Exclusion From Gross Income of Previously Taxed Earnings and Profits and Adjustments to Basis of Stock in Controlled Foreign Corporations and of Other Property; Correction, 71116-71117 [E6-20798]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 71, Number 236 (Friday, December 8, 2006)]
[Proposed Rules]
[Pages 71116-71117]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-20798]



[[Page 71116]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-121509-00]
RIN 1545-AY54


Exclusion From Gross Income of Previously Taxed Earnings and 
Profits and Adjustments to Basis of Stock in Controlled Foreign 
Corporations and of Other Property; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correction to notice of proposed rulemaking.

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SUMMARY: This document corrects notice of proposed rulemaking (REG-
121509-00) that was published in the Federal Register on Tuesday, 
August 29, 2006 (71 FR 51155). The document contains proposed 
regulations that provide guidance relating to the exclusion from gross 
income of previously taxed earnings and profits under section 959 of 
the Internal Revenue Code (Code) and related basis adjustments under 
section 961 of the Code.

FOR FURTHER INFORMATION CONTACT: Ethan Atticks, (202) 622-3840 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    The notice of proposed rulemaking (REG-121509-00) that is the 
subject of these corrections is under sections 959 and 961 of the 
Internal Revenue Code.

Need for Correction

    As published, REG-121509-00 contains errors that may prove to be 
misleading and are in need of clarification.

Correction of Publication

    Accordingly, the notice of proposed rulemaking (REG-121509-00), 
that was the subject of FR Doc. 06-7195, is corrected as follows:
    1. On page 51155, column 1, in the preamble, under the paragraph 
heading ``Background'', the last paragraph of the column, third line, 
the language, ``sections 959 and 961. Section 959(a)(1)'' is corrected 
to read ``sections 959, 961, and 1502. Section 959(a)(1)''.
    2. On page 51156, column 1, in the preamble, the last paragraph of 
the column, fifth line from bottom, the language ``109-222), which 
provides for look-'' is corrected to read ``109-222), which generally 
provides for look-''.
    3. On page 51156, column 3, in the preamble, under paragraph 
heading ``2. Shareholder PTI Accounts'', sixth line, the language 
``directly, or indirectly under section'' is corrected to read 
``directly or indirectly under section''.
    4. On page 51157, column 1, in the preamble, under paragraph 
heading ``3. Successors in Interest'', second paragraph, sixteenth 
line, the language ``corporation from a person that is not a'' is 
corrected to read ``corporation from any person, including a person 
that is not a''.
    5. On page 51157, column 1, in the preamble, under paragraph 
heading ``B. CFC-Level Exclusion Under Section 959(b)'' first line of 
first paragraph, the language ``The earnings and profits of a CFC'' is 
corrected to read ``Section 959(b) provides an exclusion pursuant to 
which the earnings and profits of a CFC''.
    6. On page 51157, column 1, in the preamble, under paragraph 
heading ``B. CFC-Level Exclusion Under Section 959(b)'', first 
paragraph, third line from the bottom of the paragraph, the language 
``rules regarding cross-chain sales of'' is corrected to read ``to 
provide guidance regarding cross-chain sales of''.
    7. On page 51157, column 2, in the preamble, first paragraph of the 
column, ninth line, the language ``section 951(a)) and a $100 of non-'' 
is corrected to read ``section 951(a)) and $100x of non-''.
    8. On page 51157, column 2, in the preamble, first paragraph of the 
column, last line, the language ``$91x ((70% x $30) + (70% x $100)).'' 
is corrected to read ``$91x ((70% x $30x) + (70% x $100x)).''.
    9. On page 51157, column 2, in the preamble, second paragraph of 
the column, third line, the language ``accordingly, provides that, the 
amount'' is corrected to read ``accordingly, provides that the 
amount''.
    10. On page 51157, column 2, in the preamble, second paragraph of 
the column, eleventh line, the language ``of section 958(a)) in the 
lower-tier and'' is corrected to read ``of section 958(a)) in the 
lower-and''.
    11. On page 51157, column 2, in the preamble, fourth paragraph of 
the column, seventh line, the language ``CFC from a person who was not 
taxed'' is corrected to read ``CFC from a person that was not taxed''.
    12. On page 51157, column 3, in the preamble, first paragraph of 
the column, eighth line, the language ``inclusion is still $100. In 
contrast, Prop.'' is corrected to read ``inclusion is still $100x. In 
contrast, Prop.''.
    13. On page 51157, column 3, in the preamble, under the paragraph 
heading ``1. Shareholder-Level Accounting of PTI'', last line of the 
column, the language ``shareholder who owns the stock or by'' is 
corrected to read ``shareholder that owns the stock or by''.
    14. On page 51158, column 2, in the preamble, under the paragraph 
heading ``a. Dollar Basis Pooling Election'', first paragraph of the 
column, ninth to fifteenth lines, the language ``to a distribution of 
PTI. Notice 88-71 (1988-2 C.B. 374) makes this pooled approach 
available to taxpayers for purposes of section 986(c) at the taxpayer's 
election, but it does not provide guidance as to how this election is 
made. The proposed regulations'' is corrected to read ``to a 
distribution of PTI. The proposed regulations make this pooled approach 
available to taxpayers for purposes of section 986(c) at the taxpayer's 
election. The proposed regulations''.
    15. On page 51158, column 3, in the preamble, under paragraph 
heading ``4. Adjustment of Shareholder PTI Accounts'', second 
paragraph, tenth line, the language ``corporation. Next, a 
shareholder's PTI'' is corrected to read ``corporation. Second, a 
shareholder's PTI''.
    16. On page 51160, column 1, in the preamble, under paragraph 
heading ``b. Shareholder That Is a Member of a Consolidated Group'', 
first paragraph, seventh line from the bottom of the first paragraph, 
the language ``consolidated group who own stock in'' is corrected to 
read ``consolidated group that own stock in''.
    17. On page 51160, column 1, in the preamble, second paragraph, 
eleventh line, the language ``taxable year who own stock in the'' is 
corrected to read ``taxable year that own stock in the''.
    18. On page 51161, column 3, in the preamble, under paragraph 
heading ``A. Coordination of Shareholder-Level and Corporate-Level 
Accounts'', ninth line, the language ``PTI information is to be shared 
between'' is corrected to read ``PTI information is to be shared 
among''.
    19. On page 51161, column 3, in the preamble, thirteenth line, the 
language ``are necessary, and if so, how they'' is corrected to read 
``are necessary and, if so, how they''.
    20. On page 51162, column 3, in the preamble, under paragraph 
heading ``F. Section 961(c) Basis Adjustments'', first line of the 
paragraph, the language ``Section 961(c) is by its terms only'' is 
corrected to read ``Section 961(c) is only''.


Sec.  1.959-1  [Corrected]

    21. On page 51163, column 3, Sec.  1.959-1(a), second line of the 
column, the language ``except that such

[[Page 71117]]

distributions shall'' is corrected to read ``except that such 
distribution shall''.
    22. On page 51164, column 1, Sec.  1.959-1(b)(2), first paragraph 
of the column, fifth and sixth lines, the language ``any) that are 
attributable to section 951(a) inclusions.'' is corrected to read 
``any).''.
    23. On page 51164, column 1, Sec.  1.959-1(b)(3), second paragraph 
of the column, third line, the language ``income with respect to the 
previously'' is corrected to read ``a United States shareholder's 
income with respect to the previously''.
    24. On page 51164, column 1, Sec.  1.959-1(b)(4)(iii), second line 
from the bottom of the paragraph, the language ``corporations are 
members of the same'' is corrected to read ``if both the first 
mentioned corporation and the covered shareholder are members of the 
same''.
    25. On page 51165, column 1, Sec.  1.959-1(d)(3), second paragraph 
of the column, first line, the language ``The application of this 
paragraph'' is corrected to read ``Examples. The application of this 
paragraph''.
    26. On page 51165, column 1, Sec.  1.959-1(d)(3), Example 1., 
paragraph heading, the language ``Shareholder previously taxed earnings 
and profits account.'' is corrected to read ``Shareholder's previously 
taxed earnings and profits account.''.
    27. On page 51165, column 1, Sec.  1.959-1(d)(3)(i), eighth and 
ninth lines, the language ``currency. FC earns $100x of subpart F 
income in year 1 and $100x of non-subpart'' is corrected to read 
``currency. In year 1, FC earns $100x of subpart F income and $100x of 
non-subpart F''.


Sec.  1.959-2  [Corrected]

    28. On page 51165, column 2, Sec.  1.959-2(a)(1), fourth line from 
the bottom of the paragraph, the language ``income of such distributee 
CFC also'' is corrected to read ``income of such upper-tier CFC also''.
    29. On page 51165, column 3, Sec.  1.959-2(a)(2), paragraph (i) of 
Example 2., second line from the bottom of the paragraph, the language 
``2, and FC had no earnings for year 2 other'' is corrected to read 
``2, and FC had no earnings and profits for year 2 other''.
    30. On page 51165, column 3, Sec.  1.959-2(a)(2), paragraph (ii) of 
Example 3., eighth and ninth lines, the language ``DP's pro rata share 
of the remaining $50, or $35 ($50 x 70%), is included in DP's gross'' 
is corrected to read ``DP's pro rata share of the remaining $50x, or 
$35x ($50x x 70%), is included in DP's gross''.
    31. On page 51166, column 1, Sec.  1.959-2(a)(2), paragraph (ii) of 
Example 3., first paragraph of the column, first line, the language 
``reduced to $0, however, as a result of the'' is corrected to read 
``reduced to $0, as a result of the''.
    32. On page 51166, column 1, Sec.  1.959-2(b)(2), third paragraph 
of the column, first line, the language ``The application of this 
paragraph'' is corrected to read ``Example. The application of this 
paragraph''.


Sec.  1.959-3  [Corrected]

    33. On page 51166, column 3, Sec.  1.959-3(b)(3)(i), third 
paragraph of the column, fifth through twelfth lines, the language 
``earnings and profits in the year in which such amounts are included 
in gross income of a United States shareholder under section 951(a) and 
are reclassified as to category of earnings and profits in the year in 
which such amounts would be so included but for the provisions of'' is 
corrected to read ``earnings and profits in the taxable year of the 
foreign corporation in which such amounts are included in the gross 
income of a United States shareholder under section 951(a) and are 
reclassified as to category of earnings and profits in the taxable year 
of the foreign corporation in which such amounts would be so included 
in the gross income of a United States shareholder under section 951(a) 
but for the provisions of''.
    34. On page 51167, column 2, Sec.  1.959-3(c)(1), third paragraph 
of the column, fourth line, the language ``are distributed by a foreign 
corporation'' is corrected to read ``are distributed by a foreign 
corporation to another foreign corporation''.
    35. On page 51167, column 2, Sec.  1.959-3(c)(1), fourteenth line, 
the language ``included in the foreign corporation's'' is corrected to 
read ``included in the distributee foreign corporation's''.
    36. On page 51167, column 2, Sec.  1.959-3(c)(2), fourth paragraph 
of the column, first line, the language ``The application of this 
paragraph'' is corrected to read ``Example. The application of this 
paragraph''.
    37. On page 51172, column 3, Sec.  1.959-3(g)(4), paragraph (i) of 
Example 1., first paragraph of the column, fourth line from the bottom 
of the paragraph, the language ``earnings and profits on its stock 
Class A'' is corrected to read ``earnings and profits on its Class A''.
    38. On page 51173, column 3, Sec.  1.959-3(g)(4), paragraph (i) of 
Example 5., third line, the language ``on its stock Class A stock 
consisting of a'' is corrected to read `` on its Class A stock 
consisting of a''.
    39. On page 51174, column 3, Sec.  1.959-3(h)(3)(i), third 
paragraph of the column, fourth line from the bottom of the paragraph, 
the language ``Sec. Sec.  1.959-1 and this section shall apply'' is 
corrected to read ``Sec.  1.959-1 and this section shall apply''.
    40. On page 51175, column 1, Sec.  1.959-3(h)(4)(i), fourth 
paragraph of the column, fifth line from the bottom of the paragraph, 
the language ``Sec. Sec.  1.959-1 and this section shall'' is corrected 
to read ``Sec.  1.959-1 and this section shall''.
    41. On page 51175, column 1, Sec.  1.959-3(h)(4)(ii), fifth 
paragraph of the column, first line, the language ``The application of 
this paragraph'' is corrected to read ``Example. The application of 
this paragraph''.


Sec.  1.961-2  [Corrected]

    42. On page 51177, column 1, Sec.  1.961-2(d), paragraph (i) of 
Example 3., third paragraph of the column, third line from the bottom 
of the paragraph, the language ``December 31, of year 1. In year 2, DP 
has a'' is corrected to read ``December 31 of year 1. In year 2, DP has 
a''.


Sec.  1.961-3  [Corrected]

    43. On page 51177, column 2, Sec.  1.961-3(a)(1), first paragraph 
of the column, second line from the bottom of the paragraph, the 
language ``shareholders gross income under'' is corrected to read 
``shareholder's gross income under''.
    44. On page 51177, column 3, Sec.  1.961-3(b)(1), third paragraph 
of the column, twelfth line, the language ``than wholly owned by a 
single United'' is corrected to read ``than wholly indirectly owned by 
a single United''.

LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel, (Procedure and Administration).
[FR Doc. E6-20798 Filed 12-7-06; 8:45 am]
BILLING CODE 4830-01-P