Anti-Avoidance and Anti-Loss Reimportation Rules Applicable Following a Loss on Disposition of Stock of Consolidated Subsidiaries, 17804-17806 [E7-6541]
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17804
Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations
Dated: March 29, 2007.
John C. Dugan,
Comptroller of the Currency, Office of the
Comptroller of the Currency.
Board of Governors of the Federal Reserve
System, April 3, 2007.
Jennifer J. Johnson,
Secretary of the Board.
Dated at Washington, DC, this 20th day of
March, 2007.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
Dated: April 2, 2007.
By the Office of Thrift Supervision.
John M. Reich,
Director.
[FR Doc. 07–1716 Filed 4–9–07; 8:45 am]
BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P;
6720–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Docket No. FAA–2006–24826; Airspace
Docket No. 06–ANM–3]
Establishment of Class E Airspace;
Nucla, CO
Class E airspace. This action corrects
this error.
Correction to Final Rule
Accordingly, pursuant to the authority
delegated to me, the legal description as
published in the Federal Register
February 23, 2007 (72 FR 8100), Federal
Register Docket No. FAA–2006–24826,
Airspace Docket No. 06–ANM–3, and
incorporated by reference in 14 CFR
71.1, is corrected as follows:
I
PART 71—[AMENDED]
§ 71.1
*
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule; correction.
SUMMARY: This action corrects an error
in the northwest boundary description
of a final rule that was published in the
Federal Register on February 23, 2007
(72 FR 8100) Federal Register Docket
No. FAA–2006–24826, Airspace Docket
No. 06–ANM–3.
DATES: Effective Date: 0901 UTC, May
10, 2007. The Director of the Federal
Register approves this incorporation by
reference action under 1 CFR part 51,
subject to the annual revision of FAA
Order 7400.9 and publication of
conforming amendments.
FOR FURTHER INFORMATION CONTACT: Ed
Haeseker, Federal Aviation
Administration, Western Service Area,
System Support Group, 1601 Lind
Avenue, SW., Renton, WA 98057;
telephone: (425) 917–6714.
SUPPLEMENTARY INFORMATION:
*
*
*
ANM CO E5 Nucla, CO [Corrected]
Hopkins Field, CO
(Lat. 38°14′20″ N., long. 108°33′48″ W.)
That airspace extending upward from 700
feet above the surface within a 6.0-mile
radius of Hopkins Field and within 4 miles
each side of the 317° bearing from Hopkins
Field extending from the 6.0-mile radius of
Hopkins Field northwest to 12.0 miles from
Hopkins Field; that airspace extending
upward from 1,200 feet above the surface
beginning at lat. 38°45′00″ N., long.
109°00′00″ W.; to lat. 38°30′00″ N., long.
108°30′00″ W.; to CONES VOR/DME; to
DOVE CREEK VORTAC; to lat. 38°30′00″ N.,
long. 109°10′00″ W.; to point of beginning.
*
AGENCY:
[Amended]
*
*
*
*
*
Issued in Seattle, Washington, on March
30, 2007.
Steven M. Osterdahl,
Director of Operations, En Route and Oceanic,
Western Service Area.
[FR Doc. E7–6649 Filed 4–9–07; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9322]
RIN 1545–BG26
Anti-Avoidance and Anti-Loss
Reimportation Rules Applicable
Following a Loss on Disposition of
Stock of Consolidated Subsidiaries
cprice-sewell on PROD1PC66 with RULES
History
Internal Revenue Service (IRS),
Treasury.
ACTION: Final and temporary
regulations.
Federal Register Docket FAA–2006–
24826, Airspace Docket No. 06–ANM–3,
published on February 23, 2007 (72 FR
8100), establishes Class E Airspace at
Hopkins Field, Nucla, CO, effective May
10, 2007. An error was discovered in the
northwest geographic boundary of the
SUMMARY: This document contains final
and temporary regulations under section
1502 of the Internal Revenue Code
(Code). These regulations provide
guidance to corporations filing
consolidated returns. These regulations
apply an anti-avoidance rule and revise
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an anti-loss reimportation rule that
applies following a disposition of stock
of a subsidiary at a loss. The text of the
temporary regulations also serves as the
text of the proposed regulations (REG–
156420–06) 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 April 10, 2007.
Applicability Date: For dates of
applicability, see §§ 1.1502–32T(k) and
1.1502–35T(j)(2).
FOR FURTHER INFORMATION CONTACT:
Theresa Abell, (202) 622–7700 or
Phoebe Bennett, (202) 622–7770 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Section 1.1502–35 currently addresses
loss duplication. The rule generally
applies whenever there is a disposition
of loss shares of subsidiary stock or a
subsidiary is deconsolidated. The
regulation includes several specific antiabuse rules, including a rule intended to
prevent a group from getting the benefit
of a loss on the stock of one of its
subsidiaries and then reimporting the
same economic loss back to into the
group (or its successor) in order to claim
a duplicative benefit from the one loss.
The current anti-loss reimportation
rule generally disallows reimported
losses that duplicate a loss recognized
and allowed with respect to the
disposition of subsidiary stock. The
term ‘‘subsidiary’’ is defined in
§ 1.1502–1(c) to mean a corporation that
is a member of a consolidated group but
is not the common parent of the group.
Taxpayers have attempted to avoid the
anti-loss reimportation rule by first
deconsolidating a subsidiary and then
selling loss shares of the subsidiary’s
stock. The loss on the stock is one that
was reflected in the subsidiary’s
attributes at the time of the
deconsolidation and is thus one that the
anti-loss reimportation rule is intended
to address. But because the sale occurs
after the subsidiary ceases to be a
member of the group, taxpayers take the
position that the loss recognized is not
with respect to ‘‘subsidiary’’ stock and
therefore is not subject to the anti-loss
reimportation rule. Thus, after obtaining
the tax benefit of its economic loss (on
the disposition of the stock), the group
would be free to reimport the loss and
then (directly or through a successor
group) claim a second tax benefit for its
one economic loss.
The IRS and Treasury Department
believe that the duplication of a group
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Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations
cprice-sewell on PROD1PC66 with RULES
loss distorts group income, and is
therefore inappropriate, regardless of
whether or not a duplicative recognition
of the loss occurs while the subsidiary
is a member. In either case, the group
would obtain more than a single tax
benefit for one economic loss. The IRS
and Treasury Department recognize that
such transactions remain subject to, and
reimportation will be prevented by,
other principles of law, such as the
Step-Transaction Doctrine and other
anti-avoidance rules of law. However,
the IRS and Treasury Department have
concluded that tax administration
would be better served by revising the
current anti-loss reimportation rule to
address these situations more directly.
Accordingly, these final and
temporary regulations revise the antiloss reimportation rule to clarify that
losses reflected in the basis of
subsidiary stock at the time of
deconsolidation may not be recognized
and reimported into the group,
regardless of whether the stock losses
are recognized when the subsidiary is a
member of the group. To discourage
further structuring to avoid its purposes,
the loss reimportation rule is also
revised to replace the list of events that
cause the application of the rule with a
list of criteria that identify
reimportation transactions that will be
treated as subject to the rule.
In addition, the temporary regulations
add a general anti-avoidance rule under
§ 1.1502–35T(g)(6), which provides that
appropriate adjustments will be made if
a taxpayer acts with a view to avoid the
purposes of § 1.1502–35. The temporary
regulations also remove § 1.1502–35(h)
(continued applicability of other rules of
law) because it unnecessarily duplicates
§ 1.1502–80(a), which provides that
other rules of law apply to members of
consolidated groups unless otherwise
provided in the regulations.
The temporary regulations that revise
the anti-loss reimportation rule apply to
reimportation events that occur on or
after April 10, 2007 if they occur with
respect to stock of a subsidiary sold on
or after March 7, 2002, or with respect
to stock of a subsidiary or former
subsidiary sold on or after April 10,
2007. The temporary regulations
provide a general anti-avoidance rule
that applies on or after April 10, 2007.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12666. Therefore, a
regulatory assessment is not required.
These temporary regulations address
situations in which taxpayers
inappropriately attempt to recognize
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duplicative tax losses by attempting to
avoid the application of the anti-loss
reimportation rule. For this reason, it
has been determined pursuant to 5
U.S.C. 553(b)(B) that prior notice and
public procedure are impracticable and
contrary to the public interest. For the
same reason, it has been determined
pursuant to 5 U.S.C. 553(d)(3) that good
cause exists to make these temporary
regulations effective upon the date of
publication. For applicability of the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) refer to the Special Analyses
section of the preamble to the crossreference notice of the 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.
§ 1.1502–32T
(temporary).
17805
Investment adjustments
Adoption of Amendments to the
Regulations
(a) through (b)(3)(iii)(C) [Reserved].
For further guidance, see § 1.1502–32(a)
through (b)(3)(iii)(C).
(D) Loss disallowed under § 1.1502–
35T(g)(3)(ii). Any loss or deduction the
use of which is disallowed pursuant to
§ 1.1502–35T(g)(3)(ii) (other than
duplicating items that are carried back
to a consolidated return year of the
group), and with respect to which no
waiver described in paragraph (b)(4) of
this section is filed, is treated as a
noncapital, nondeductible expense
incurred during the taxable year that
such loss would otherwise be absorbed.
(b)(3)(iv) through (b)(4)(iii) [Reserved].
For further guidance, see § 1.1502–
32(b)(3)(iv) through (b)(4)(iii).
*
*
*
*
*
(k) Effective date—(1) Applicability
date. Paragraph (b)(3)(iii)(D) of this
section applies to any original
consolidated Federal income tax return
due (without extensions) after April 10,
2007.
(2) Expiration date. The applicability
of paragraphs (b)(3)(iii)(D) and (k) of this
section will expire on April 9, 2010.
I Par. 4. Section 1.1502–35 is amended
by:
I 1. Revising paragraphs (g)(3) and (h).
I 2. Adding new paragraph (g)(6).
I 3. Revising paragraph (j).
The revisions and additions read as
follows:
Accordingly, 26 CFR part 1 is
amended as follows:
§ 1.1502–35 Transfers of subsidiary stock
and deconsolidations of subsidiaries.
PART 1—INCOME TAXES
*
Drafting Information
The principal author of these
regulations is Phoebe Bennett, Office of
the Associate Chief Counsel (Corporate).
However, other personnel from the IRS
and Treasury Department participated
in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
I
Paragraph 1. The authority citation
for part 1 continues to read as follows:
I
Authority: 26 U.S.C. 7805 * * *.
Sections 1.1502–32T and 1.1502–35T also
issued under 26 U.S.C. 1502 * * *.
I Par. 2. Section 1.1502–32 is amended
by revising paragraph (b)(3)(iii)(D) and
adding paragraph (k) to read as follows:
§ 1.1502–32
Investment adjustments.
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*
*
*
*
(b) * * *
(3) * * *
(iii)* * *
(D) [Reserved]. For further guidance,
see § 1.1502–32T(b)(3)(iii)(D).
*
*
*
*
*
(k) [Reserved]. For further guidance,
see § 1.1502–32T(k).
I Par. 3. Section 1.1502–32T is
amended by revising paragraphs (a)
through (b)(4)(iii) and adding paragraph
(k) to read as follows:
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(g) * * *
(3) [Reserved]. For further guidance,
see § 1.1502–35T(g)(3).
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*
*
*
*
(6) [Reserved]. For further guidance,
see § 1.1502–35T(g)(6).
(h) [Reserved]. For further guidance,
see § 1.1502–35T(h).
*
*
*
*
*
(j) Effective dates—(1) In general. This
section applies with respect to stock
transfers, deconsolidations of
subsidiaries, determinations of
worthlessness, and stock dispositions
on or after March 10, 2006. For rules
applicable before March 10, 2006, see
§ 1.1502–35T(j) as contained in 26 CFR
part 1 in effect on January 1, 2006.
(2) [Reserved]. For further guidance,
see § 1.1502–35T(j)(2).
*
*
*
*
*
I Par. 5. Section 1.1502–35T is
amended by revising paragraphs
(c)(4)(ii) through (j) to read as follows:
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17806
Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations
§ 1.1502–35T Transfers of subsidiary stock
and deconsolidations of subsidiaries
(temporary).
cprice-sewell on PROD1PC66 with RULES
*
*
*
*
*
(c)(4)(ii) through (g)(2) [Reserved]. For
further guidance, see § 1.1502–
35(c)(4)(ii) through (g)(2).
(3) Anti-loss reimportation rule—(i)
Conditions for application. This
paragraph (g)(3) applies when—
(A) A member of a group (the selling
group) recognized and was allowed a
loss with respect to a share of stock of
S, a subsidiary or former subsidiary of
the selling group;
(B) That stock loss was duplicated (in
whole or in part) in S’s attributes
(duplicating items) at the earlier of the
time that the loss was recognized or that
S ceased to be a member; and
(C) Within ten years of the date that
S ceased to be a member, there is a
reimportation event. For this purpose, a
reimportation event is any event after
which a duplicating item is a
reimported item. A reimported item is
any duplicating item that is reflected in
the attributes of any member of the
selling group, including S, or, if not
reflected in the attributes, would be
properly taken into account by any
member of the selling group (for
example as the result of a carryback) (a
reimported item).
(ii) Effect of application. Immediately
before the time that a reimported item
(or any portion of a reimported item)
would be properly taken into account
(but for the application of this paragraph
(g)(3)), such item (or such portion of the
item) is reduced to zero and no
deduction or loss is allowed, directly or
indirectly, with respect to that item.
(iii) Operating rules. For purposes of
this paragraph (g)(3)—
(A) The terms member, subsidiary,
and group include their predecessors
and successors to the extent necessary
to effectuate the purposes of this
section;
(B) The determination of whether a
loss is duplicative is made under the
principles of paragraph (d)(4) of this
section; and
(C) The reduction of a reimported
item (other than duplicating items that
are carried back to a consolidated return
year of the selling group) is a
noncapital, nondeductible expense
within the meaning of § 1.1502–
32(b)(3)(iii).
(g)(4) through (g)(5) [Reserved]. For
further guidance, see § 1.1502–35(g)(4)
through (g)(5).
(6) General anti-avoidance rule
applicable on or after April 10, 2007. If
a taxpayer acts with a view to avoid the
purposes of this section, appropriate
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13:19 Apr 09, 2007
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adjustments will be made to carry out
the purposes of this section.
(h) Application of other rules of law.
See § 1.1502–80(a) regarding the general
applicability of other rules of law.
(i) [Reserved]. For further guidance,
see § 1.1502–35(i).
(j)(1) [Reserved]. For further guidance,
see § 1.1502–35(j)(1).
(2) Transactions after April 10,
2007—(i) Effective date. Paragraph (g)(3)
of this section applies to reimported
items if the related stock loss is
recognized on or after April 10, 2007.
Paragraph (g)(3) (other than paragraph
(g)(3)(i)(A)) of this section also applies
with respect to the duplication of
subsidiary stock loss recognized in
dispositions (described in § 1.1502–
35(g)(3)(i)(A), as contained in 26 CFR
part 1, revised as of January 1, 2007) on
or after March 7, 2002, if the
reimportation event with respect to that
loss occurs on or after April 10, 2007.
For rules applicable to losses
reimported before April 10, 2007, see
§ 1.1502–35(g)(3), as contained in 26
CFR part 1 in effect on January 1, 2007.
Paragraphs (g)(6) and (h) of this section
apply on or after April 10, 2007. For
rules applicable prior to April 10, 2007,
see § 1.1502–35 as contained in 26 CFR
part 1 in effect on January 1, 2007.
(ii) Expiration date. The applicability
of paragraphs (g)(3), (g)(6), and (h) of
this section will expire on April 9, 2010.
*
*
*
*
*
Linda M. Kroening,
Acting Deputy Commissioner for Services and
Enforcement.
Approved: March 29, 2007.
Eric Solomon,
Assistant Secretary of the Treasury.
[FR Doc. E7–6541 Filed 4–9–07; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric
Administration
50 CFR Part 648
[Docket No. 04011–2010–4114–02; I.D.
040407D]
Magnuson-Stevens Fishery
Conservation and Management Act
Provisions; Fisheries of the
Northeastern United States; Northeast
(NE) Multispecies Fishery; Modification
of the Yellowtail Flounder Landing
Limit for the U.S./Canada Management
Area
National Marine Fisheries
Service (NMFS), National Oceanic and
AGENCY:
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Atmospheric Administration (NOAA),
Commerce.
ACTION: Temporary rule; landing limit.
SUMMARY: NMFS announces that the
Administrator, Northeast (NE) Region,
NMFS (Regional Administrator), is
increasing the Georges Bank (GB)
yellowtail flounder trip limit to 25,000
lb (11,340 kg) for NE multispecies daysat-sea (DAS) vessels fishing in the U.S./
Canada Management Area. This action
is authorized by the regulations
implementing Amendment 13 to the NE
Multispecies Fishery Management Plan
and is intended to prevent underharvesting of the Total Allowable Catch
(TAC) for GB yellowtail flounder while
ensuring that the TAC will not be
exceeded during the 2006 fishing year.
This action is being taken to provide
additional opportunities for vessels to
fully harvest the GB yellowtail flounder
TAC under the authority of the
Magnuson-Stevens Fishery
Conservation and Management Act
(Magnuson-Stevens Act).
DATES: Effective April 5, 2007, through
April 30, 2007.
FOR FURTHER INFORMATION CONTACT:
Tobey Curtis, Fishery Management
Specialist, (978) 281–9273, fax (978)
281–9135.
SUPPLEMENTARY INFORMATION:
Regulations governing the GB yellowtail
flounder landing limit within the U.S./
Canada Management Area are found at
§ 648.85(a)(3)(iv)(C) and (D). The
regulations authorize vessels issued a
valid limited access NE multispecies
permit and fishing under a NE
multispecies DAS to fish in the U.S./
Canada Management Area, as defined at
§ 648.85(a)(1), under specific
conditions. The TAC for GB yellowtail
flounder for the 2006 fishing year (May
1, 2006 - April 30, 2007) is 2,070 mt.
The regulations at § 648.85(a)(3)(iv)(D)
authorize the Regional Administrator to
increase or decrease the trip limits in
the U.S./Canada Management Area to
prevent over-harvesting or underharvesting the TAC allocation. On
March 8, 2007, the 10,000–lb (4,536–kg)
trip limit for GB yellowtail flounder was
reduced to 5,000 lb (2,268 kg) in the
Eastern U.S./Canada Area to prevent
over-harvesting the TAC (72 FR 10426),
and the requirement to only use a
haddock separator trawl in the Eastern
U.S./Canada Area was removed.
Currently, NE multispecies vessels
fishing in the Eastern U.S./Canada Area
under a NE multispecies day-at-sea
(DAS) with trawl gear must use either a
haddock separator trawl or a flounder
trawl net, as specified at
§ 648.85(a)(3)(iii). Based upon the most
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]]>Agencies
[Federal Register Volume 72, Number 68 (Tuesday, April 10, 2007)]
[Rules and Regulations]
[Pages 17804-17806]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-6541]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9322]
RIN 1545-BG26
Anti-Avoidance and Anti-Loss Reimportation Rules Applicable
Following a Loss on Disposition of Stock of Consolidated Subsidiaries
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final and temporary regulations under
section 1502 of the Internal Revenue Code (Code). These regulations
provide guidance to corporations filing consolidated returns. These
regulations apply an anti-avoidance rule and revise an anti-loss
reimportation rule that applies following a disposition of stock of a
subsidiary at a loss. The text of the temporary regulations also serves
as the text of the proposed regulations (REG-156420-06) 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 April 10, 2007.
Applicability Date: For dates of applicability, see Sec. Sec.
1.1502-32T(k) and 1.1502-35T(j)(2).
FOR FURTHER INFORMATION CONTACT: Theresa Abell, (202) 622-7700 or
Phoebe Bennett, (202) 622-7770 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
Section 1.1502-35 currently addresses loss duplication. The rule
generally applies whenever there is a disposition of loss shares of
subsidiary stock or a subsidiary is deconsolidated. The regulation
includes several specific anti-abuse rules, including a rule intended
to prevent a group from getting the benefit of a loss on the stock of
one of its subsidiaries and then reimporting the same economic loss
back to into the group (or its successor) in order to claim a
duplicative benefit from the one loss.
The current anti-loss reimportation rule generally disallows
reimported losses that duplicate a loss recognized and allowed with
respect to the disposition of subsidiary stock. The term ``subsidiary''
is defined in Sec. 1.1502-1(c) to mean a corporation that is a member
of a consolidated group but is not the common parent of the group.
Taxpayers have attempted to avoid the anti-loss reimportation rule by
first deconsolidating a subsidiary and then selling loss shares of the
subsidiary's stock. The loss on the stock is one that was reflected in
the subsidiary's attributes at the time of the deconsolidation and is
thus one that the anti-loss reimportation rule is intended to address.
But because the sale occurs after the subsidiary ceases to be a member
of the group, taxpayers take the position that the loss recognized is
not with respect to ``subsidiary'' stock and therefore is not subject
to the anti-loss reimportation rule. Thus, after obtaining the tax
benefit of its economic loss (on the disposition of the stock), the
group would be free to reimport the loss and then (directly or through
a successor group) claim a second tax benefit for its one economic
loss.
The IRS and Treasury Department believe that the duplication of a
group
[[Page 17805]]
loss distorts group income, and is therefore inappropriate, regardless
of whether or not a duplicative recognition of the loss occurs while
the subsidiary is a member. In either case, the group would obtain more
than a single tax benefit for one economic loss. The IRS and Treasury
Department recognize that such transactions remain subject to, and
reimportation will be prevented by, other principles of law, such as
the Step-Transaction Doctrine and other anti-avoidance rules of law.
However, the IRS and Treasury Department have concluded that tax
administration would be better served by revising the current anti-loss
reimportation rule to address these situations more directly.
Accordingly, these final and temporary regulations revise the anti-
loss reimportation rule to clarify that losses reflected in the basis
of subsidiary stock at the time of deconsolidation may not be
recognized and reimported into the group, regardless of whether the
stock losses are recognized when the subsidiary is a member of the
group. To discourage further structuring to avoid its purposes, the
loss reimportation rule is also revised to replace the list of events
that cause the application of the rule with a list of criteria that
identify reimportation transactions that will be treated as subject to
the rule.
In addition, the temporary regulations add a general anti-avoidance
rule under Sec. 1.1502-35T(g)(6), which provides that appropriate
adjustments will be made if a taxpayer acts with a view to avoid the
purposes of Sec. 1.1502-35. The temporary regulations also remove
Sec. 1.1502-35(h) (continued applicability of other rules of law)
because it unnecessarily duplicates Sec. 1.1502-80(a), which provides
that other rules of law apply to members of consolidated groups unless
otherwise provided in the regulations.
The temporary regulations that revise the anti-loss reimportation
rule apply to reimportation events that occur on or after April 10,
2007 if they occur with respect to stock of a subsidiary sold on or
after March 7, 2002, or with respect to stock of a subsidiary or former
subsidiary sold on or after April 10, 2007. The temporary regulations
provide a general anti-avoidance rule that applies on or after April
10, 2007.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12666.
Therefore, a regulatory assessment is not required. These temporary
regulations address situations in which taxpayers inappropriately
attempt to recognize duplicative tax losses by attempting to avoid the
application of the anti-loss reimportation rule. For this reason, it
has been determined pursuant to 5 U.S.C. 553(b)(B) that prior notice
and public procedure are impracticable and contrary to the public
interest. For the same reason, it has been determined pursuant to 5
U.S.C. 553(d)(3) that good cause exists to make these temporary
regulations effective upon the date of publication. For 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 the 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 Phoebe Bennett, Office
of the Associate Chief Counsel (Corporate). However, other personnel
from the IRS and Treasury Department participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read as
follows:
Authority: 26 U.S.C. 7805 * * *.
Sections 1.1502-32T and 1.1502-35T also issued under 26 U.S.C.
1502 * * *.
0
Par. 2. Section 1.1502-32 is amended by revising paragraph
(b)(3)(iii)(D) and adding paragraph (k) to read as follows:
Sec. 1.1502-32 Investment adjustments.
* * * * *
(b) * * *
(3) * * *
(iii)* * *
(D) [Reserved]. For further guidance, see Sec. 1.1502-
32T(b)(3)(iii)(D).
* * * * *
(k) [Reserved]. For further guidance, see Sec. 1.1502-32T(k).
0
Par. 3. Section 1.1502-32T is amended by revising paragraphs (a)
through (b)(4)(iii) and adding paragraph (k) to read as follows:
Sec. 1.1502-32T Investment adjustments (temporary).
(a) through (b)(3)(iii)(C) [Reserved]. For further guidance, see
Sec. 1.1502-32(a) through (b)(3)(iii)(C).
(D) Loss disallowed under Sec. 1.1502-35T(g)(3)(ii). Any loss or
deduction the use of which is disallowed pursuant to Sec. 1.1502-
35T(g)(3)(ii) (other than duplicating items that are carried back to a
consolidated return year of the group), and with respect to which no
waiver described in paragraph (b)(4) of this section is filed, is
treated as a noncapital, nondeductible expense incurred during the
taxable year that such loss would otherwise be absorbed.
(b)(3)(iv) through (b)(4)(iii) [Reserved]. For further guidance,
see Sec. 1.1502-32(b)(3)(iv) through (b)(4)(iii).
* * * * *
(k) Effective date--(1) Applicability date. Paragraph
(b)(3)(iii)(D) of this section applies to any original consolidated
Federal income tax return due (without extensions) after April 10,
2007.
(2) Expiration date. The applicability of paragraphs (b)(3)(iii)(D)
and (k) of this section will expire on April 9, 2010.
0
Par. 4. Section 1.1502-35 is amended by:
0
1. Revising paragraphs (g)(3) and (h).
0
2. Adding new paragraph (g)(6).
0
3. Revising paragraph (j).
The revisions and additions read as follows:
Sec. 1.1502-35 Transfers of subsidiary stock and deconsolidations of
subsidiaries.
* * * * *
(g) * * *
(3) [Reserved]. For further guidance, see Sec. 1.1502-35T(g)(3).
* * * * *
(6) [Reserved]. For further guidance, see Sec. 1.1502-35T(g)(6).
(h) [Reserved]. For further guidance, see Sec. 1.1502-35T(h).
* * * * *
(j) Effective dates--(1) In general. This section applies with
respect to stock transfers, deconsolidations of subsidiaries,
determinations of worthlessness, and stock dispositions on or after
March 10, 2006. For rules applicable before March 10, 2006, see Sec.
1.1502-35T(j) as contained in 26 CFR part 1 in effect on January 1,
2006.
(2) [Reserved]. For further guidance, see Sec. 1.1502-35T(j)(2).
* * * * *
0
Par. 5. Section 1.1502-35T is amended by revising paragraphs (c)(4)(ii)
through (j) to read as follows:
[[Page 17806]]
Sec. 1.1502-35T Transfers of subsidiary stock and deconsolidations of
subsidiaries (temporary).
* * * * *
(c)(4)(ii) through (g)(2) [Reserved]. For further guidance, see
Sec. 1.1502-35(c)(4)(ii) through (g)(2).
(3) Anti-loss reimportation rule--(i) Conditions for application.
This paragraph (g)(3) applies when--
(A) A member of a group (the selling group) recognized and was
allowed a loss with respect to a share of stock of S, a subsidiary or
former subsidiary of the selling group;
(B) That stock loss was duplicated (in whole or in part) in S's
attributes (duplicating items) at the earlier of the time that the loss
was recognized or that S ceased to be a member; and
(C) Within ten years of the date that S ceased to be a member,
there is a reimportation event. For this purpose, a reimportation event
is any event after which a duplicating item is a reimported item. A
reimported item is any duplicating item that is reflected in the
attributes of any member of the selling group, including S, or, if not
reflected in the attributes, would be properly taken into account by
any member of the selling group (for example as the result of a
carryback) (a reimported item).
(ii) Effect of application. Immediately before the time that a
reimported item (or any portion of a reimported item) would be properly
taken into account (but for the application of this paragraph (g)(3)),
such item (or such portion of the item) is reduced to zero and no
deduction or loss is allowed, directly or indirectly, with respect to
that item.
(iii) Operating rules. For purposes of this paragraph (g)(3)--
(A) The terms member, subsidiary, and group include their
predecessors and successors to the extent necessary to effectuate the
purposes of this section;
(B) The determination of whether a loss is duplicative is made
under the principles of paragraph (d)(4) of this section; and
(C) The reduction of a reimported item (other than duplicating
items that are carried back to a consolidated return year of the
selling group) is a noncapital, nondeductible expense within the
meaning of Sec. 1.1502-32(b)(3)(iii).
(g)(4) through (g)(5) [Reserved]. For further guidance, see Sec.
1.1502-35(g)(4) through (g)(5).
(6) General anti-avoidance rule applicable on or after April 10,
2007. If a taxpayer acts with a view to avoid the purposes of this
section, appropriate adjustments will be made to carry out the purposes
of this section.
(h) Application of other rules of law. See Sec. 1.1502-80(a)
regarding the general applicability of other rules of law.
(i) [Reserved]. For further guidance, see Sec. 1.1502-35(i).
(j)(1) [Reserved]. For further guidance, see Sec. 1.1502-35(j)(1).
(2) Transactions after April 10, 2007--(i) Effective date.
Paragraph (g)(3) of this section applies to reimported items if the
related stock loss is recognized on or after April 10, 2007. Paragraph
(g)(3) (other than paragraph (g)(3)(i)(A)) of this section also applies
with respect to the duplication of subsidiary stock loss recognized in
dispositions (described in Sec. 1.1502-35(g)(3)(i)(A), as contained in
26 CFR part 1, revised as of January 1, 2007) on or after March 7,
2002, if the reimportation event with respect to that loss occurs on or
after April 10, 2007. For rules applicable to losses reimported before
April 10, 2007, see Sec. 1.1502-35(g)(3), as contained in 26 CFR part
1 in effect on January 1, 2007. Paragraphs (g)(6) and (h) of this
section apply on or after April 10, 2007. For rules applicable prior to
April 10, 2007, see Sec. 1.1502-35 as contained in 26 CFR part 1 in
effect on January 1, 2007.
(ii) Expiration date. The applicability of paragraphs (g)(3),
(g)(6), and (h) of this section will expire on April 9, 2010.
* * * * *
Linda M. Kroening,
Acting Deputy Commissioner for Services and Enforcement.
Approved: March 29, 2007.
Eric Solomon,
Assistant Secretary of the Treasury.
[FR Doc. E7-6541 Filed 4-9-07; 8:45 am]
BILLING CODE 4830-01-P
