Application of Separate Limitations to Dividends From Noncontrolled Section 902 Corporations; Correction, 48474-48475 [E6-13425]
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48474
Federal Register / Vol. 71, No. 161 / Monday, August 21, 2006 / Rules and Regulations
4. By revising the text of paragraph (e),
Example 4., the first sentence of
paragraph (iv), and paragraph (v).
I 5. By revising the text of paragraph (e),
Example 6., paragraph (i).
I 6. By revising the text of paragraph
(g)(5) Examples 1. and 2, first sentence
of paragraph (i).
I 7. By revising the text of paragraph
(g)(5) Example 3, first three sentences of
paragraph (i), and paragraph (ii).
I 8. By revising the text of the first
sentence of paragraph (j).
I
§ 1.1502–35 Transfers of subsidiary stock
and deconsolidations of subsidiaries.
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(d)
(4) * * *
(i) * * *
(B) * * *
(2) Any liabilities of the subsidiary
that have been taken into account for tax
purposes.
*
*
*
*
*
(8) Higher-tier. A subsidiary is highertier with respect to a member if or to the
extent investment adjustments under
§ 1.1502–32 with respect to the stock of
the latter member would affect
investment adjustments with respect to
the stock of the former member.
(9) Lower-tier. A subsidiary is lowertier with respect to a member if or to the
extent investment basis adjustments
under § 1.1502–32 with respect to the
stock of the former member would affect
investment adjustments with respect to
the stock of the latter member.
(e) * * *
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Example 3. * * *
(v) Effect of subsequent stock sale. P
recognizes $0 gain/loss on the Year 6 sale of
its remaining S common stock. No amount of
suspended loss remains to be allowed under
paragraph (c)(5) of this section.
Example 4. * * *
(iv) Effect of subsequent asset sale on
suspended loss. Because P cannot establish
that all or a portion of the loss recognized on
the sale of Asset B was not reflected in the
calculation of the duplicated loss of S2 on
the date of the Year 4 stock sale and such loss
is allocable to the period beginning on the
date of the Year 4 disposition of the S2 stock
and ending on the day before the first date
on which S2 is not a member of the P group
and is taken into account in determining
consolidated taxable income (or loss) of the
P group for a taxable year that includes a date
on or after the date of the Year 4 disposition
and before the first date on which S2 is not
a member of the P group, such asset loss
reduces the suspended loss pursuant to
paragraph (c)(4) of this section. * * *
(v) Effect of subsequent stock sale. In year
6, when S1 sells its remaining S2 stock for
$100, it recognizes $0 gain/loss. Pursuant to
paragraph (c)(5) of this section, the remaining
$5 of the suspended loss is allowed on the
P group’s return for Year 6 when S1 sells its
remaining S2 stock.
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16:48 Aug 18, 2006
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Example 6. * * * (i) In Year 1. P forms S
with a contribution of $80 in exchange for 80
shares of common stock of S which at that
time represents all of the outstanding stock
of S. S becomes a member of the P group. In
Year 2, P contributes Asset A with a basis of
$50 and a value of $20 in exchange for 20
shares of common stock of S in a transfer to
which section 351 applies. In Year 4, in a
transaction that is not part of a plan that
includes the Year 1 and Year 2 contributions,
P contributes the 20 shares of S common
stock it acquired in Year 2 to PS, a
partnership, in exchange for a 20 percent
capital and profits interest in a transaction
described in section 721. Immediately after
the contribution to PS, S is a member of the
P group. In Year 5, P sells its interest in PS
for $20.
*
*
*
(g) * * *
(5) * * *
*
*
Example 1. Transfers of property in the
avoidance of basis redetermination rule—
(i) Facts. In Year 1, P forms S with a
contribution of $100 in exchange for 100
shares of common stock of S which at that
time represents all of the outstanding stock
of S. S becomes a member of the P group. In
Year 2, P contributes 20 shares of common
stock of S to PS, a partnership, in exchange
for a 20 percent capital and profits interest
in a transaction described in section 721. In
Year 3, P contributes Asset A with a basis of
$50 and a value of $20 to PS in exchange for
an additional capital and profits interest in
PS in a transaction described in section 721.
Also in Year 3, PS contributes Asset A to S
and P contributes an additional $80 to S in
transfers to which section 351 applies. In
Year 4, S sells Asset A for $20, recognizing
a loss of $30. The P group uses that loss to
offset income of P. In Year 5, P sells its entire
interest in PS for $40.
Example 2. Transfers effecting a
reimportation of loss—(i) Facts. In Year 1, P
forms S with a contribution of Asset A with
a value of $100 and a basis of $120, Asset B
with a value of $50 and a basis of $70, and
Asset C with a value of $90 and a basis of
$100 in exchange for all of the common stock
of S and S becomes a member of the P group.
* * *
*
*
*
*
*
Example 3. Transfers to avoid recognition
of gain—(i) Facts. P owns all of the stock of
S1 and S2. The S2 stock has a basis of $400
and a value of $500. S1 owns 50% of the S3
common stock with a basis of $150. * * *
(ii) Analysis. Pursuant to paragraph (b)(4)
of this section, because S2 owns stock of S3
(another subsidiary of the same group) and,
immediately after the sale of the S2 stock, S3
is a member of the group, then for purposes
of applying paragraph (b) of this section, S2
is deemed to have transferred its S3 stock.
Because S3 is a member of the group
immediately after the transfer of the S2 stock
and the S3 stock deemed transferred has a
basis in excess of value, the group in the S3
stock is redetermined pursuant to paragraph
(b)(1) of this section immediately prior to the
sale of the S2 stock.
Accordingly, P would recognize only $1 of
gain on the sale of its S2 stock. However,
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because the recapitalization of the S3 was
structured with a view to, and has the effect
of, avoiding the recognition of gain on a
disposition of stock by invoking the
application of paragraph (b) of this section,
paragraph (g)(4)(i) of this section applies.
Accordingly, paragraph (b) of this section
does not apply upon P’s disposition of the S2
stock and P recognizes $100 gain on the
disposition of the S2 stock.
*
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*
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(j) Effective date. This section applies
with respect to stock transfers,
deconsolidations of subsidiaries,
determinations of worthlessness, and
stock dispositions on or after March 10,
2006. * * *
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Guy R. Traynor,
Branch Chief, Publications and Regulations
Branch, Legal Processing Division, Associate
Chief Counsel (Procedure and
Administration).
[FR Doc. E6–13399 Filed 8–18–06; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9260]
RIN 1545–BF46
Application of Separate Limitations to
Dividends From Noncontrolled Section
902 Corporations; Correction
Internal Revenue Service (IRS),
Treasury.
AGENCY:
Correction to temporary
regulations.
ACTION:
SUMMARY: This document contains
corrections to temporary regulations
that were published in the Federal
Register on Tuesday, April 25, 2006 (71
FR 24516) regarding the application of
separate foreign tax credit limitations to
dividends received from noncontrolled
section 902 corporations under section
904(d)(4).
These corrections are effective
April 25, 2006.
DATES:
FOR FURTHER INFORMATION CONTACT:
Ginny Chung, (202) 622–3850 (not a
toll-free call).
SUPPLEMENTARY INFORMATION:
Background
The temporary regulations (TD 9260)
that are the subject of this correction are
under section 904 of the Internal
Revenue Code.
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Federal Register / Vol. 71, No. 161 / Monday, August 21, 2006 / Rules and Regulations
Need for Correction
As published, (TD 9260) contains
errors that may prove to be misleading
and are in need of clarification.
Correction of Publication
Accordingly, the publication of the
temporary regulations (TD 9260) which
was the subject of FR Doc. 06–3882, is
corrected as follows:
I
§ 1.904–4
[Corrected]
1. On page 24530, column 2, § 1.904–
4, Instructional Par. 11., number 3, the
language ‘‘3. In paragraph (e)(5)(iii),
remove the language ‘‘and paragraph (9)
of this section’’ and add the language
‘‘paid in taxable years beginning before
January 1, 2003’’ in its place.’’ is
corrected to read ‘‘3. In paragraph
(e)(5)(iii), remove the language ‘‘and
paragraph (g) of this section’’ and add
the language ‘‘paid in taxable years
beginning before January 1, 2003’’ in its
place.’’
I
Guy R. Traynor,
Branch Chief, Publications and Regulations
Branch, Legal Processing Division, Associate
Chief Counsel (Procedure and
Administration).
[FR Doc. E6–13425 Filed 8–18–06; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 100
docket, are part of docket (CGD05–06–
064) and are available for inspection or
copying at Commander (dpi), Fifth
Coast Guard District, 431 Crawford
Street, Portsmouth, Virginia 23704–
5004, between 9 a.m. and 2 p.m.,
Monday through Friday, except Federal
holidays.
FOR FURTHER INFORMATION CONTACT:
Dennis Sens, Project Manager,
Inspections and Investigations Branch,
at (757) 398–6204.
SUPPLEMENTARY INFORMATION:
Regulatory Information
On June 29, 2006, we published a
notice of proposed rulemaking (NPRM)
entitled Special Local Regulations for
Marine Events; Atlantic Ocean, Ocean
City, MD in the Federal Register (71 FR
37019). We received no letters
commenting on the proposed rule. No
public meeting was requested, and none
was held.
Under 5 U.S.C. 553(d)(3), the Coast
Guard finds that good cause exists for
making this rule effective less than 30
days after publication in the Federal
Register. Delaying the effective date
would be contrary to the public interest,
since immediate action is needed to
ensure the safety of the event
participants, support craft and other
vessels transiting the event area.
However, advance notifications will be
made to affected waterway users via
marine information broadcasts and area
newspapers.
Background and Purpose
[CGD05–06–064]
RIN 1625–AA08
Special Local Regulations for Marine
Events; Atlantic Ocean, Ocean City,
MD
Coast Guard, DHS.
Temporary final rule.
AGENCY:
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ACTION:
SUMMARY: The Coast Guard is
establishing special local regulations
during the ‘‘Ocean City Maryland
Offshore Challenge’’, a power boat race
to be held on the waters of the Atlantic
Ocean adjacent to the shoreline at
Ocean City, MD. These special local
regulations are necessary to provide for
the safety of life on navigable waters
during the event. This action is
intended to restrict vessel traffic in the
regulated area during the power boat
race.
This rule is effective from 10
a.m. to 4 p.m. on September 10, 2006.
ADDRESSES: Documents indicated in this
preamble as being available in the
DATES:
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15:07 Aug 18, 2006
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On September 10, 2006, the Offshore
Performance Association, Inc. will
conduct the ‘‘Ocean City Maryland
Offshore Challenge’’, on the waters of
the Atlantic Ocean along the shoreline
near Ocean City, MD. The event will
consist of approximately 40 V-hull and
twin-hull inboard hydroplanes racing in
heats counter-clockwise around an oval
race course. A fleet of spectator vessels
is anticipated to gather nearby to view
the competition. Due to the need for
vessel control during the event, vessel
traffic will be temporarily restricted to
provide for the safety of participants,
spectators and transiting vessels.
Discussion of Comments and Changes
The Coast Guard did not receive
comments in response to the notice of
proposed rulemaking (NPRM) published
in the Federal Register. Accordingly,
the Coast Guard is establishing
temporary special local regulations on
specified waters of the Atlantic Ocean,
Ocean City, Maryland.
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48475
Regulatory Evaluation
This rule is not a ‘‘significant
regulatory action’’ under section 3(f) of
Executive Order 12866, Regulatory
Planning and Review, and does not
require an assessment of potential costs
and benefits under section 6(a)(3) of that
Order. The Office of Management and
Budget has not reviewed it under that
Order. It is not ‘‘significant’’ under the
regulatory policies and procedures of
the Department of Homeland Security
(DHS).
We expect the economic impact of
this rule to be so minimal that a full
Regulatory Evaluation under the
regulatory policies and procedures of
DHS is unnecessary.
Although this regulation will prevent
traffic from transiting a small segment of
the Atlantic Ocean near Ocean City, MD
during the event, the effect of this
regulation will not be significant due to
the limited duration that the regulated
area will be enforced. Extensive advance
notifications will be made to the
maritime community via Local Notice to
Mariners, marine information
broadcasts, area newspapers and local
radio stations, so mariners can adjust
their plans accordingly.
Small Entities
Under the Regulatory Flexibility Act
(5 U.S.C. 601–612), we have considered
whether this rule would have a
significant economic impact on a
substantial number of small entities.
The term ‘‘small entities’’ comprises
small businesses, not-for-profit
organizations that are independently
owned and operated and are not
dominant in their fields, and
governmental jurisdictions with
populations of less than 50,000.
The Coast Guard certifies under 5
U.S.C. 605(b) that this rule would not
have a significant economic impact on
a substantial number of small entities.
This rule would affect the following
entities, some of which might be small
entities: the owners or operators of
vessels intending to transit this section
of the Atlantic Ocean during the event.
This rule would not have a significant
economic impact on a substantial
number of small entities for the
following reasons. This rule would be in
effect for only a limited period.
Although the regulated area will apply
to waters of the Atlantic Ocean near the
Ocean City, Maryland shoreline, traffic
may be allowed to pass through the
regulated area with the permission of
the Coast Guard patrol commander. In
the case where the patrol commander
authorizes passage through the
regulated area during the event, vessels
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]]>Agencies
[Federal Register Volume 71, Number 161 (Monday, August 21, 2006)]
[Rules and Regulations]
[Pages 48474-48475]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-13425]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9260]
RIN 1545-BF46
Application of Separate Limitations to Dividends From
Noncontrolled Section 902 Corporations; Correction
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Correction to temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains corrections to temporary regulations
that were published in the Federal Register on Tuesday, April 25, 2006
(71 FR 24516) regarding the application of separate foreign tax credit
limitations to dividends received from noncontrolled section 902
corporations under section 904(d)(4).
DATES: These corrections are effective April 25, 2006.
FOR FURTHER INFORMATION CONTACT: Ginny Chung, (202) 622-3850 (not a
toll-free call).
SUPPLEMENTARY INFORMATION:
Background
The temporary regulations (TD 9260) that are the subject of this
correction are under section 904 of the Internal Revenue Code.
[[Page 48475]]
Need for Correction
As published, (TD 9260) contains errors that may prove to be
misleading and are in need of clarification.
Correction of Publication
0
Accordingly, the publication of the temporary regulations (TD 9260)
which was the subject of FR Doc. 06-3882, is corrected as follows:
Sec. 1.904-4 [Corrected]
0
1. On page 24530, column 2, Sec. 1.904-4, Instructional Par. 11.,
number 3, the language ``3. In paragraph (e)(5)(iii), remove the
language ``and paragraph (9) of this section'' and add the language
``paid in taxable years beginning before January 1, 2003'' in its
place.'' is corrected to read ``3. In paragraph (e)(5)(iii), remove the
language ``and paragraph (g) of this section'' and add the language
``paid in taxable years beginning before January 1, 2003'' in its
place.''
Guy R. Traynor,
Branch Chief, Publications and Regulations Branch, Legal Processing
Division, Associate Chief Counsel (Procedure and Administration).
[FR Doc. E6-13425 Filed 8-18-06; 8:45 am]
BILLING CODE 4830-01-P
