Unified Rule for Loss on Subsidiary Stock; Correction, 62204-62205 [E8-24670]

Download as PDF 62204 Federal Register / Vol. 73, No. 203 / Monday, October 20, 2008 / Rules and Regulations ‘‘reason for this concern was that loss’’ is corrected to read ‘‘reasons for this concern were that loss’’. 7. On page 53943, column 1, in the preamble, under the paragraph heading ‘‘vi. Election to Reduce Stock Basis and/ or Reattribute Attributes’’, first paragraph of the column, line 19, the language ‘‘to be attributed. Similar to the rule’’ is corrected to read ‘‘to be attributed. As in the rule’’. 8. On page 53943, column 2, in the preamble, under the paragraph heading ‘‘vii. The Conforming Limitation’’, last paragraph of the column, line 5, the language ‘‘rule would then either reduce lower-tier’’ is corrected to read ‘‘rule could then either reduce lower-tier’’. 9. On page 53946, column 3, in the preamble, under the paragraph heading ‘‘B. Amendments to § 1.1502–33(e) ‘‘Whole-Group’’ Exception’’, first paragraph of the column, line 7, the language ‘‘elect to apply each of these modified’’ is corrected to read ‘‘apply each of these modified’’. LaNita Van Dyke, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel, (Procedure and Administration). [FR Doc. E8–24672 Filed 10–17–08; 8:45 am] BILLING CODE 4830–01–P consolidated group. Finally, the final regulations conform or clarify various provisions of the consolidated return regulations, including those relating to adjustments to subsidiary stock basis. DATES: Effective Date: This correction is effective October 20, 2008 and is applicable on September 17, 2008. FOR FURTHER INFORMATION CONTACT: Marcie P. Barese, (202) 622–7790, Sean P. Duffley, (202) 622–7770, or Theresa Abell (202) 622–7700 (none of the numbers are toll-free). SUPPLEMENTARY INFORMATION: ■ Par. 4. Section 1.1502–19(h)(1) is amended by revising the second sentence to read as follows: Background § 1.1502–33 The final regulations that are the subjects of this document are under sections 337, 358, 362, 1502 of the Internal Revenue Code. * Need for Correction As published, final regulations (TD 9424) contain errors that may prove to be misleading and are in need of clarification. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Correction of Publication DEPARTMENT OF THE TREASURY Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments: Internal Revenue Service PART 1—INCOME TAXES ■ 26 CFR Part 1 Paragraph 1. The authority citation for part 1 continues to read, in part, as follows: ■ [TD 9424] RIN 1545–BB61 Authority: 26 U.S.C. 7805 * * * Unified Rule for Loss on Subsidiary Stock; Correction Internal Revenue Service (IRS), Treasury. ACTION: Correcting amendment. AGENCY: This document contains corrections to final regulations (TD 9424) that were published in the Federal Register on Wednesday, September 17, 2008 (73 FR 53934) under sections 358, 362(e)(2), and 1502 of the Internal Revenue Code. The final regulations apply to corporations filing consolidated returns, and corporations that enter into certain tax-free reorganizations. The final regulations provide rules for determining the tax consequences of a member’s transfer (including by deconsolidation and worthlessness) of loss shares of subsidiary stock. In addition, the final regulations provide that section 362(e)(2) generally does not apply to transactions between members of a dwashington3 on PRODPC61 with RULES SUMMARY: VerDate Aug<31>2005 15:13 Oct 17, 2008 Jkt 217001 ■ Par. 2. Section 1.358–6(f)(3) is amended by revising the last sentence to read as follows: § 1.358–6 Stock basis in certain triangular reorganizations. * * * * (f) * * * (3) * * * However, taxpayers may apply paragraph (b)(2)(v) of this section to triangular reorganizations occurring before September 17, 2008 and on or after December 23, 1994. ■ Par. 3. Section 1.1502–13(l)(1) is amended by revising the last sentence to read as follows: § 1.1502–19 * * * * (h) * * * (1) * * * However, taxpayers may apply paragraph (c)(3)(i)(A) of this section to transactions that occurred prior to September 17, 2008. * * * * * * * * ■ Par. 5. Section 1.1502–33(j)(1) is amended by revising the last sentence to read as follows: Intercompany transactions. * * * * * (l) * * * (1) * * * However, taxpayers may apply paragraph (j)(5)(i)(A) of this section to transactions that occurred prior to September 17, 2008. * * * * * PO 00000 Frm 00018 Fmt 4700 Sfmt 4700 Earnings and profits. * * * * (j) * * * (1) * * * However, taxpayers may apply paragraph (e)(2)(i)(A) of this section with respect to determinations of the earnings and profits of a member in consolidated return years beginning prior to September 17, 2008. * * * * * ■ Par. 6. Section 1.1502–36 is amended by revising the last sentence of the paragraph (b)(3) Example 3.(i)(D); the fourth sentence of the paragraph (c)(8) Example 6.(iii)(A); (d)(3)(i)(B); the third through fifth sentences of the paragraph (d)(5)(ii); the third sentence of the paragraph (d)(8) Example 6.(ii)(B); the second sentence of the paragraph (d)(8) Example 6.(ii)(D)(3); the fifth sentence of the paragraph (d)(8) Example 8.(i)(F); the first sentence of the paragraph (d)(8) Example 8.(ii)(E); the first sentence of the paragraph (d)(8) Example 8.(ii)(F); the first sentence of the paragraph (d)(8) Example 9.(ii);the second sentence of the paragraph (g)(2) Example 5.(i); and the third sentence of the paragraph (g)(2) Example 5.(iii) to read as follows: § 1.1502–36 * * § 1.1502–13 Excess loss accounts. * Unified loss rule. * * (b) * * * (3) * * * * * Example 3. * * * (i) * * * (D) * * * The results would be the same if, in addition to the facts in paragraph (i)(A) of this Example 3, M transferred its S share to X in a fully taxable transaction and, as permitted under paragraph (b)(1)(ii)(B) of this section, P elected to redetermine basis under this paragraph (b). * * * * * (c) * * * (8) * * * Example 6. * * * (iii) * * * (A) * * * After taking into account the effects of all applicable rules of law, M’s basis in the S share at the end of year 5 is $100 (M’s original $100 basis decreased under § 1.1502–32 by $40 at the end of the year 1 and then increased under § 1.1502–32 E:\FR\FM\20OCR1.SGM 20OCR1 Federal Register / Vol. 73, No. 203 / Monday, October 20, 2008 / Rules and Regulations by $40 at end of the year 5 (the net of the $100 tax exempt income from the excluded COD applied to reduce attributes and the $60 noncapital, nondeductible expense from the reduction of S’s portion of the CNOL)).* * * * * * * * (d) * * * (3) * * * (i) * * * (B) S’s aggregate inside loss (as defined in paragraph (d)(3)(iii) of this section). * * * * * * * * (8) * * * Example 6. * * * (ii) * * * (B) * * * However, S’s gain recognized on the transfer of Share E is computed and immediately adjusts members’ bases in subsidiary stock under § 1.1502–32 (because M and S are not members of the same group immediately after the transaction, the sale is not an intercompany transaction subject to § 1.1502–13). * * * * * (D) * * * (3) * * * See paragraph (d)(5)(v)(A) of this section.* * * * * * * * Example 8. * * * (F) * * * Under § 1.1502–32(c)(1)(ii)(A)(1) this $90 expense is allocated to the transferred loss shares of S stock in proportion to the loss in the shares, or $.90 per share.* * * dwashington3 on PRODPC61 with RULES * * * * * (ii) * * * (E) * * * The facts 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 basis in the S shares by the full attribute reduction amount of $22, in lieu of S reducing its attributes.* * * (F) * * * The facts are the same as in paragraph (ii)(A) of this Example 8.*** Example 9. * * * (ii) * * * However, S1’s gain recognized on the transfer of the S2 share is computed and immediately adjusts members’ bases in subsidiary stock under § 1.1502–32. * * * * * (g) * * * (2) * * * Example 5. * * * (i) * * * S owns Asset 1 with a basis of $100 and a value of $20.* * * VerDate Aug<31>2005 * * * * * LaNita Van Dyke, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. E8–24670 Filed 10–17–08; 8:45 am] BILLING CODE 4830–01–P * (5) * * * (ii) * * * S’s attribute reduction amount is allocated proportionately (by basis) between (among) the non-stock Category D asset and S’s deemed single share(s) of subsidiary stock. (See paragraphs (d)(4)(ii)(B)(2) and (d)(4)(ii)(C) of this section regarding the portion of S’s attribute reduction amount allocated to the Category D assets other than lower-tier subsidiary stock.) For allocation purposes, S’s basis in each deemed single share of S1 stock is its deemed basis (determined under paragraphs (d)(5)(i)(B) and (d)(5)(i)(C) of this section), reduced by— * (iii) * * * However, because all the shares are transferred, the group’s income is clearly reflected. * * * 16:44 Oct 17, 2008 Jkt 217001 DEPARTMENT OF THE TREASURY 31 CFR Part 30 Tarp Capital Purchase Program Domestic Finance, Treasury. Interim final rule. AGENCY: ACTION: SUMMARY: This interim rule, promulgated pursuant to sections 101(a)(1), 101(c)(5), and 111(b) of the Emergency Economic Stabilization Act of 2008, Division A of Public Law 110– 343 (EESA), provides guidance on the executive compensation provisions applicable to participants in the Troubled Assets Relief Program (TARP) Capital Purchase Program (CPP). Section 111(b) of EESA requires financial institutions from which the Department of the Treasury (Treasury) is purchasing troubled assets through direct purchases to meet appropriate standards for executive compensation and corporate governance. This interim final rule includes the following standards for purposes of the CPP: (a) Limits on compensation that exclude incentives for senior executive officers (SEOs) of financial institutions to take unnecessary and excessive risks that threaten the value of the financial institution; (b) required recovery of any bonus or incentive compensation paid to a SEO based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate; (c) prohibition on the financial institution from making any golden parachute payment to any SEO; and (d) agreement to limit a claim to a federal income tax deduction for certain executive remuneration. These rules generally affect financial institutions that participate in the CPP, certain employers related to those financial institutions, and their officers. DATES: Effective Date: These regulations are effective on October 20, 2008. Comment due date: November 19, 2008. ADDRESSES: The Treasury requests comments on the topics addressed in this interim rule. Comments may be submitted to the Treasury by any of the following methods: Submit electronic comments through the federal PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 62205 government e-rulemaking portal, http:// www.regulations.gov or by e-mail to executivecompensationcomments@do. treas.gov or send paper comments in triplicate to Executive Compensation Comments, Office of Financial Institutions Policy, Room 1418, Department of the Treasury, 1500 Pennsylvania Avenue, NW., Washington, DC 20220. In general, the Treasury will post all comments to http://www.regulations.gov without change, including any business or personal information provided such as names, addresses, e-mail addresses, or telephone numbers. The Treasury will also make such comments available for public inspection and copying in the Treasury’s Library, Room 1428, Main Department Building, 1500 Pennsylvania Avenue, NW., Washington, DC 20220, on official business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect comments by telephoning (202) 622– 0990. All comments, including attachments and other supporting materials, received are part of the public record and subject to public disclosure. You should submit only information that you wish to make available publicly. For further information regarding this interim rule, contact the Office of Domestic Finance, the Treasury, at (202) 927–6618. FOR FURTHER INFORMATION CONTACT: SUPPLEMENTARY INFORMATION: I. Background This document adds 31 CFR Part 30 under section 111(b) of the Emergency Economic Stabilization Act of 2008, Div. A of Public Law No. 110–343 (EESA) with respect to the Troubled Assets Relief Program (TARP) Capital Purchase Program (CPP) established by the Department of the Treasury (Treasury) under EESA. Section 101(a) of EESA authorizes the Secretary of the Treasury to establish a TARP to ‘‘purchase, and to make and fund commitments to purchase, troubled assets from any financial institution, on such terms and conditions as are determined by the Secretary, and in accordance with this Act and policies and procedures developed and published by the Secretary.’’ Section 120 of EESA provides that the TARP authorities generally terminate on December 31, 2009, unless extended upon certification by the Secretary of the Treasury to Congress, but in no event later than two years from the date of enactment of EESA (October 3, 2008) E:\FR\FM\20OCR1.SGM 20OCR1

Agencies

[Federal Register Volume 73, Number 203 (Monday, October 20, 2008)]
[Rules and Regulations]
[Pages 62204-62205]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-24670]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9424]
RIN 1545-BB61


Unified Rule for Loss on Subsidiary Stock; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendment.

-----------------------------------------------------------------------

SUMMARY: This document contains corrections to final regulations (TD 
9424) that were published in the Federal Register on Wednesday, 
September 17, 2008 (73 FR 53934) under sections 358, 362(e)(2), and 
1502 of the Internal Revenue Code. The final regulations apply to 
corporations filing consolidated returns, and corporations that enter 
into certain tax-free reorganizations. The final regulations provide 
rules for determining the tax consequences of a member's transfer 
(including by deconsolidation and worthlessness) of loss shares of 
subsidiary stock. In addition, the final regulations provide that 
section 362(e)(2) generally does not apply to transactions between 
members of a consolidated group. Finally, the final regulations conform 
or clarify various provisions of the consolidated return regulations, 
including those relating to adjustments to subsidiary stock basis.

DATES: Effective Date: This correction is effective October 20, 2008 
and is applicable on September 17, 2008.

FOR FURTHER INFORMATION CONTACT: Marcie P. Barese, (202) 622-7790, Sean 
P. Duffley, (202) 622-7770, or Theresa Abell (202) 622-7700 (none of 
the numbers are toll-free).

SUPPLEMENTARY INFORMATION:

Background

    The final regulations that are the subjects of this document are 
under sections 337, 358, 362, 1502 of the Internal Revenue Code.

Need for Correction

    As published, final regulations (TD 9424) contain errors that may 
prove to be misleading and are in need of clarification.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

0
Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read, in 
part, as follows:

    Authority: 26 U.S.C. 7805 * * *


0
Par. 2. Section 1.358-6(f)(3) is amended by revising the last sentence 
to read as follows:


Sec.  1.358-6  Stock basis in certain triangular reorganizations.

* * * * *
    (f) * * *
    (3) * * * However, taxpayers may apply paragraph (b)(2)(v) of this 
section to triangular reorganizations occurring before September 17, 
2008 and on or after December 23, 1994.

0
Par. 3. Section 1.1502-13(l)(1) is amended by revising the last 
sentence to read as follows:


Sec.  1.1502-13  Intercompany transactions.

* * * * *
    (l) * * *
    (1) * * * However, taxpayers may apply paragraph (j)(5)(i)(A) of 
this section to transactions that occurred prior to September 17, 2008.
* * * * *

0
Par. 4. Section 1.1502-19(h)(1) is amended by revising the second 
sentence to read as follows:


Sec.  1.1502-19  Excess loss accounts.

* * * * *
    (h) * * *
    (1) * * * However, taxpayers may apply paragraph (c)(3)(i)(A) of 
this section to transactions that occurred prior to September 17, 2008. 
* * *
* * * * *

0
Par. 5. Section 1.1502-33(j)(1) is amended by revising the last 
sentence to read as follows:


Sec.  1.1502-33  Earnings and profits.

* * * * *
    (j) * * *
    (1) * * * However, taxpayers may apply paragraph (e)(2)(i)(A) of 
this section with respect to determinations of the earnings and profits 
of a member in consolidated return years beginning prior to September 
17, 2008.
* * * * *

0
Par. 6. Section 1.1502-36 is amended by revising the last sentence of 
the paragraph (b)(3) Example 3.(i)(D); the fourth sentence of the 
paragraph (c)(8) Example 6.(iii)(A); (d)(3)(i)(B); the third through 
fifth sentences of the paragraph (d)(5)(ii); the third sentence of the 
paragraph (d)(8) Example 6.(ii)(B); the second sentence of the 
paragraph (d)(8) Example 6.(ii)(D)(3); the fifth sentence of the 
paragraph (d)(8) Example 8.(i)(F); the first sentence of the paragraph 
(d)(8) Example 8.(ii)(E); the first sentence of the paragraph (d)(8) 
Example 8.(ii)(F); the first sentence of the paragraph (d)(8) Example 
9.(ii);the second sentence of the paragraph (g)(2) Example 5.(i); and 
the third sentence of the paragraph (g)(2) Example 5.(iii) to read as 
follows:


Sec.  1.1502-36  Unified loss rule.

* * * * *
    (b) * * *
    (3) * * *

    Example 3. * * *
    (i) * * *
    (D) * * * The results would be the same if, in addition to the 
facts in paragraph (i)(A) of this Example 3, M transferred its S 
share to X in a fully taxable transaction and, as permitted under 
paragraph (b)(1)(ii)(B) of this section, P elected to redetermine 
basis under this paragraph (b).
* * * * *
    (c) * * *
    (8) * * *
    Example 6. * * *
    (iii) * * *
    (A) * * * After taking into account the effects of all 
applicable rules of law, M's basis in the S share at the end of year 
5 is $100 (M's original $100 basis decreased under Sec.  1.1502-32 
by $40 at the end of the year 1 and then increased under Sec.  
1.1502-32

[[Page 62205]]

by $40 at end of the year 5 (the net of the $100 tax exempt income 
from the excluded COD applied to reduce attributes and the $60 
noncapital, nondeductible expense from the reduction of S's portion 
of the CNOL)).* * *
* * * * *
    (d) * * *
    (3) * * *
    (i) * * *
    (B) S's aggregate inside loss (as defined in paragraph 
(d)(3)(iii) of this section).
* * * * *
    (5) * * *
    (ii) * * * S's attribute reduction amount is allocated 
proportionately (by basis) between (among) the non-stock Category D 
asset and S's deemed single share(s) of subsidiary stock. (See 
paragraphs (d)(4)(ii)(B)(2) and (d)(4)(ii)(C) of this section 
regarding the portion of S's attribute reduction amount allocated to 
the Category D assets other than lower-tier subsidiary stock.) For 
allocation purposes, S's basis in each deemed single share of S1 
stock is its deemed basis (determined under paragraphs (d)(5)(i)(B) 
and (d)(5)(i)(C) of this section), reduced by--
* * * * *
    (8) * * *
    Example 6. * * *
    (ii) * * *
    (B) * * * However, S's gain recognized on the transfer of Share 
E is computed and immediately adjusts members' bases in subsidiary 
stock under Sec.  1.1502-32 (because M and S are not members of the 
same group immediately after the transaction, the sale is not an 
intercompany transaction subject to Sec.  1.1502-13).
* * * * *
    (D) * * *
    (3) * * * See paragraph (d)(5)(v)(A) of this section.* * *
* * * * *
    Example 8. * * *
    (F) * * * Under Sec.  1.1502-32(c)(1)(ii)(A)(1) this $90 expense 
is allocated to the transferred loss shares of S stock in proportion 
to the loss in the shares, or $.90 per share.* * *
* * * * *
    (ii) * * *
    (E) * * * The facts 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 basis in the S shares by the full attribute 
reduction amount of $22, in lieu of S reducing its attributes.* * *
    (F) * * * The facts are the same as in paragraph (ii)(A) of this 
Example 8.***
    Example 9. * * *
    (ii) * * * However, S1's gain recognized on the transfer of the 
S2 share is computed and immediately adjusts members' bases in 
subsidiary stock under Sec.  1.1502-32.
* * * * *
    (g) * * *
    (2) * * *
    Example 5. * * *
    (i) * * * S owns Asset 1 with a basis of $100 and a value of 
$20.* * *
    (iii) * * * However, because all the shares are transferred, the 
group's income is clearly reflected. * * *
* * * * *

LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
 [FR Doc. E8-24670 Filed 10-17-08; 8:45 am]
BILLING CODE 4830-01-P