Unified Rule for Loss on Subsidiary Stock; Correction, 31483-31487 [E7-11057]
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Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Proposed Rules
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(f) Allocation of income and loss by a
corporation that is a member of the
expanded affiliated group for only a
portion of the year—(1) In general. A
corporation that becomes or ceases to be
a member of an EAG during its taxable
year must allocate its taxable income or
loss, QPAI, and W–2 wages between the
portion of the taxable year that it is a
member of the EAG and the portion of
the taxable year that it is not a member
of the EAG. This allocation of items is
made by using the pro rata allocation
method described in this paragraph
(f)(1). Under the pro rata allocation
method, an equal portion of a
corporation’s taxable income or loss,
QPAI, and W–2 wages for the taxable
year is assigned to each day of the
corporation’s taxable year. Those items
assigned to those days that the
corporation was a member of the EAG
are then aggregated.
*
*
*
*
*
(g) * * *
(3) Example. The following example
illustrates the application of paragraphs
(f) and (g) of this section:
Example. (i) Facts. Corporations X and Y,
calendar year corporations, are members of
the same EAG for the entire 2010 taxable
year. Corporation Z, also a calendar year
corporation, is a member of the EAG of
which X and Y are members for the first half
of 2010 and not a member of any EAG for the
second half of 2010. During the 2010 taxable
year, neither X, Y, nor Z join in the filing of
a consolidated Federal income tax return.
Assume that X, Y, and Z each have W–2
wages in excess of the section 199(b) wage
limitation for all relevant periods. In 2010, X
has taxable income of $2,000 and QPAI of
$600, Y has a taxable loss of $400 and QPAI
of ($200), and Z has taxable income of $1,400
and QPAI of $2,400.
(ii) Analysis. Pursuant to the pro rata
allocation method, $700 of Z’s 2010 taxable
income and $1,200 of Z’s 2010 QPAI are
allocated to the first half of the 2010 taxable
year (the period in which Z is a member of
the EAG) and $700 of Z’s 2010 taxable
income and $1,200 of Z’s 2010 QPAI are
allocated to the second half of the 2010
taxable year (the period in which Z is not a
member of any EAG). Accordingly, in 2010,
the EAG has taxable income of $2,300 (X’s
$2,000 + Y’s ($400) + Z’s $700) and QPAI of
$1,600 (X’s $600 + Y’s ($200) + Z’s $1,200).
The EAG’s section 199 deduction for 2010 is
therefore $144 (9% of the lesser of the EAG’s
$2,300 of taxable income or $1,600 of QPAI).
Pursuant to § 1.199–7(c)(1), this $144
deduction is allocated to X, Y, and Z in
proportion to their respective QPAI.
Accordingly, X is allocated $48 of the EAG’s
section 199 deduction, Y is allocated $0 of
the EAG’s section 199 deduction, and Z is
allocated $96 of the deduction. For the
second half of 2010, Z has taxable income of
$700 and QPAI of $1,200. Therefore, for the
second half of 2010, Z has a section 199
deduction of $63 (9% of the lesser of its $700
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taxable income or $1,200 QPAI for the
second half of 2010). Accordingly, X’s 2010
section 199 deduction is $48, Y’s 2010
section 199 deduction is $0, and Z’s 2010
section 199 deduction is $159, the sum of the
$96 section 199 deduction of the EAG
allocated to Z for the first half of 2010 and
Z’s $63 section 199 deduction for the second
half of 2010.
DEPARTMENT OF THE TREASURY
Par. 4. Section 1.199–8 is amended
by:
1. Adding two sentences at the end of
paragraph (a).
2. Adding new paragraphs (i)(8) and
(i)(9).
The revisions and additions read as
follows:
Unified Rule for Loss on Subsidiary
Stock; Correction
§ 1.199–8
Other rules.
(a) * * * For purposes of §§ 1.199–1
through 1.199–9, use of terms such as
payment, paid, incurred, or paid or
incurred is not intended to provide any
specific rule based upon the use of one
term versus another. In general, the use
of the term payment, paid, incurred, or
paid or incurred is intended to convey
the appropriate standard under the
taxpayer’s method of accounting.
*
*
*
*
*
(i) * * *
(8) Qualified film produced by the
taxpayer. Section 1.199–3(k) is
proposed to be applicable to taxable
years beginning on or after the date the
final regulations are published in the
Federal Register. Until the date the final
regulations are published in the Federal
Register, taxpayers may rely on § 1.199–
3(k) of these proposed regulations for
taxable years beginning after December
31, 2004. However, for taxable years
beginning before June 1, 2006, a
taxpayer may rely on § 1.199–3(k) of the
proposed regulations only if the
taxpayer does not apply Notice 2005–14
(2005–1 CB 498) (see
§ 601.601(d)(2)(ii)(b) of this chapter) or
REG–105847–05 (2005–2 CB 987) (see
§ 601.601(d)(2)(ii)(b) of this chapter) to
the taxable year.
(9) Expanded affiliated groups.
Section 1.199–7(e), Example 10, and
§ 1.199–7(f)(1) are proposed to be
applicable to taxable years beginning on
or after the date the final regulations are
published in the Federal Register. Until
the date the final regulations are
published in the Federal Register,
taxpayers may rely on § 1.199–7(e),
Example 10, of these proposed
regulations for taxable years beginning
after December 31, 2004.
Kevin M. Brown,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. E7–10821 Filed 6–6–07; 8:45 am]
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Internal Revenue Service
26 CFR Part 1
[REG–157711–02]
RIN 1545–BB61
Internal Revenue Service (IRS),
Treasury.
ACTION: Correction to notice of proposed
rulemaking.
AGENCY:
SUMMARY: This document contains
corrections to a notice of proposed
rulemaking that were published in the
Federal Register on Tuesday, January
23, 2007 (72 FR 2964). These regulations
apply to corporations filing
consolidated returns. The regulations
implement aspects of the repeal of the
General Utilities doctrine by
redetermining members’ bases in
subsidiary stock and requiring certain
reductions in subsidiary stock basis on
a transfer of the stock. The regulations
promote the clear reflection of income
by redetermining members’ bases in
subsidiary’s stock and reducing the
subsidiary’s attributes to prevent the
duplication of loss, and they also,
provide guidance limiting the
application of section 362(e)(2) with
respect to transactions between
members of a consolidated group.
FOR FURTHER INFORMATION CONTACT:
Theresa Abell (202) 622–7700 or Phoebe
Bennett (202) 622–7770 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
The notice of proposed rulemaking
(REG–157711–02) that is the subject of
these corrections are under sections 358,
362(e)(2) and 1502 of the Internal
Revenue Code.
Need for Correction
As published, the notice of proposed
rulemaking (REG–157711–02) contains
errors that may prove to be misleading
and are in need of clarification.
Correction of Publication
Accordingly, the publication of the
notice of proposed rulemaking (REG–
157711–02), that is the subject of FR
Doc. 07–187, is corrected as follows:
1. On page 2964, column 2, in the
preamble, under the paragraph heading
‘‘Paperwork Reduction Act’’, eighth
paragraph of the column, line 3, the
language ‘‘13(e)(4)(v) and 1.1502–
36(d)(7). The’’ is corrected to read
‘‘13(e)(4)(v) and 1.1502–36(d)(6). The’’.
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2. On page 2964, column 3, in the
preamble, under the paragraph heading
‘‘Background’’, second paragraph of the
column, line 10, the language ‘‘v. United
States, 255 F.3d 1357 (2001),’’ is
corrected to read ‘‘v. United States, 255
F.3d 1357 (Fed. Cir. 2001),’’.
3. On page 2965, column 1, in the
preamble, under the paragraph heading
‘‘2. The Administrative Response to GU
Repeal: § 1.1502–20.’’, first paragraph,
line 2 from bottom of the paragraph, the
language ‘‘determine adjustments to
member’s’’ is corrected to read
‘‘determine adjustments to members ’’ ‘.
4. On page 2972, column 1, in the
preamble, under the paragraph heading
‘‘2. Hybrid Tracing-Presumptive Model:
Asset Tracing.’’, first paragraph, line 3,
the language ‘‘presumption approach
that would’’ is corrected to read
‘‘presumptive approach that would’’.
5. On page 2972, column 2, in the
preamble, the paragraph heading ‘‘3.
Presumption-Based Models’’ is
corrected to read ‘‘3. Presumptive-Based
Models.’’.
6. On page 2975, column 1, in the
preamble, under the paragraph heading
‘‘d. Netting of items from different tax
periods.’’, first paragraph, line 6, the
language, ‘‘investments were not. The
IRS and’’ is corrected to read
‘‘investment adjustments were not. The
IRS and’’.
7. On page 2975, column 1, in the
preamble, under the paragraph heading
‘‘d. Netting of items from different tax
periods.’’, second paragraph, line 8, the
language, ‘‘account by the group. Thus,
IRS and’’ is corrected to read ‘‘account
by the group. Thus, the IRS and’’.
8. On page 2975, column 2, in the
preamble under the paragraph heading
‘‘e. Summary and conclusions.’’, second
paragraph, line 12 from the bottom of
the paragraph, the language
‘‘administrative and other concerns’’ is
corrected to read ‘‘administrative
burden and other concerns’’.
9. On page 2977, column 1, in the
preamble, under the paragraph heading
‘‘E. Noneconomic and Duplicated Loss
From Investment Adjustment System.’’,
first paragraph, line 2, the language
‘‘preamble, IRS and Treasury
Department’’ is corrected to read
‘‘preamble, the IRS and Treasury
Department’’.
10. On page 2978, column 3, under
paragraph heading ‘‘1. Overview.’’, third
paragraph of the column, line 4 from the
bottom of the paragraph, the language
‘‘implement a loss limitation approach’’
is correct to read ‘‘implements a loss
limitation approach’’.
11. On page 2980, column 1, under
paragraph heading ‘‘4. The Attribute
Reduction Rule.’’, second paragraph,
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lines 16 and 17, the language ‘‘the value
of all of the S shares. Net the inside
attributes generally has the same’’ is
corrected to read ‘‘the value of all the S
shares. The term net inside attributes
generally has the same’’.
12. On page 2980, column 1, under
paragraph heading ‘‘4. The Attribute
Reduction Rule.’’, third paragraph, last
line of the column, the language ‘‘stock
loss for a later recognition (for’’ is
corrected to read ‘‘stock loss for later
recognition (for’’.
13. On page 2980, column 2, under
paragraph heading ‘‘4. The Attribute
Reduction Rule.’’, second paragraph of
the column, lines 1 and 2 from bottom
of the paragraph, the language
‘‘attributes are reduced reflects this
principle.’’ is corrected to read
‘‘attributes are reduced reflects these
principles.’’.
14. On page 2980, column 3, under
subparagraph heading ‘‘a. Special rules
applicable when S holds stock of lowertier subsidiary.’’, second paragraph, line
16, the language ‘‘inside attributes. For
example, if P owns’’ is corrected to read
‘‘inside attributes. For example, assume
P owns’’.
15. On page 2981, column 3, under
subparagraph heading ‘‘b. Election to
reduce stock basis and/or reattribute
loss.’’, first paragraph of the column,
line 22 from bottom of the paragraph,
the language ‘‘transaction. Proposed
regulations under’’ is corrected to read
‘‘transaction.’’
16. On page 2981, column 3, under
subparagraph heading ‘‘b. Election to
reduce stock basis and/or reattribute
loss.’’, second paragraph, line 21 from
bottom of the paragraph, the language
‘‘§ 1.1502–32 treat the reattributed’’ is
corrected and added with new
paragraph to read ‘‘Proposed regulations
under § 1.1502–32 treat the
reattributed’’.
17. On page 2982, column 1, under
subparagraph heading ‘‘6. Special Rules
for Section 362(e)(2) Transaction.’’,
second paragraph, lines 1 and 2 from
bottom of the column, the language
‘‘under section 362(e)(2)(C) been made
Similarly, to adjust for distortions’’ is
corrected to read ‘‘under section
362(e)(2)(C) been made. Similarly, to
adjust for distortions’’.
18. On page 2982, column 2, under
subparagraph heading ‘‘6. Special Rules
for Section 362(e)(2) Transaction.’’,
second paragraph of the column, line 9
from the bottom of the paragraph, the
language, ‘‘stock basis and net inside
attributes that’’ is corrected to read
‘‘stock basis, net inside attributes, and
value that’’.
19. On page 2983, column 2, under
subparagraph heading ‘‘2. Suspension of
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Section 362(e)(2) for Intercompany
Transactions.’’, last paragraph of the
column, line 2 from bottom of the
column, the language ‘‘investment
adjustment system has not’’ is corrected
to read ‘‘investment adjustment system
has not eliminated’’.
20. On page 2984, column 2, under
subparagraph heading ‘‘4. Application
of Section 362(e)(2) to Intercompany
Transactions.’’, first paragraph of the
column, line 7 from the bottom of the
paragraph, the language ‘‘attributes is
applied to proportionately’’ is corrected
to read ‘‘attributes is applied
proportionately’’.
21. On page 2984, column 3, under
subparagraph heading ‘‘5. Special
Allocations Under § 1.1502–32.’’, line 7
of the paragraph, the language ‘‘entirely
to member’s shares. In other’’ is
corrected to read ‘‘entirely to members’’
shares. In other’’.
22. On page 2986, column 2, under
subparagraph heading, ‘‘8. Retention of,
and Nonsubstantive Revisions to,
§ 1.1502–80(c).’’, third paragraph of the
column, line 8 of the paragraph, the
language ‘‘under the LDR and, since
LDR no longer’’ is corrected to read
‘‘under the LDR and, since the LDR no
longer’’.
23. On page 2986, column 3, under
subparagraph heading, ‘‘8. Retention of,
and Nonsubstantive Revisions to,
§ 1.1502–80(c).’’, first paragraph of the
column, line 2 of the column, the
language ‘‘deduction. See, In re
Prudential Lines,’’ is corrected to read
‘‘deduction. See In re Prudential
Lines,’’.
§ 1.1502–13
[Corrected]
24. On page 2988, column 1,
§ 1.1502–13(e)(4)(ii)(C)(2), line 12 from
bottom of the column, the language
‘‘otherwise is eliminated (other than’’ is
corrected to read ‘‘otherwise eliminated
(other than’’.
25. On page 2989, column 3,
§ 1.1502–13(e)(4)(vi), Example 3.(iv),
line 18 of the paragraph, the language
‘‘in § 1.1502–32(b)(3)(iii)(B), and will
effect P’s’’ is corrected to read ‘‘in
§ 1.1502–32(b)(3)(iii)(B), and will affect
P’s’’.
§ 1.1502–32
[Corrected]
26. On page 2991, column 3,
§ 1.1502–32(b)(3)(iii)(C), line 3 from
bottom of the paragraph, the language
‘‘Federal Register, see 1.1502–’’ is
corrected to read ‘‘Federal Register, see
§ 1.1502–’’.
27. On page 2991, column 3,
§ 1.1502–32(b)(3)(iii)(D), line 3 from
bottom of the paragraph, the language
‘‘see 1.1502–32(b)(3)(iii)(D) as
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contained’’ is corrected to read ‘‘see
§ 1.1502–32(b)(3)(iii)(D) as contained’’.
28. On page 2991, column 3,
§ 1.1502–32(c)(1)(i), line 2 from bottom
of the column, the language ‘‘allocated
to the shares of S’s stock to’’ is corrected
to read ‘‘allocated to the shares of S
stock to’’.
29. On page 2993, column 1,
§ 1.1502–32(c)(1)(ii)(A)(2)
Example.(iv)(D), line 7 from bottom of
the column, the language
‘‘nondeductible basis recovery item if it
is’’ is corrected to read ‘‘nondeductible
basis recovery item if it were’’.
30. On page 2994, column 1,
§ 1.1502–32(c)(2)(i), line 11, the
language ‘‘that member’s excess loss
accounts and’’ is corrected to read ‘‘that
member’s excess loss account and’’.
31. On page 2994, column 2,
§ 1.1502–32(c)(4)(i), line 3 of the
paragraph, the language ‘‘share of S’s
preferred and common stock’’ is
corrected to read ‘‘share of S preferred
and common stock’’.
32. On page 2994, column 2,
§ 1.1502–32(c)(4)(i), line 8 of the
paragraph, the language ‘‘made by
reallocating S’s adjustments’’ is
corrected to read ‘‘made by reallocating
S stock adjustments’’.
33. On page 2994, column 2,
§ 1.1502–32(c)(4)(i), last line of the
paragraph, the language ‘‘of S’s shares.
* * *’’ is corrected to read ‘‘of the S
shares. * * *’’.
§ 1.1502–35
[Corrected]
34. On page 2994, column 3,
§ 1.1502–35(a), line 5 from bottom of the
paragraph, the language ‘‘of April 1,
2006. For transfers and’’ is corrected to
read ‘‘of April 1, 2007. For transfers
and’’.
35. On page 2995, column 1,
§ 1.1502–35(b)(3)(iii), line 4, the
language ‘‘year of the group) is a
noncapital,’’ is corrected to read ‘‘year
of the selling group) is a noncapital,’’.
jlentini on PROD1PC65 with PROPOSALS
§ 1.1502–36
[Corrected]
36. On page 2995, column 2, the
language of the section heading
‘‘§ 1.1502–36 Loss on subsidiary stock.’’
is corrected to read ‘‘§ 1.1502–36
Unified rule for loss on subsidiary
stock.’’.
37. On page 2996, column 2,
§ 1.1502–36(b)(1)(i), line 4 of the
paragraph, the language ‘‘(b) reduce the
extent to which there is’’ is corrected to
read ‘‘(b) reduce (but do not increase)
the extent to which there is’’.
38. On page 2997, column 1,
§ 1.1502–36(b)(2)(iii)(A), line 2 of the
paragraph, the language ‘‘ Reallocations
are made in a manner that’’ is corrected
to read ‘‘All reallocations (both to and
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from members’ shares of S stock) are
made in a manner that’’.
39. On page 2997, column 2,
§ 1.1502–36(b)(2)(iii)(B)(2)(ii)
Example.(iii), line 6 from the bottom of
the column, the language ‘‘would have
tiered up to the M share P sold,’’ is
corrected to read ‘‘would have tiered up
to the M share that P sold,’’.
40. On page 2998, column 2,
§ 1.1502–36(b)(3) Example 2.(i), line 10
of the paragraph, the language ‘‘Asset 1
for $100. On December 31, year 2, S’’ is
corrected to read ‘‘Asset 1 for $100. On
December 31, year 2, P’’.
41. On page 2999, column 2,
§ 1.1502–36(b)(3) Example 3.(i), line 5 of
the paragraph, the language ‘‘preferred
shares to reflect their entitlement to’’ is
corrected to read ‘‘preferred shares to
reflect its entitlement to’’.
42. On page 2999, column 3,
§ 1.1502–36(b)(3) Example 3.(ii)(C), line
8 of the paragraph, the language
‘‘Accordingly $25 of that amount is
reallocated’’ is corrected to read
‘‘Accordingly, $25 of that amount is
reallocated’’.
43. On page 3000, column 2,
§ 1.1502–36(c)(6)(i), line 5 from the
bottom of the paragraph, the language
‘‘S1’s investment adjustments
increased’’ is corrected to read ‘‘S1’s
investment adjustments increase’’.
44. On page 3000, column 3,
§ 1.1502–36(c)(6)(v) Example.(ii), line 3
from the bottom of the paragraph, the
language ‘‘the loss share stock of S1, the
lowest-tier’’ is corrected to read ‘‘the
loss share of S1 stock, the lowest-tier’’.
45. On page 3000, column 3,
§ 1.1502–36(c)(6)(v) Example.(iii), line 3
from the bottom of the paragraph, the
language ‘‘recognized on the transfer of
S3 tiers up to’’ is corrected to read
‘‘recognized on the transfer of S3 stock
tiers up to’’.
46. On page 3001, column 3,
§ 1.1502–36(c)(8) Example 1.(i)(C), line
13 of the paragraph, the language
‘‘recognized on the sale of Asset 1. Thus
the’’ is corrected to read ‘‘recognized on
the sale of Asset 1. Thus, the’’.
47. On page 3001, column 3,
§ 1.1502–36(c)(8) Example 1.(ii), line 5
from the bottom of the paragraph, the
language ‘‘Asset 1 to $0) Because the net
positive’’ is corrected to read ‘‘Asset 1
to $0). Because the net positive’’.
48. On page 3002, column 3,
§ 1.1502–36(c)(8) Example 1.(iv)(B), line
4 of the paragraph, the language ‘‘there
redetermination would change no’’ is
corrected to read ‘‘redetermination
would change no’’.
49. On page 3003, column 2,
§ 1.1502–36(c)(8) Example 4.(ii), lines 4
through 10 of the column, the language
‘‘Because the net positive adjustment
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includes items of income (and not just
gain), the analysis of the application of
this paragraph (c) is the same here as in
paragraph (i)(C) of this Example 4.
Furthermore, the analysis of the
application of this paragraph (C) would
also be the same if the $60 loss
carryover were subject to a section 382
limitation from a prior ownership
change, and if, instead, it would subject
to the limitation in § 1.1502–’’ is
corrected to read ‘‘The analysis of the
application of this paragraph (c) is the
same here as in paragraph (i)(C) of this
Example 4. Furthermore, the analysis of
the application of this paragraph (c)
would also be the same if the $60 loss
carryover were subject to a section 382
limitation from a prior ownership
change, if, instead, it were subject to the
limitation in § 1.1502–’’.
50. On page 3003, column 2,
§ 1.1502–36(c)(8) Example 5.(i), lines 7
through 10 of the paragraph, the
language ‘‘December 31, year 1, P sells
one of its shares, Share 1, for $20. After
applying and giving effect to all
generally applicable rules of law (other
than this section), P’s basis in its Share’’
is corrected to read ‘‘December 31, year
1, P sells one of its S shares, Share 1,
for $20. After applying and giving effect
to all generally applicable rules of law
(other than this section), P’s basis in
Share’’.
51. On page 3003, column 2,
§ 1.1502–36(c)(8) Example 5.(iii), line 6
from the bottom of the paragraph, the
language ‘‘($100 from the sale of the
asset), and Share’’ is corrected to read
‘‘($100 from the sale of Asset), and
Share’’.
52. On page 3004, column 3,
§ 1.1502–36(c)(8) Example 7.(i), line 8
from the bottom of the paragraph, the
language ‘‘basis in S1 under § 1.1502–32
by $40 (to’’ is corrected to read ‘‘basis
in the S1 share under § 1.1502–32 by
$40 (to’’.
53. On page 3006, column 2,
§ 1.1502–36(d)(5)(ii)(B)(3), line 3 from
the bottom of the paragraph, the
language ‘‘extent necessary to reduce
the bases of’’ is corrected to read ‘‘extent
necessary to reduce the basis of’’.
54. On page 3006, column 2,
§ 1.1502–36(d)(5)(ii)(B)(4), line 2 from
the bottom of the paragraph, the
language ‘‘the basis of such shares
without’’ is corrected to read ‘‘the bases
of such shares without’’.
55. On page 3007, column 1,
§ 1.1502–36(d)(6)(ii)(B), line 5 from the
bottom of the paragraph, the language
‘‘immediately tier up (under the’’ is
corrected to read ‘‘immediately tiers up
(under the’’.
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56. On page 3007, column 3,
§ 1.1502–36(d)(6)(iv), line 4 of the
paragraph, the language ‘‘all members’
basis in loss shares of S’’ is corrected to
read ‘‘all members’ bases in loss shares
of S’’.
57. On page 3007, column 3,
§ 1.1502–36(d)(7) Example 1.(i)(B), line
3 of the paragraph, the language ‘‘under
paragraph (b) of this section either’’ is
corrected to read ‘‘under paragraph (b)
of this section because’’.
58. On page 3008, column 1,
§ 1.1502–36(d)(7) Example 1.(i)(B), line
2 of the column, the language ‘‘disparity
in the basis of the shares). See’’ is
corrected to read ‘‘disparity in the bases
of the shares). See’’.
59. On page 3009, column 2,
§ 1.1502–36(d)(7) Example 4.(i)(A), line
4 of the column, the language ‘‘the $500
income earned). The sale is’’ is
corrected to read ‘‘the $500 of income
earned). The sale is’’.
60. On page 3010, column 2,
§ 1.1502–36(d)(7) Example 5.(i)(C)(3),
line 10 from the bottom of the
paragraph, the language ‘‘the transaction
($50) over the sum of’’ is corrected to
read ‘‘the transaction ($50) over the sum
of the’’.
61. On page 3010, column 3,
§ 1.1502–36(d)(7) Example 5.(ii)(C)(4),
lines 15 to 21 of the paragraph, the
language ‘‘reductions to share A and to
share B under this paragraph (d) are
reversed to restore the basis of each
share to $12.50. Thus, $25 of the $27.50
attribute reduction applied to reduce the
basis of share A and $25 of the $47.50
attribute reduction applied to reduce the
basis of share B are reversed, restoring
the’’ is corrected to read ‘‘reductions to
Share A and to Share B under this
paragraph (d) are reversed to restore the
basis of each share to $12.50. Thus, $25
of the $27.50 attribute reduction applied
to reduce the basis of Share A and $25
of the $47.50 attribute reduction applied
to reduce the basis of Share B are
reversed, restoring the’’.
62. On page 3011, column 2,
§ 1.1502–36(d)(7) Example 6.(ii)(B), line
2 from the bottom of the column, the
language ‘‘basis in subsidiary stock
under the principles’’ is corrected to
read ‘‘bases in subsidiary stock under
the principles’’.
63. On page 3011, column 3,
§ 1.1502–36(d)(7) Example 6.(ii)(B), line
2 from the top of the column, the
language ‘‘the transaction the sale is not
subject to’’ is corrected to read ‘‘the
transaction, the sale is not subject to’’.
64. On page 3011, column 3,
§ 1.1502–36(d)(7) Example 6.(ii)(C), line
3 of the paragraph, the language ‘‘this
section). The next highest tier transfer
VerDate Aug<31>2005
16:51 Jun 06, 2007
Jkt 211001
is’’ is corrected to read ‘‘this section).
The next higher tier transfer is’’.
65. On page 3011, column 3,
§ 1.1502–36(d)(7) Example 6.(ii)(C), line
8 from the bottom of the paragraph, the
language ‘‘of the transferred Share E
minus the $20’’ is corrected to read ‘‘of
the transferred share E minus the $20’’.
66. On page 3011, column 3,
§ 1.1502–36(d)(7) Example 6.(ii)(D)(1),
line 6 from the bottom of the paragraph,
the language ‘‘basis in its asset)) minus
S’s liability ($20).’’ is corrected to read
‘‘basis in its asset))) minus S’s liability
($20).’’.
67. On page 3011, column 3,
§ 1.1502–36(d)(7) Example 6.(ii)(D)(2),
lines 5 to 6 from the bottom of the
paragraph, the language ‘‘applied to
reduce the basis of share E because
share E was transferred in a transaction
in’’ is corrected to read ‘‘applied to
reduce the basis of share E, because
share E was transferred in a transfer in’’.
68. On page 3011, column 3,
§ 1.1502–36(d)(7) Example 6.(ii)(D)(3),
line 3 from the bottom of the column,
the language ‘‘apportioned to or applied
to reduced the’’ is corrected to read
‘‘apportioned to or applied to reduce
the’’.
69. On page 3012, column 3,
§ 1.1502–36(d)(7) Example 7.(iii)(C)(3),
line 16 of the paragraph, the language
‘‘reducing the basis of both assets to
$0.’’ is corrected to read ‘‘reducing the
basis of each asset to $0.’’.
70. On page 3012, column 3,
§ 1.1502–36(d)(7) Example 7.(iii)(C)(3),
line 2 from the bottom of the paragraph,
the language ‘‘attribute reduction
amount is disregarded has’’ is corrected
to read ‘‘attribute reduction amount is
disregarded and has’’.
71. On page 3013, column 1,
§ 1.1502–36(d)(7) Example 8.(i)(E), line
5 of the paragraph, the language ‘‘basis
in the S shares by the full attribute’’ is
corrected to read ‘‘bases in the S shares
by the full attribute’’.
72. On page 3013, column 2,
§ 1.1502–36(d)(7) Example 8.(i)(E), line
7 of the paragraph, the language
‘‘transfer. The reduction of M’s basis in
the S’’ is corrected to read ‘‘transfer. The
reduction of M’s bases in the S’’.
73. On page 3014, column 1,
§ 1.1502–36(d)(7) Example 8.(ii)(E),
lines 2 through 5 of the paragraph, the
language ‘‘are the same as paragraph
(ii)(A) of this Example 8, except that P
elects under paragraph (d)(6) of this
section to reduce M’s basis in the S
shares by the full attribute’’ is corrected
to read ‘‘are the same as in paragraph
(ii)(A) of this Example 8, except that P
elects under paragraph (d)(6) of this
section to reduce M’s bases in the S
shares by the full attribute’’.
PO 00000
Frm 00014
Fmt 4702
Sfmt 4702
74. On page 3014, column 1,
§ 1.1502–36(d)(7) Example 8.(ii)(F), is
removed.
75. On page 3014, column 1,
§ 1.1502–36(d)(7) Example 8.(ii)(G), is
the newly designated paragraph (F).
76. On page 3014, column 2,
§ 1.1502–36(d)(7) Example 9.(i), line 5
from the bottom of the column, the
language ‘‘to P1 (the common parent of
a consolidated’’ is corrected to read ‘‘to
P1 (the common parent of a different
consolidated’’.
77. On page 3014, column 3,
§ 1.1502–36(d)(7) Example 9.(ii), line 7
from the bottom of the column, the
language ‘‘computed and is applied to
adjust the basis’’ is corrected to read
‘‘computed and is applied to adjust the
bases’’.
78. On page 3015, column 1,
§ 1.1502–36(d)(7) Example 9.(iii), line 1
of the paragraph, the language ‘‘(iii)
Transfers in next highest tier (loss’’ is
corrected to read ‘‘(iii) Transfers in next
higher tier (loss’’.
79. On page 3015, column 3,
§ 1.1502–36(d)(7) Example 9.(iv)(B)(2),
line 30 from the bottom of the
paragraph, the language ‘‘allocated
amount is apportioned among other’’ is
corrected to read ‘‘allocated amount is
apportioned among the other’’.
80. On page 3017, column 1,
§ 1.1502–36(e)(1), last line of the
paragraph, the language ‘‘the section.’’ is
corrected to read ‘‘this section.’’.
81. On page 3017, column 2,
§ 1.1502–36(e)(2)(iii), line 6 of the
paragraph, the language ‘‘allocable
portion of S’s attributes has’’ is
corrected to read ‘‘allocable portion of
S’s net inside attributes has’’.
82. On page 3017, column 2,
§ 1.1502–36(e)(2)(iv) Example.(i)(A),
line 11 of the paragraph, the language
‘‘basis of A1 would have been reduced
by $80’’ is corrected to read ‘‘basis in
Asset 1 would have been reduced by
$80’’.
83. On page 3017, column 2,
§ 1.1502–36(e)(2)(iv) Example.(i)(B), last
line of the paragraph, the language ‘‘to
this paragraph (c).’’ is corrected to read
‘‘to paragraph (c) of this section.’’.
84. On page 3018, column 1,
§ 1.1502–36(f)(2), line 6 of the column,
the language ‘‘dealers in securities) and
481’’ is corrected to read ‘‘dealers in
securities) and section 481’’.
85. On page 3018, column 1,
§ 1.1502–36(f)(4), lines 6 through 15 of
the paragraph, the language ‘‘basis of
shares of S2 stock under § 1.1502–32
affect the investment adjustments made
to the basis of the stock of S1. A
subsidiary (S1) (and its shares of stock)
is lower tier with respect to another
subsidiary (S) (and its shares of stock)
E:\FR\FM\07JNP1.SGM
07JNP1
Federal Register / Vol. 72, No. 109 / Thursday, June 7, 2007 / Proposed Rules
if investment adjustments made to the
basis of shares of S1 stock affect the
investment adjustments made to the
basis of shares of S stock. The’’ is
corrected to read ‘‘bases of shares of S2
stock under § 1.1502–32 affect the
investment adjustments made to the
bases of shares of S1 stock. A subsidiary
(S1) (and its shares of stock) is lower tier
with respect to another subsidiary (S)
(and its shares of stock) if investment
adjustments made to the bases of shares
of S1 stock affect the investment
adjustments made to the bases of shares
of S stock. The’’.
86. On page 3019, column 1,
§ 1.1502–36(g)(2) Example 3.(ii), line 4
of the paragraph, the language ‘‘there is
no disparity in the basis of the’’ is
corrected to read ‘‘there is no disparity
in the bases of the’’.
87. On page 3019, column 1,
§ 1.1502–36(g)(2) Example 4.(i), lines 5
through 6 from the bottom of the
paragraph, the language ‘‘equal basis
that exceeds value. S owns Asset 1 with
a basis that exceeds value and cash.’’ is
corrected to read ‘‘equal basis that
exceeds value. S owns Cash and Asset
1 with a basis that exceeds value.’’.
88. On page 3019, column 1,
§ 1.1502–36(g)(2) Example 4.(ii), line 4
of the paragraph, the language ‘‘there is
no disparity in the basis of the’’ is
corrected to read ‘‘there is no disparity
in the bases of the’’.
LaNita Van Dyke,
Chief, Publications and Regulations Branch,
Legal Processing Division, Associate Chief
Counsel (Procedure and Administration).
[FR Doc. E7–11057 Filed 6–6–07; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 20
[REG–119097–05]
RIN 1545–BE52
Grantor Retained Interest Trusts—
Application of Sections 2036 and 2039
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
jlentini on PROD1PC65 with PROPOSALS
AGENCY:
SUMMARY: This document contains
proposed regulations providing
guidance on the portion of a trust
properly includible in a grantor’s gross
estate under Internal Revenue Code
(Code) sections 2036 and 2039 if the
grantor has retained the use of property
in a trust or the right to an annuity,
VerDate Aug<31>2005
16:51 Jun 06, 2007
Jkt 211001
unitrust, or other income payment from
such trust for life, for any period not
ascertainable without reference to the
grantor’s death, or for a period that does
not in fact end before the grantor’s
death. This document also provides
notice of a public hearing on these
proposed regulations.
DATES: Written or electronic comments
must be received by September 5, 2007.
Outlines of topics to be discussed at the
public hearing scheduled for September
26, 2007, must be received by
September 5, 2007.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–119097–05),
Internal Revenue Service, POB 7604,
Ben Franklin Station, Washington, DC
20044. Submissions may be hand
delivered to the Courier’s Desk, Internal
Revenue Service, Attn: CC:PA:LPD:PR
(REG–119097–05), room 5203, Internal
Revenue Service, PO Box 7604, Ben
Franklin Station, Washington DC 20044.
Alternatively, submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–119097–05),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW., Washington DC, or sent
electronically via the Federal
eRulemaking Portal at https://
www.regulations.gov (IRS REG–119097–
05). The public hearing will be held in
the auditorium, Internal Revenue
Building, 1111 Constitution Avenue,
NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations,
Theresa M. Melchiorre, (202) 622–7830;
concerning submissions of comments,
the hearing, and/or to be placed on the
building access list to attend the
hearing, Richard Hurst, (202) 622–7180
(not toll-free numbers) or e-mail at
Richard.A.Hurst@irscounsel.treas.gov.
SUPPLEMENTARY INFORMATION:
Background
The proposed regulations provide
guidance on what portion of a trust is
includible in the deceased grantor’s
gross estate under section 2036 if the
grantor retained the right to use
property in the trust or the right to
receive from that trust an annuity,
unitrust, or other income payment for
the grantor’s life, for any period not
ascertainable without reference to the
grantor’s death, or for any period that
does not in fact end before the grantor’s
death. In addition, the proposed
regulations provide guidance on the
possible application of section 2039 to
trusts in which the decedent has
retained the use of property held in the
trust or has retained an annuity,
PO 00000
Frm 00015
Fmt 4702
Sfmt 4702
31487
unitrust, or other income interest that is
includible in the decedent’s gross estate
under section 2036. These trusts include
without limitation certain charitable
trusts (collectively CRTs) such as
charitable remainder annuity trusts
(CRATs) within the meaning of section
664(d)(1), charitable remainder unitrusts
(CRUTs) within the meaning of section
664(d)(2) or (d)(3), and charitable
remainder trusts that do not qualify
under section 664, as well as other
trusts established by a grantor
(collectively GRTs) such as grantor
retained annuity trusts (GRATs), grantor
retained unitrusts (GRUTs), and various
forms of grantor retained income trusts
(GRITs), such as qualified personal
residence trusts (QPRTs) and personal
residence trusts (PRTs). A CRT is within
the scope of these proposed regulations
whether or not the CRT meets the
qualifications of sections 664(d)(1), (2),
or (3) and a GRT is within the scope of
these proposed regulations whether or
not the grantor’s retained interest is a
‘‘qualified interest’’ as defined in
section 2702(b). This guidance does not
apply to trusts or other contractual
arrangements arising by reason of a
decedent’s employment and generally
does not apply to annuities purchased
by the decedent, as these types of
interests fall within the ambit of section
2039.
Under section 2036(a), a decedent’s
gross estate includes the value of any
interest in property transferred by the
decedent in which the decedent
retained for the decedent’s life, for any
period not ascertainable without
reference to the decedent’s death, or for
any period that does not in fact end
before the decedent’s death, either the
possession or enjoyment of the property
or a right to the income from the
property, or the right (either alone or
with another) to designate the persons
who may possess or enjoy the property
or its income. Section 20.2036–1(a)
provides generally that, if the decedent
retained or reserved an interest with
respect to all of the property transferred
by the decedent, the amount to be
included in the gross estate under
section 2036 is the value of the entire
property on the date of death. If the
decedent retained a right with respect to
only part of the property transferred, the
amount to be included in the decedent’s
gross estate under section 2036 is the
corresponding proportionate amount of
the corpus. Rev. Rul. 76–273, 1976–2 CB
268, and Rev. Rul. 82–105, 1982–1 CB
133 (See § 601.601(d)(2)), generally
provide that the portion of the corpus of
a CRUT and CRAT includible in the
decedent’s gross estate under section
E:\FR\FM\07JNP1.SGM
07JNP1
]]>Agencies
[Federal Register Volume 72, Number 109 (Thursday, June 7, 2007)]
[Proposed Rules]
[Pages 31483-31487]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-11057]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-157711-02]
RIN 1545-BB61
Unified Rule for Loss on Subsidiary Stock; Correction
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Correction to notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This document contains corrections to a notice of proposed
rulemaking that were published in the Federal Register on Tuesday,
January 23, 2007 (72 FR 2964). These regulations apply to corporations
filing consolidated returns. The regulations implement aspects of the
repeal of the General Utilities doctrine by redetermining members'
bases in subsidiary stock and requiring certain reductions in
subsidiary stock basis on a transfer of the stock. The regulations
promote the clear reflection of income by redetermining members' bases
in subsidiary's stock and reducing the subsidiary's attributes to
prevent the duplication of loss, and they also, provide guidance
limiting the application of section 362(e)(2) with respect to
transactions between members of a consolidated group.
FOR FURTHER INFORMATION CONTACT: Theresa Abell (202) 622-7700 or Phoebe
Bennett (202) 622-7770 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
The notice of proposed rulemaking (REG-157711-02) that is the
subject of these corrections are under sections 358, 362(e)(2) and 1502
of the Internal Revenue Code.
Need for Correction
As published, the notice of proposed rulemaking (REG-157711-02)
contains errors that may prove to be misleading and are in need of
clarification.
Correction of Publication
Accordingly, the publication of the notice of proposed rulemaking
(REG-157711-02), that is the subject of FR Doc. 07-187, is corrected as
follows:
1. On page 2964, column 2, in the preamble, under the paragraph
heading ``Paperwork Reduction Act'', eighth paragraph of the column,
line 3, the language ``13(e)(4)(v) and 1.1502-36(d)(7). The'' is
corrected to read ``13(e)(4)(v) and 1.1502-36(d)(6). The''.
[[Page 31484]]
2. On page 2964, column 3, in the preamble, under the paragraph
heading ``Background'', second paragraph of the column, line 10, the
language ``v. United States, 255 F.3d 1357 (2001),'' is corrected to
read ``v. United States, 255 F.3d 1357 (Fed. Cir. 2001),''.
3. On page 2965, column 1, in the preamble, under the paragraph
heading ``2. The Administrative Response to GU Repeal: Sec. 1.1502-
20.'', first paragraph, line 2 from bottom of the paragraph, the
language ``determine adjustments to member's'' is corrected to read
``determine adjustments to members '' `.
4. On page 2972, column 1, in the preamble, under the paragraph
heading ``2. Hybrid Tracing-Presumptive Model: Asset Tracing.'', first
paragraph, line 3, the language ``presumption approach that would'' is
corrected to read ``presumptive approach that would''.
5. On page 2972, column 2, in the preamble, the paragraph heading
``3. Presumption-Based Models'' is corrected to read ``3. Presumptive-
Based Models.''.
6. On page 2975, column 1, in the preamble, under the paragraph
heading ``d. Netting of items from different tax periods.'', first
paragraph, line 6, the language, ``investments were not. The IRS and''
is corrected to read ``investment adjustments were not. The IRS and''.
7. On page 2975, column 1, in the preamble, under the paragraph
heading ``d. Netting of items from different tax periods.'', second
paragraph, line 8, the language, ``account by the group. Thus, IRS
and'' is corrected to read ``account by the group. Thus, the IRS and''.
8. On page 2975, column 2, in the preamble under the paragraph
heading ``e. Summary and conclusions.'', second paragraph, line 12 from
the bottom of the paragraph, the language ``administrative and other
concerns'' is corrected to read ``administrative burden and other
concerns''.
9. On page 2977, column 1, in the preamble, under the paragraph
heading ``E. Noneconomic and Duplicated Loss From Investment Adjustment
System.'', first paragraph, line 2, the language ``preamble, IRS and
Treasury Department'' is corrected to read ``preamble, the IRS and
Treasury Department''.
10. On page 2978, column 3, under paragraph heading ``1.
Overview.'', third paragraph of the column, line 4 from the bottom of
the paragraph, the language ``implement a loss limitation approach'' is
correct to read ``implements a loss limitation approach''.
11. On page 2980, column 1, under paragraph heading ``4. The
Attribute Reduction Rule.'', second paragraph, lines 16 and 17, the
language ``the value of all of the S shares. Net the inside attributes
generally has the same'' is corrected to read ``the value of all the S
shares. The term net inside attributes generally has the same''.
12. On page 2980, column 1, under paragraph heading ``4. The
Attribute Reduction Rule.'', third paragraph, last line of the column,
the language ``stock loss for a later recognition (for'' is corrected
to read ``stock loss for later recognition (for''.
13. On page 2980, column 2, under paragraph heading ``4. The
Attribute Reduction Rule.'', second paragraph of the column, lines 1
and 2 from bottom of the paragraph, the language ``attributes are
reduced reflects this principle.'' is corrected to read ``attributes
are reduced reflects these principles.''.
14. On page 2980, column 3, under subparagraph heading ``a. Special
rules applicable when S holds stock of lower-tier subsidiary.'', second
paragraph, line 16, the language ``inside attributes. For example, if P
owns'' is corrected to read ``inside attributes. For example, assume P
owns''.
15. On page 2981, column 3, under subparagraph heading ``b.
Election to reduce stock basis and/or reattribute loss.'', first
paragraph of the column, line 22 from bottom of the paragraph, the
language ``transaction. Proposed regulations under'' is corrected to
read ``transaction.''
16. On page 2981, column 3, under subparagraph heading ``b.
Election to reduce stock basis and/or reattribute loss.'', second
paragraph, line 21 from bottom of the paragraph, the language ``Sec.
1.1502-32 treat the reattributed'' is corrected and added with new
paragraph to read ``Proposed regulations under Sec. 1.1502-32 treat
the reattributed''.
17. On page 2982, column 1, under subparagraph heading ``6. Special
Rules for Section 362(e)(2) Transaction.'', second paragraph, lines 1
and 2 from bottom of the column, the language ``under section
362(e)(2)(C) been made Similarly, to adjust for distortions'' is
corrected to read ``under section 362(e)(2)(C) been made. Similarly, to
adjust for distortions''.
18. On page 2982, column 2, under subparagraph heading ``6. Special
Rules for Section 362(e)(2) Transaction.'', second paragraph of the
column, line 9 from the bottom of the paragraph, the language, ``stock
basis and net inside attributes that'' is corrected to read ``stock
basis, net inside attributes, and value that''.
19. On page 2983, column 2, under subparagraph heading ``2.
Suspension of Section 362(e)(2) for Intercompany Transactions.'', last
paragraph of the column, line 2 from bottom of the column, the language
``investment adjustment system has not'' is corrected to read
``investment adjustment system has not eliminated''.
20. On page 2984, column 2, under subparagraph heading ``4.
Application of Section 362(e)(2) to Intercompany Transactions.'', first
paragraph of the column, line 7 from the bottom of the paragraph, the
language ``attributes is applied to proportionately'' is corrected to
read ``attributes is applied proportionately''.
21. On page 2984, column 3, under subparagraph heading ``5. Special
Allocations Under Sec. 1.1502-32.'', line 7 of the paragraph, the
language ``entirely to member's shares. In other'' is corrected to read
``entirely to members'' shares. In other''.
22. On page 2986, column 2, under subparagraph heading, ``8.
Retention of, and Nonsubstantive Revisions to, Sec. 1.1502-80(c).'',
third paragraph of the column, line 8 of the paragraph, the language
``under the LDR and, since LDR no longer'' is corrected to read ``under
the LDR and, since the LDR no longer''.
23. On page 2986, column 3, under subparagraph heading, ``8.
Retention of, and Nonsubstantive Revisions to, Sec. 1.1502-80(c).'',
first paragraph of the column, line 2 of the column, the language
``deduction. See, In re Prudential Lines,'' is corrected to read
``deduction. See In re Prudential Lines,''.
Sec. 1.1502-13 [Corrected]
24. On page 2988, column 1, Sec. 1.1502-13(e)(4)(ii)(C)(2), line
12 from bottom of the column, the language ``otherwise is eliminated
(other than'' is corrected to read ``otherwise eliminated (other
than''.
25. On page 2989, column 3, Sec. 1.1502-13(e)(4)(vi), Example
3.(iv), line 18 of the paragraph, the language ``in Sec. 1.1502-
32(b)(3)(iii)(B), and will effect P's'' is corrected to read ``in Sec.
1.1502-32(b)(3)(iii)(B), and will affect P's''.
Sec. 1.1502-32 [Corrected]
26. On page 2991, column 3, Sec. 1.1502-32(b)(3)(iii)(C), line 3
from bottom of the paragraph, the language ``Federal Register, see
1.1502-'' is corrected to read ``Federal Register, see Sec. 1.1502-''.
27. On page 2991, column 3, Sec. 1.1502-32(b)(3)(iii)(D), line 3
from bottom of the paragraph, the language ``see 1.1502-
32(b)(3)(iii)(D) as
[[Page 31485]]
contained'' is corrected to read ``see Sec. 1.1502-32(b)(3)(iii)(D) as
contained''.
28. On page 2991, column 3, Sec. 1.1502-32(c)(1)(i), line 2 from
bottom of the column, the language ``allocated to the shares of S's
stock to'' is corrected to read ``allocated to the shares of S stock
to''.
29. On page 2993, column 1, Sec. 1.1502-32(c)(1)(ii)(A)(2)
Example.(iv)(D), line 7 from bottom of the column, the language
``nondeductible basis recovery item if it is'' is corrected to read
``nondeductible basis recovery item if it were''.
30. On page 2994, column 1, Sec. 1.1502-32(c)(2)(i), line 11, the
language ``that member's excess loss accounts and'' is corrected to
read ``that member's excess loss account and''.
31. On page 2994, column 2, Sec. 1.1502-32(c)(4)(i), line 3 of the
paragraph, the language ``share of S's preferred and common stock'' is
corrected to read ``share of S preferred and common stock''.
32. On page 2994, column 2, Sec. 1.1502-32(c)(4)(i), line 8 of the
paragraph, the language ``made by reallocating S's adjustments'' is
corrected to read ``made by reallocating S stock adjustments''.
33. On page 2994, column 2, Sec. 1.1502-32(c)(4)(i), last line of
the paragraph, the language ``of S's shares. * * *'' is corrected to
read ``of the S shares. * * *''.
Sec. 1.1502-35 [Corrected]
34. On page 2994, column 3, Sec. 1.1502-35(a), line 5 from bottom
of the paragraph, the language ``of April 1, 2006. For transfers and''
is corrected to read ``of April 1, 2007. For transfers and''.
35. On page 2995, column 1, Sec. 1.1502-35(b)(3)(iii), line 4, the
language ``year of the group) is a noncapital,'' is corrected to read
``year of the selling group) is a noncapital,''.
Sec. 1.1502-36 [Corrected]
36. On page 2995, column 2, the language of the section heading
``Sec. 1.1502-36 Loss on subsidiary stock.'' is corrected to read
``Sec. 1.1502-36 Unified rule for loss on subsidiary stock.''.
37. On page 2996, column 2, Sec. 1.1502-36(b)(1)(i), line 4 of the
paragraph, the language ``(b) reduce the extent to which there is'' is
corrected to read ``(b) reduce (but do not increase) the extent to
which there is''.
38. On page 2997, column 1, Sec. 1.1502-36(b)(2)(iii)(A), line 2
of the paragraph, the language `` Reallocations are made in a manner
that'' is corrected to read ``All reallocations (both to and from
members' shares of S stock) are made in a manner that''.
39. On page 2997, column 2, Sec. 1.1502-36(b)(2)(iii)(B)(2)(ii)
Example.(iii), line 6 from the bottom of the column, the language
``would have tiered up to the M share P sold,'' is corrected to read
``would have tiered up to the M share that P sold,''.
40. On page 2998, column 2, Sec. 1.1502-36(b)(3) Example 2.(i),
line 10 of the paragraph, the language ``Asset 1 for $100. On December
31, year 2, S'' is corrected to read ``Asset 1 for $100. On December
31, year 2, P''.
41. On page 2999, column 2, Sec. 1.1502-36(b)(3) Example 3.(i),
line 5 of the paragraph, the language ``preferred shares to reflect
their entitlement to'' is corrected to read ``preferred shares to
reflect its entitlement to''.
42. On page 2999, column 3, Sec. 1.1502-36(b)(3) Example
3.(ii)(C), line 8 of the paragraph, the language ``Accordingly $25 of
that amount is reallocated'' is corrected to read ``Accordingly, $25 of
that amount is reallocated''.
43. On page 3000, column 2, Sec. 1.1502-36(c)(6)(i), line 5 from
the bottom of the paragraph, the language ``S1's investment adjustments
increased'' is corrected to read ``S1's investment adjustments
increase''.
44. On page 3000, column 3, Sec. 1.1502-36(c)(6)(v) Example.(ii),
line 3 from the bottom of the paragraph, the language ``the loss share
stock of S1, the lowest-tier'' is corrected to read ``the loss share of
S1 stock, the lowest-tier''.
45. On page 3000, column 3, Sec. 1.1502-36(c)(6)(v) Example.(iii),
line 3 from the bottom of the paragraph, the language ``recognized on
the transfer of S3 tiers up to'' is corrected to read ``recognized on
the transfer of S3 stock tiers up to''.
46. On page 3001, column 3, Sec. 1.1502-36(c)(8) Example 1.(i)(C),
line 13 of the paragraph, the language ``recognized on the sale of
Asset 1. Thus the'' is corrected to read ``recognized on the sale of
Asset 1. Thus, the''.
47. On page 3001, column 3, Sec. 1.1502-36(c)(8) Example 1.(ii),
line 5 from the bottom of the paragraph, the language ``Asset 1 to $0)
Because the net positive'' is corrected to read ``Asset 1 to $0).
Because the net positive''.
48. On page 3002, column 3, Sec. 1.1502-36(c)(8) Example
1.(iv)(B), line 4 of the paragraph, the language ``there
redetermination would change no'' is corrected to read
``redetermination would change no''.
49. On page 3003, column 2, Sec. 1.1502-36(c)(8) Example 4.(ii),
lines 4 through 10 of the column, the language ``Because the net
positive adjustment includes items of income (and not just gain), the
analysis of the application of this paragraph (c) is the same here as
in paragraph (i)(C) of this Example 4. Furthermore, the analysis of the
application of this paragraph (C) would also be the same if the $60
loss carryover were subject to a section 382 limitation from a prior
ownership change, and if, instead, it would subject to the limitation
in Sec. 1.1502-'' is corrected to read ``The analysis of the
application of this paragraph (c) is the same here as in paragraph
(i)(C) of this Example 4. Furthermore, the analysis of the application
of this paragraph (c) would also be the same if the $60 loss carryover
were subject to a section 382 limitation from a prior ownership change,
if, instead, it were subject to the limitation in Sec. 1.1502-''.
50. On page 3003, column 2, Sec. 1.1502-36(c)(8) Example 5.(i),
lines 7 through 10 of the paragraph, the language ``December 31, year
1, P sells one of its shares, Share 1, for $20. After applying and
giving effect to all generally applicable rules of law (other than this
section), P's basis in its Share'' is corrected to read ``December 31,
year 1, P sells one of its S shares, Share 1, for $20. After applying
and giving effect to all generally applicable rules of law (other than
this section), P's basis in Share''.
51. On page 3003, column 2, Sec. 1.1502-36(c)(8) Example 5.(iii),
line 6 from the bottom of the paragraph, the language ``($100 from the
sale of the asset), and Share'' is corrected to read ``($100 from the
sale of Asset), and Share''.
52. On page 3004, column 3, Sec. 1.1502-36(c)(8) Example 7.(i),
line 8 from the bottom of the paragraph, the language ``basis in S1
under Sec. 1.1502-32 by $40 (to'' is corrected to read ``basis in the
S1 share under Sec. 1.1502-32 by $40 (to''.
53. On page 3006, column 2, Sec. 1.1502-36(d)(5)(ii)(B)(3), line 3
from the bottom of the paragraph, the language ``extent necessary to
reduce the bases of'' is corrected to read ``extent necessary to reduce
the basis of''.
54. On page 3006, column 2, Sec. 1.1502-36(d)(5)(ii)(B)(4), line 2
from the bottom of the paragraph, the language ``the basis of such
shares without'' is corrected to read ``the bases of such shares
without''.
55. On page 3007, column 1, Sec. 1.1502-36(d)(6)(ii)(B), line 5
from the bottom of the paragraph, the language ``immediately tier up
(under the'' is corrected to read ``immediately tiers up (under the''.
[[Page 31486]]
56. On page 3007, column 3, Sec. 1.1502-36(d)(6)(iv), line 4 of
the paragraph, the language ``all members' basis in loss shares of S''
is corrected to read ``all members' bases in loss shares of S''.
57. On page 3007, column 3, Sec. 1.1502-36(d)(7) Example 1.(i)(B),
line 3 of the paragraph, the language ``under paragraph (b) of this
section either'' is corrected to read ``under paragraph (b) of this
section because''.
58. On page 3008, column 1, Sec. 1.1502-36(d)(7) Example 1.(i)(B),
line 2 of the column, the language ``disparity in the basis of the
shares). See'' is corrected to read ``disparity in the bases of the
shares). See''.
59. On page 3009, column 2, Sec. 1.1502-36(d)(7) Example 4.(i)(A),
line 4 of the column, the language ``the $500 income earned). The sale
is'' is corrected to read ``the $500 of income earned). The sale is''.
60. On page 3010, column 2, Sec. 1.1502-36(d)(7) Example
5.(i)(C)(3), line 10 from the bottom of the paragraph, the language
``the transaction ($50) over the sum of'' is corrected to read ``the
transaction ($50) over the sum of the''.
61. On page 3010, column 3, Sec. 1.1502-36(d)(7) Example
5.(ii)(C)(4), lines 15 to 21 of the paragraph, the language
``reductions to share A and to share B under this paragraph (d) are
reversed to restore the basis of each share to $12.50. Thus, $25 of the
$27.50 attribute reduction applied to reduce the basis of share A and
$25 of the $47.50 attribute reduction applied to reduce the basis of
share B are reversed, restoring the'' is corrected to read ``reductions
to Share A and to Share B under this paragraph (d) are reversed to
restore the basis of each share to $12.50. Thus, $25 of the $27.50
attribute reduction applied to reduce the basis of Share A and $25 of
the $47.50 attribute reduction applied to reduce the basis of Share B
are reversed, restoring the''.
62. On page 3011, column 2, Sec. 1.1502-36(d)(7) Example
6.(ii)(B), line 2 from the bottom of the column, the language ``basis
in subsidiary stock under the principles'' is corrected to read ``bases
in subsidiary stock under the principles''.
63. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(B), line 2 from the top of the column, the language ``the
transaction the sale is not subject to'' is corrected to read ``the
transaction, the sale is not subject to''.
64. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(C), line 3 of the paragraph, the language ``this section). The
next highest tier transfer is'' is corrected to read ``this section).
The next higher tier transfer is''.
65. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(C), line 8 from the bottom of the paragraph, the language ``of
the transferred Share E minus the $20'' is corrected to read ``of the
transferred share E minus the $20''.
66. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(D)(1), line 6 from the bottom of the paragraph, the language
``basis in its asset)) minus S's liability ($20).'' is corrected to
read ``basis in its asset))) minus S's liability ($20).''.
67. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(D)(2), lines 5 to 6 from the bottom of the paragraph, the
language ``applied to reduce the basis of share E because share E was
transferred in a transaction in'' is corrected to read ``applied to
reduce the basis of share E, because share E was transferred in a
transfer in''.
68. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(D)(3), line 3 from the bottom of the column, the language
``apportioned to or applied to reduced the'' is corrected to read
``apportioned to or applied to reduce the''.
69. On page 3012, column 3, Sec. 1.1502-36(d)(7) Example
7.(iii)(C)(3), line 16 of the paragraph, the language ``reducing the
basis of both assets to $0.'' is corrected to read ``reducing the basis
of each asset to $0.''.
70. On page 3012, column 3, Sec. 1.1502-36(d)(7) Example
7.(iii)(C)(3), line 2 from the bottom of the paragraph, the language
``attribute reduction amount is disregarded has'' is corrected to read
``attribute reduction amount is disregarded and has''.
71. On page 3013, column 1, Sec. 1.1502-36(d)(7) Example 8.(i)(E),
line 5 of the paragraph, the language ``basis in the S shares by the
full attribute'' is corrected to read ``bases in the S shares by the
full attribute''.
72. On page 3013, column 2, Sec. 1.1502-36(d)(7) Example 8.(i)(E),
line 7 of the paragraph, the language ``transfer. The reduction of M's
basis in the S'' is corrected to read ``transfer. The reduction of M's
bases in the S''.
73. On page 3014, column 1, Sec. 1.1502-36(d)(7) Example
8.(ii)(E), lines 2 through 5 of the paragraph, the language ``are the
same as paragraph (ii)(A) of this Example 8, except that P elects under
paragraph (d)(6) of this section to reduce M's basis in the S shares by
the full attribute'' is corrected to read ``are the same as in
paragraph (ii)(A) of this Example 8, except that P elects under
paragraph (d)(6) of this section to reduce M's bases in the S shares by
the full attribute''.
74. On page 3014, column 1, Sec. 1.1502-36(d)(7) Example
8.(ii)(F), is removed.
75. On page 3014, column 1, Sec. 1.1502-36(d)(7) Example
8.(ii)(G), is the newly designated paragraph (F).
76. On page 3014, column 2, Sec. 1.1502-36(d)(7) Example 9.(i),
line 5 from the bottom of the column, the language ``to P1 (the common
parent of a consolidated'' is corrected to read ``to P1 (the common
parent of a different consolidated''.
77. On page 3014, column 3, Sec. 1.1502-36(d)(7) Example 9.(ii),
line 7 from the bottom of the column, the language ``computed and is
applied to adjust the basis'' is corrected to read ``computed and is
applied to adjust the bases''.
78. On page 3015, column 1, Sec. 1.1502-36(d)(7) Example 9.(iii),
line 1 of the paragraph, the language ``(iii) Transfers in next highest
tier (loss'' is corrected to read ``(iii) Transfers in next higher tier
(loss''.
79. On page 3015, column 3, Sec. 1.1502-36(d)(7) Example
9.(iv)(B)(2), line 30 from the bottom of the paragraph, the language
``allocated amount is apportioned among other'' is corrected to read
``allocated amount is apportioned among the other''.
80. On page 3017, column 1, Sec. 1.1502-36(e)(1), last line of the
paragraph, the language ``the section.'' is corrected to read ``this
section.''.
81. On page 3017, column 2, Sec. 1.1502-36(e)(2)(iii), line 6 of
the paragraph, the language ``allocable portion of S's attributes has''
is corrected to read ``allocable portion of S's net inside attributes
has''.
82. On page 3017, column 2, Sec. 1.1502-36(e)(2)(iv)
Example.(i)(A), line 11 of the paragraph, the language ``basis of A1
would have been reduced by $80'' is corrected to read ``basis in Asset
1 would have been reduced by $80''.
83. On page 3017, column 2, Sec. 1.1502-36(e)(2)(iv)
Example.(i)(B), last line of the paragraph, the language ``to this
paragraph (c).'' is corrected to read ``to paragraph (c) of this
section.''.
84. On page 3018, column 1, Sec. 1.1502-36(f)(2), line 6 of the
column, the language ``dealers in securities) and 481'' is corrected to
read ``dealers in securities) and section 481''.
85. On page 3018, column 1, Sec. 1.1502-36(f)(4), lines 6 through
15 of the paragraph, the language ``basis of shares of S2 stock under
Sec. 1.1502-32 affect the investment adjustments made to the basis of
the stock of S1. A subsidiary (S1) (and its shares of stock) is lower
tier with respect to another subsidiary (S) (and its shares of stock)
[[Page 31487]]
if investment adjustments made to the basis of shares of S1 stock
affect the investment adjustments made to the basis of shares of S
stock. The'' is corrected to read ``bases of shares of S2 stock under
Sec. 1.1502-32 affect the investment adjustments made to the bases of
shares of S1 stock. A subsidiary (S1) (and its shares of stock) is
lower tier with respect to another subsidiary (S) (and its shares of
stock) if investment adjustments made to the bases of shares of S1
stock affect the investment adjustments made to the bases of shares of
S stock. The''.
86. On page 3019, column 1, Sec. 1.1502-36(g)(2) Example 3.(ii),
line 4 of the paragraph, the language ``there is no disparity in the
basis of the'' is corrected to read ``there is no disparity in the
bases of the''.
87. On page 3019, column 1, Sec. 1.1502-36(g)(2) Example 4.(i),
lines 5 through 6 from the bottom of the paragraph, the language
``equal basis that exceeds value. S owns Asset 1 with a basis that
exceeds value and cash.'' is corrected to read ``equal basis that
exceeds value. S owns Cash and Asset 1 with a basis that exceeds
value.''.
88. On page 3019, column 1, Sec. 1.1502-36(g)(2) Example 4.(ii),
line 4 of the paragraph, the language ``there is no disparity in the
basis of the'' is corrected to read ``there is no disparity in the
bases of the''.
LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division,
Associate Chief Counsel (Procedure and Administration).
[FR Doc. E7-11057 Filed 6-6-07; 8:45 am]
BILLING CODE 4830-01-P
