tax return for the taxable year of 
the exchange. If the transferee corporation is a controlled foreign 
corporation (within the meaning of section 957), each United States 
shareholder (within the meaning of section 951(b)) with respect thereto 
must include this statement on or with its return. The statement must 
include--
    (1) The name and taxpayer identification number (if any) of every 
significant transferor;
    (2) The date(s) of the transfer(s) of assets;
    (3) The aggregate fair market value and basis, determined 
immediately before the exchange, of all of the property received in the 
exchange; and
    (4) The date and control number of any private letter ruling(s) 
issued by the Internal Revenue Service in connection with the section 
351 exchange.
    (c) Exception for certain transferee corporations. The transferee 
corporation is not required to file a statement under paragraph (b) of 
this section if all of the information that would be included in the 
statement described in paragraph (b) of this section is included in any 
statement(s) described in paragraph (a) of this section that is 
attached to the same return for the same section 351 exchange.
    (d) Definitions. For purposes of this section:
    (1) Significant transferor means a person that transferred property 
to a corporation and received stock of the transferee corporation in an 
exchange described in section 351 if, immediately after the exchange, 
such person--
    (i) Owned at least five percent (by vote or value) of the total 
outstanding stock of the transferee corporation if the stock owned by 
such person is publicly traded, or
    (ii) Owned at least one percent (by vote or value) of the total 
outstanding stock of the transferee corporation if the stock owned by 
such person is not publicly traded.
    (2) Publicly traded stock means stock that is listed on--
    (i) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (ii) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).
    (e) Substantiation information. Under Sec.  1.6001-1(e), taxpayers 
are required to retain their permanent records and make such records 
available to any authorized Internal Revenue Service officers and 
employees. In connection with the exchange described in this section, 
these records should specifically include information regarding the 
amount, basis, and fair market value of all transferred property, and 
relevant facts regarding any liabilities assumed or extinguished as 
part of such exchange.
    (f) Effective date--(1) Applicability date. This section applies to 
any original Federal income tax return (including any amended return 
filed on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006.

[[Page 30597]]

    (2) Expiration date. The applicability of this section will expire 
on May 26, 2009.

0
Par. 16. Section 1.355-0 is amended by removing the entry for Sec.  
1.355-5 and adding an entry for Sec.  1.355-5T.
    The revision and addition read as follows:


Sec.  1.355-0  Outline of sections.

* * * * *


Sec.  1.355-5T  Records to be kept and information to be filed 
(temporary).

* * * * *


Sec.  1.355-5  [Removed]

0
Par. 17. Section 1.355-5 is removed.

0
Par. 18. Section 1.355-5T is added to read as follows:


Sec.  1.355-5T  Records to be kept and information to be filed 
(temporary).

    (a) Distributing corporation--(1) In general. Every corporation 
that makes a distribution (the distributing corporation) of stock or 
securities of a controlled corporation, as described in section 355 (or 
so much of section 356 as relates to section 355), must include a 
statement entitled, ``STATEMENT PURSUANT TO Sec.  1.355-5T(a) BY 
[INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], 
A DISTRIBUTING CORPORATION,'' on or with its return for the year of the 
distribution. If the distributing corporation is a controlled foreign 
corporation (within the meaning of section 957), each United States 
shareholder (within the meaning of section 951(b)) with respect thereto 
must include this statement on or with its return. The statement must 
include--
    (i) The name and employer identification number (if any) of the 
controlled corporation;
    (ii) The name and taxpayer identification number (if any) of every 
significant distributee;
    (iii) The date of the distribution of the stock or securities of 
the controlled corporation;
    (iv) The aggregate fair market value and basis, determined 
immediately before the distribution or exchange, of the stock, 
securities, or other property (including money) distributed by the 
distributing corporation in the transaction; and
    (v) The date and control number of any private letter ruling(s) 
issued by the Internal Revenue Service in connection with the 
transaction.
    (2) Special rule when an asset transfer precedes a stock 
distribution. If the distributing corporation transferred property to 
the controlled corporation in a transaction described in section 351 or 
368, as part of a plan to then distribute the stock or securities of 
the controlled corporation in a transaction described in section 355 
(or so much of section 356 as relates to section 355), then, unless 
paragraph (a)(1)(v) of this section applies, the distributing 
corporation must also include on or with its return for the year of the 
distribution the statement required by Sec.  1.351-3T(a) or 1.368-
3T(a). If the distributing corporation is a controlled foreign 
corporation (within the meaning of section 957), each United States 
shareholder (within the meaning of section 951(b)) with respect thereto 
must include the statement required by Sec.  1.351-3T(a) or 1.368-3T(a) 
on or with its return.
    (b) Significant distributee. Every significant distributee must 
include a statement entitled, ``STATEMENT PURSUANT TO Sec.  1.355-5T(b) 
BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF 
TAXPAYER], A SIGNIFICANT DISTRIBUTEE,'' on or with such distributee's 
return for the year in which such distribution is received. If a 
significant distributee is a controlled foreign corporation (within the 
meaning of section 957), each United States shareholder (within the 
meaning of section 951(b)) with respect thereto must include this 
statement on or with its return. The statement must include--
    (1) The names and employer identification numbers (if any) of the 
distributing and controlled corporations;
    (2) The date of the distribution of the stock or securities of the 
controlled corporation; and
    (3) The aggregate basis, determined immediately before the 
exchange, of any stock or securities transferred by the significant 
distributee in the exchange, and the aggregate fair market value, 
determined immediately before the distribution or exchange, of the 
stock, securities or other property (including money) received by the 
significant distributee in the distribution or exchange.
    (c) Definitions. For purposes of this section:
    (1) Significant distributee means--
    (i) A holder of stock of a distributing corporation that receives, 
in a transaction described in section 355 (or so much of section 356 as 
relates to section 355), stock of a corporation controlled by the 
distributing corporation if, immediately before the distribution or 
exchange, such holder--
    (A) Owned at least five percent (by vote or value) of the total 
outstanding stock of the distributing corporation if the stock owned by 
such holder is publicly traded; or
    (B) Owned at least one percent (by vote or value) of the stock of 
the distributing corporation if the stock owned by such holder is not 
publicly traded; or
    (ii) A holder of securities of a distributing corporation that 
receives, in a transaction described in section 355 (or so much of 
section 356 as relates to section 355), stock or securities of a 
corporation controlled by the distributing corporation if, immediately 
before the distribution or exchange, such holder owned securities in 
such distributing corporation with a basis of $1,000,000 or more.
    (2) Publicly traded stock means stock that is listed on--
    (i) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (ii) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).
    (d) Substantiation information. Under Sec.  1.6001-1(e), taxpayers 
are required to retain their permanent records and make such records 
available to any authorized Internal Revenue Service officers and 
employees. In connection with the distribution or exchange described in 
this section, these records should specifically include information 
regarding the amount, basis, and fair market value of all property 
distributed or exchanged, and relevant facts regarding any liabilities 
assumed or extinguished as part of such distribution or exchange.
    (e) Effective date--(1) Applicability date. This section applies to 
any original Federal income tax return (including any amended return 
filed on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006.
    (2) Expiration date. The applicability of this section will expire 
on May 26, 2009.


Sec.  1.368-3  [Removed]

0
Par. 19. Section 1.368-3 is removed.
0
Par. 20. Section 1.368-3T is added to read as follows:


Sec.  1.368-3T  Records to be kept and information to be filed with 
returns (temporary).

    (a) Parties to the reorganization. The plan of reorganization must 
be adopted by each of the corporations that are parties thereto. Each 
such corporation must include a statement entitled, ``STATEMENT 
PURSUANT TO Sec.  1.368-

[[Page 30598]]

3T(a) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF 
TAXPAYER], A CORPORATION A PARTY TO A REORGANIZATION,'' on or with its 
return for the taxable year of the exchange. If any such corporation is 
a controlled foreign corporation (within the meaning of section 957), 
each United States shareholder (within the meaning of section 951(b)) 
with respect thereto must include this statement on or with its return. 
However, it is not necessary for any taxpayer to include more than one 
such statement on or with the same return for the same reorganization. 
The statement must include--
    (1) The names and employer identification numbers (if any) of all 
such parties;
    (2) The date of the reorganization;
    (3) The aggregate fair market value and basis, determined 
immediately before the exchange, of the assets, stock or securities of 
the target corporation transferred in the transaction; and
    (4) The date and control number of any private letter ruling(s) 
issued by the Internal Revenue Service in connection with this 
reorganization.
    (b) Significant holders. Every significant holder, other than a 
corporation a party to the reorganization, must include a statement 
entitled, ``STATEMENT PURSUANT TO Sec.  1.368-3T(b) BY [INSERT NAME AND 
TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT 
HOLDER,'' on or with such holder's return for the taxable year of the 
exchange. If a significant holder is a controlled foreign corporation 
(within the meaning of section 957), each United States shareholder 
(within the meaning of section 951(b)) with respect thereto must 
include this statement on or with its return. The statement must 
include--
    (1) The names and employer identification numbers (if any) of all 
of the parties to the reorganization;
    (2) The date of the reorganization; and
    (3) The fair market value, determined immediately before the 
exchange, of all the stock or securities of the target corporation held 
by the significant holder that is transferred in the transaction and 
such holder's basis, determined immediately before the exchange, in the 
stock or securities of such target corporation.
    (c) Definitions. For purposes of this section:
    (1) Significant holder means--
    (i) A holder of stock of the target corporation that receives stock 
or securities in an exchange described in section 354 (or so much of 
section 356 as relates to section 354) if, immediately before the 
exchange, such holder--
    (A) Owned at least five percent (by vote or value) of the total 
outstanding stock of the target corporation if the stock owned by such 
holder is publicly traded; or
    (B) Owned at least one percent (by vote or value) of the total 
outstanding stock of the target corporation if the stock owned by such 
holder is not publicly traded; or
    (ii) A holder of securities of the target corporation that receives 
stock or securities in an exchange described in section 354 (or so much 
of section 356 as relates to section 354) if, immediately before the 
exchange, such holder owned securities in such target corporation with 
a basis of $1,000,000 or more.
    (2) Publicly traded stock means stock that is listed on--
    (i) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (ii) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).
    (d) Substantiation information. Under Sec.  1.6001-1(e), taxpayers 
are required to retain their permanent records and make such records 
available to any authorized Internal Revenue Service officers and 
employees. In connection with the reorganization described in this 
section, these records should specifically include information 
regarding the amount, basis, and fair market value of all transferred 
property, and relevant facts regarding any liabilities assumed or 
extinguished as part of such reorganization.
    (e) Effective date--(1) Applicability date. This section applies to 
any original Federal income tax return (including any amended return 
filed on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006.
    (2) Expiration date. The applicability of this section will expire 
on May 26, 2009.

0
Par. 21. Section 1.381(b)-1 is amended by revising paragraph (b)(3) and 
adding paragraph (e) to read as follows:


Sec.  1.381(b)-1  Operating rules applicable to carryovers in certain 
corporate acquisitions.

* * * * *
    (b) * * *
    (3) [Reserved]. For further guidance, see Sec.  1.381(b)-1T(b)(3).
* * * * *
    (e) [Reserved]. For further guidance, see Sec.  1.381(b)-1T(e)(1).
0
Par. 22. Section 1.381(b)-1T is added to read as follows:


Sec.  1.381(b)-1T  Operating rules applicable to carryovers in certain 
corporate acquisitions (temporary).

    (a) through (b)(2) [Reserved]. For further guidance, see Sec.  
1.381(b)-1(a) through (b)(2).
    (3) Election-- (i) Content of statements. The statements referred 
to in paragraph (b)(2) of Sec.  1.381(b)-1 must be entitled, ``ELECTION 
OF DATE OF DISTRIBUTION OR TRANSFER PURSUANT TO Sec.  1.381(b)-
1(b)(2),'' and must include: [INSERT NAME AND EMPLOYER IDENTIFICATION 
NUMBER (IF ANY) OF DISTRIBUTOR OR TRANSFEROR CORPORATION] AND [INSERT 
NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF ACQUIRING 
CORPORATION] ELECT TO DETERMINE THE DATE OF DISTRIBUTION OR TRANSFER 
UNDER Sec.  1.381(b)-1(b)(2). SUCH DATE IS [INSERT DATE (mm/dd/yyyy)].
    (ii) Filing of statements. One statement must be included on or 
with the timely filed Federal income tax return of the distributor or 
transferor corporation for its taxable year ending with the date of 
distribution or transfer. An identical statement must be included on or 
with the timely filed Federal income tax return of the acquiring 
corporation for its first taxable year ending after that date. If the 
distributor or transferor corporation, or the acquiring corporation, is 
a controlled foreign corporation (within the meaning of section 957), 
each United States shareholder (within the meaning of section 951(b)) 
with respect thereto must include this statement on or with its return.
    (b)(4) through (d) [Reserved]. For further guidance, see Sec.  
1.381(b)-1(b)(4) through (d).
    (e) Effective date--(1) Applicability date. This section applies to 
any original Federal income tax return (including any amended return 
filed on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006.
    (2) Expiration date. The applicability of this section will expire 
on May 26, 2009.

0
Par. 23. Section 1.382-1 is amended by:
0
1. Revising the entry for Sec.  1.382-2T(a)(2)(ii).
0
2. Revising the entry for Sec.  1.382-8(c)(2).
0
3. Redesignating the entry for Sec.  1.382-8(e)(4) as the entry for 
Sec.  1.382-8(e)(5).

[[Page 30599]]

0
4. Adding entries for paragraphs (e)(4) and (j)(4) of Sec.  1.382-8.
0
5. Revising the entry for paragraph (h), and removing the entries for 
paragraphs (h)(1), (h)(2) and (h)(3), of Sec.  1.382-8.
0
6. Adding entries for Sec.  1.382-8T.
0
7. Removing the entry for Sec.  1.382-11.
0
8. Adding entries for Sec.  1.382-11T.
    The additions and revisions read as follows:


Sec.  1.382-1  Table of contents.

* * * * *


Sec.  1.382-2T  Definition of ownership change under section 382, as 
amended by the Tax Reform Act of 1986 (temporary).

* * * * *
    (a) * * *
    (2) * * *
    (ii) [Reserved]
* * * * *


Sec.  1.382-8  Controlled groups.

* * * * *
    (c) * * *
    (2) [Reserved]
* * * * *
    (e) * * *
    (4) [Reserved]
    (5) Predecessor and successor corporation.
* * * * *
    (h) [Reserved]
* * * * *
    (j) * * *
    (4) [Reserved]


Sec.  1.382-8T  Controlled groups (temporary).

    (a) through (c)(1) [Reserved]
    (c)(2) Restoration of value.
    (c)(3) through (e)(3) [Reserved]
    (e)(4) Foreign component member.
    (i) In general.
    (ii) Exception.
    (e)(5) through (g) [Reserved]
    (h) Time and manner of filing election to restore.
    (1) Statements required.
    (i) Filing by loss corporation.
    (ii) Filing by electing member.
    (iii) Agreement.
    (2) Special rule for foreign component members.
    (i) Deemed election to restore full value.
    (ii) Election not to restore full value.
    (iii) Agreement.
    (3) Revocation of election.
    (i) through (j)(3) [Reserved]
    (j)(4) Effective date.
    (i) Applicability date.
    (ii) Expiration date.
* * * * *


Sec.  1.382-11T  Reporting requirements (temporary).

    (a) Information statement required.
    (b) Effective date.
    (1) Applicability date.
    (2) Expiration date.

0
Par. 24. Section 1.382-2T is amended by removing and reserving 
paragraph (a)(2)(ii) to read as follows:


Sec.  1.382-2T  Definition of ownership change under section 382, as 
amended by the Tax Reform Act of 1986 (temporary).

* * * * *
    (a) * * *
    (2) * * *
    (ii) [Reserved]. For further guidance, see Sec.  1.382-11T(a).
* * * * *

0
Par. 25. Section 1.382-8 is amended as follows:
0
1. Revising paragraphs (c)(2) and (h).
0
2. Redesignating paragraph (e)(4) as paragraph (e)(5).
0
3. Adding new paragraphs (e)(4) and (j)(4).
    The additions and revisions read as follows:


Sec.  1.382-8  Controlled groups.

* * * * *
    (c) * * *
    (2) [Reserved]. For further guidance, see Sec.  1.382-8T(c)(2).
* * * * *
    (e) * * *
    (4) [Reserved]. For further guidance, see Sec.  1.382-8T(e)(4).
    (5) Predecessor and successor corporation. * * *
* * * * *
    (h) [Reserved]. For further guidance, see Sec.  1.382-8T(h).
* * * * *
    (j) * * *
    (4) [Reserved]. For further guidance, see Sec.  1.382-8T(j)(4)(i).

0
Par. 26. Section 1.382-8T is added to read as follows:


Sec.  1.382-8T  Controlled groups (temporary).

    (a) through (c)(1) [Reserved]. For further guidance, see Sec.  
1.382-8(a) through (c)(1).
    (2) Restoration of value. After the value of the stock of each 
component member is reduced pursuant to paragraph (c)(1) of Sec.  
1.382-8, the value of the stock of each component member is increased 
by the amount of value, if any, restored to the component member by 
another component member (the electing member) pursuant to this 
paragraph (c)(2). The electing member may elect (or may be deemed to 
elect under paragraph (h)(2)(i) of this section in the case of a 
foreign component member) to restore value to another component member 
in an amount that does not exceed the lesser of--
    (i) The sum of--
    (A) The value, determined immediately before the ownership change, 
of the electing member's stock (after adjustment under paragraph (c)(1) 
of Sec.  1.382-8 and before any restoration of value under this 
paragraph (c)(2)); plus
    (B) Any amount of value restored to the electing member by another 
component member under this paragraph (c)(2); or
    (ii) The value, determined immediately before any ownership change, 
of the electing member's stock (without regard to any adjustment under 
this section) that is directly owned by the other component member 
immediately after the ownership change.
    (c)(3) through (e)(3) [Reserved]. For further guidance, see Sec.  
1.382-8(c)(3) through (e)(3).
    (4) Foreign component member-- (i) In general. Except as provided 
in paragraph (e)(4)(ii) of this section, foreign component member means 
a component member that is a foreign corporation.
    (ii) Exception. A foreign component member shall not include a 
foreign corporation that has items treated as connected with the 
conduct of a trade or business in the United States that it takes into 
account in determining its value pursuant to section 382(e)(3).
    (e)(5) through (g) [Reserved]. For further guidance, see Sec.  
1.382-8(e)(5) through (g).
    (h) Time and manner of filing election to restore--(1) Statements 
required--(i) Filing by loss corporation. The election to restore value 
described in paragraph (c)(2) of this section must be in the form set 
forth in this paragraph (h)(1)(i). It must be filed by the loss 
corporation by including a statement on or with its income tax return 
for the taxable year in which the ownership change occurs (or with an 
amended return for that year filed on or before the due date (including 
extensions) of the income tax return of any component member with 
respect to the taxable year in which the ownership change occurs). The 
common parent of a consolidated group must make the election on behalf 
of the group. The election is made in the form of a statement entitled, 
``STATEMENT PURSUANT TO Sec.  1.382-8T(h)(1) TO ELECT TO RESTORE ALL OR 
PART OF THE VALUE OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER 
(IF ANY) OF THE ELECTING MEMBER] TO [INSERT NAME AND EMPLOYER 
IDENTIFICATION NUMBER (IF ANY) OF THE CORPORATION TO WHICH VALUE IS 
RESTORED].'' The statement must include the amount of the value being 
restored and must also indicate that an agreement signed and dated by 
both

[[Page 30600]]

parties, as described in paragraph (h)(1)(iii) of this section, has 
been entered into. Each such party must retain either the original or a 
copy of this agreement as part of its records. See Sec.  1.6001-1(e).
    (ii) Filing by electing member. An electing member must include a 
statement identical to the one described in paragraph (h)(1)(i) of this 
section on or with its income tax return (or with an amended return for 
that year filed on or before the due date (including extensions) of the 
income tax return of any component member with respect to the taxable 
year in which the ownership change occurs) (if any) for the taxable 
year which includes the change date in connection with which the 
election described in paragraph (c)(2) of this section is made. If the 
electing member is a controlled foreign corporation (within the meaning 
of section 957), each United States shareholder (within the meaning of 
section 951(b)) with respect thereto must include this statement on or 
with its return. It is not necessary for the electing member (or the 
United States shareholder, as the case may be) to include this 
statement on or with its return if the loss corporation includes an 
identical statement on or with the same return for the same election.
    (iii) Agreement. Both the electing member and the corporation to 
which value is restored must sign and date an agreement. The agreement 
must--
    (A) Identify the change date for the loss corporation in connection 
with which the election is made;
    (B) State the value of the electing member's stock (without regard 
to any adjustment under paragraphs (c)(1), (c)(3), (c)(4) and (c)(5) of 
Sec.  1.382-8 and paragraph (c)(2) of this section) immediately before 
the ownership change;
    (C) State the amount of any reduction required under paragraph 
(c)(1) of Sec.  1.382-8 with respect to stock of the electing member 
that is owned directly or indirectly by the corporation to which value 
is restored;
    (D) State the amount of value that the electing member elects to 
restore to the corporation; and
    (E) State whether the value of either component member's stock was 
adjusted pursuant to paragraph (c)(4) of Sec.  1.382-8.
    (2) Special rule for foreign component members--(i) Deemed election 
to restore full value. Unless the election described in paragraph 
(h)(2)(ii) of this section is made for a foreign component member, each 
foreign component member of the controlled group is deemed to have 
elected to restore to each other component member the maximum value 
allowable under paragraph (c)(2) of this section, taking into account 
the limitations of Sec.  1.382-8.
    (ii) Election not to restore full value. (A) A loss corporation may 
elect to reduce the amount of value restored from a foreign component 
member (the electing foreign component member) to another component 
member under paragraph (h)(2)(i) of this section in the form set forth 
in this paragraph (h)(2)(ii). It must be filed by the loss corporation 
by including a statement on or with its income tax return for the 
taxable year in which the ownership change occurs (or with an amended 
return for that year filed on or before the due date (including 
extensions) of the income tax return of any component member with 
respect to the taxable year in which the ownership change occurs). The 
common parent of a consolidated group must make the election on behalf 
of the group. The election is made in the form of a statement entitled, 
``STATEMENT PURSUANT TO Sec.  1.382-8T(h)(2)(ii) TO ELECT NOT TO 
RESTORE FULL VALUE OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER 
(IF ANY) OF ELECTING FOREIGN COMPONENT MEMBER] TO [INSERT NAME AND 
EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF THE CORPORATION TO WHICH 
SUCH VALUE IS NOT TO BE RESTORED].'' The statement must include the 
amount of the value not being restored and must also indicate that an 
agreement signed and dated by both parties, as described in paragraph 
(h)(2)(iii) of this section, has been entered into. Each such party 
must retain either the original or a copy of the agreement as part of 
its records. See Sec.  1.6001-1(e).
    (B) An electing foreign component member must include a statement 
identical to the one described in paragraph (h)(2)(ii)(A) of this 
section on or with its income tax return (or with an amended return for 
that year filed on or before the due date (including extensions) of the 
income tax return of any component member with respect to the taxable 
year in which the ownership change occurs) (if any) for the taxable 
year which includes the change date in connection with which the 
election described in paragraph (h)(2)(ii)(A) of this section is made. 
If the electing foreign component member is a controlled foreign 
corporation (within the meaning of section 957), each United States 
shareholder (within the meaning of section 951(b)) with respect thereto 
must include this statement on or with its return. It is not necessary 
for the electing foreign component member (or United States 
shareholder, as the case may be) to include this statement on or with 
its return if the loss corporation includes an identical statement on 
or with the same return for the same election.
    (iii) Agreement. Both the electing foreign component member and the 
corporation to which full value is not restored must sign and date an 
agreement. The agreement must--
    (A) Identify the change date for the loss corporation in connection 
with which the election is made;
    (B) State the value of the electing foreign component member's 
stock (without regard to any adjustment under paragraphs (c)(1), 
(c)(3), (c)(4) and (c)(5) of Sec.  1.382-8 and paragraph (c)(2) of this 
section) immediately before the ownership change;
    (C) State the amount of any reduction required under paragraph 
(c)(1) of Sec.  1.382-8 with respect to stock of the electing foreign 
component member that is owned directly or indirectly by the 
corporation to which value is not restored;
    (D) State the amount of value that the electing foreign component 
member elects not to restore to the corporation; and
    (E) State whether the value of either component member's stock was 
adjusted pursuant to paragraph (c)(4) of Sec.  1.382-8.
    (3) Revocation of election. An election (other than the deemed 
election described in paragraph (h)(2)(i) of this section) made under 
this section is revocable only with the consent of the Commissioner.
    (i) through (j)(3) [Reserved]. For further guidance, see S