Unified Rule for Loss on Subsidiary Stock; Correction, 62203-62204 [E8-24672]
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Federal Register / Vol. 73, No. 203 / Monday, October 20, 2008 / Rules and Regulations
is not evidenced by a written instrument.
Both the $16,000 advance and the $22,000
advance are open account debt and remain
outstanding at those amounts during 2009.
There is no net increase under paragraph (c)
of this section in year 2009.
(ii) At the close of the 2009 taxable year,
A’s open account debt does not exceed
$25,000. A therefore carries forward to the
beginning of the 2010 taxable year the
$16,000 as open account debt.
(iii) At the close of the 2009 taxable year,
B’s open account debt does not exceed
$25,000. B therefore carries forward to the
beginning of the 2010 taxable year the
$22,000 as open account debt.
Example 7. Treatment of open account
debt. (i) The facts are the same as in Example
6, in addition to which, on December 31,
2009, A’s basis in the open account debt is
reduced under paragraph (b) of this section
to $8,000. On April 1, 2010, S repays A
$4,000 of the open account indebtedness. On
September 1, 2010, A advances S an
additional $1,000, which is not evidenced by
a written instrument. There is no net increase
under paragraph (c) of this section in year
2010.
(ii) The $4,000 April repayment S makes to
A and A’s $1,000 September advance are
netted to result in a net repayment of $3,000
for the taxable year on A’s $16,000 open
account debt carried forward from 2009.
Because there is no net increase in 2010, no
basis of indebtedness is restored for the 2010
taxable year, and A realizes $1,500 of income
on the $3,000 net repayment at the close of
the 2010 taxable year.
(iii) At close of the 2010 taxable year, A’s
open account debt does not exceed $25,000.
The net repayment of $3,000 for the taxable
year on A’s $16,000 open account debt
carried forward from 2009, leaves A with an
open account debt of $13,000 to carry
forward as open account debt to the
beginning of the 2011 taxable year.
Example 8. Treatment of shareholder
indebtedness not evidenced by a written
instrument which exceeds $25,000. (i) The
facts are the same as in Example 7, in
addition to which, on February 1, 2011, S
repays $5,000 of the open account debt and
on March 1, 2011, A advances S $20,000,
which is not evidenced by a written
instrument.
(ii) At the close of the 2010 taxable year,
A has an open account debt of $13,000 to
carry forward as open account debt to the
beginning of the 2011 taxable year.
(iii) The 2011 advances and repayments are
netted to result in a net advance of $15,000
on A’s $13,000 open account debt carried
forward from 2010, increasing A’s open
account debt to $28,000 as of the close of the
2011 taxable year. Because A’s open account
debt exceeds $25,000, for any subsequent
taxable year the $28,000 indebtedness will be
treated in the same manner as indebtedness
evidenced by a separate written instrument
for the purposes of this section. Because
there is no net increase in 2011, no basis of
indebtedness is restored for the 2011 taxable
year.
Par. 3. Section 1.1367–3 is revised to
read as follows:
■
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15:13 Oct 17, 2008
Jkt 217001
§ 1.1367–3
Effective/Applicability date.
Section 1.1367–2(a), (c)(2), (d)(2), and
(e) Example 6, Example 7, and Example
8 apply to any shareholder advances to
the S corporation made on or after
October 20, 2008 and repayments on
those advances by the S corporation.
The rules that apply with respect to
shareholder advances to the S
corporation made before October 20,
2008, are contained in § 1.1367–3 in
effect prior to October 20, 2008. (See 26
CFR part 1 revised as of April 1, 2007.)
Shareholders have the option to apply
these rules to shareholder advances to
the S corporation made before October
20, 2008, and repayments on those
advances by the S corporation.
Approved: September 25, 2008.
Linda E. Stuff,
Deputy Commissioner for Services and
Enforcement.
Eric Solomon,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. E8–24926 Filed 10–17–08; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9424]
RIN 1545–BB61
Unified Rule for Loss on Subsidiary
Stock; Correction
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations; Correction.
AGENCY:
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.
PO 00000
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Fmt 4700
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62203
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:
DATES:
Background
The final regulations that are the
subject 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.
Correction of Publication
Accordingly, the publication of the
final regulations (TD 9424), which were
the subject of FR Doc. E8–21006, is
corrected as follows:
1. On page 53937, column 3, in the
preamble, under the paragraph heading
‘‘vii. Adjustments for Section 362(e)(2)
Transactions’’, first paragraph, line 9,
the language ‘‘not elect to apply the rule
in the final’’ is corrected to read ‘‘not
apply the rule in the final’’.
2. On page 53938, column 3, in the
preamble, under the paragraph heading
‘‘B. Section 1.1502–36(b): Basis
Redetermination Rule’’, first paragraph
of the column, line 1, the language
‘‘have no correlation to unrecognized
loss’’ is corrected to read ‘‘have no
correlation to unrecognized gain or
loss’’.
3. On page 53938, column 3, in the
preamble, under the paragraph heading
‘‘B. Section 1.1502–36(b): Basis
Redetermination Rule’’, first paragraph
of the column, line 17, the language
‘‘contributions of assets in exchanged
for’’ is corrected to read ‘‘contributions
of assets in exchange for’’.
4. On page 53938, column 3, in the
preamble, under the paragraph heading
‘‘i. Exceptions to Basis Redetermination
Rule’’, last paragraph of the column,
line 7, the language ‘‘to a nonmember in
a one or more fully’’ is corrected to read
‘‘to a nonmember in one or more fully’’.
5. On page 53939, column 3, in the
preamble, under the paragraph heading
‘‘i. Treatment of Intercompany Debt’’,
first paragraph, line 7, the language
‘‘more like to capital transactions than’’
is corrected to read ‘‘more like capital
transactions than’’.
6. On page 53940, column 3, in the
preamble, under the paragraph heading
‘‘i. Lower-Tier Subsidiary Rules’’,
second paragraph, line 7, the language
E:\FR\FM\20OCR1.SGM
20OCR1
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.
*
*
*
*
*
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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
]]>Agencies
[Federal Register Volume 73, Number 203 (Monday, October 20, 2008)]
[Rules and Regulations]
[Pages 62203-62204]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-24672]
-----------------------------------------------------------------------
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: Final regulations; Correction.
-----------------------------------------------------------------------
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: 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 subject 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.
Correction of Publication
Accordingly, the publication of the final regulations (TD 9424),
which were the subject of FR Doc. E8-21006, is corrected as follows:
1. On page 53937, column 3, in the preamble, under the paragraph
heading ``vii. Adjustments for Section 362(e)(2) Transactions'', first
paragraph, line 9, the language ``not elect to apply the rule in the
final'' is corrected to read ``not apply the rule in the final''.
2. On page 53938, column 3, in the preamble, under the paragraph
heading ``B. Section 1.1502-36(b): Basis Redetermination Rule'', first
paragraph of the column, line 1, the language ``have no correlation to
unrecognized loss'' is corrected to read ``have no correlation to
unrecognized gain or loss''.
3. On page 53938, column 3, in the preamble, under the paragraph
heading ``B. Section 1.1502-36(b): Basis Redetermination Rule'', first
paragraph of the column, line 17, the language ``contributions of
assets in exchanged for'' is corrected to read ``contributions of
assets in exchange for''.
4. On page 53938, column 3, in the preamble, under the paragraph
heading ``i. Exceptions to Basis Redetermination Rule'', last paragraph
of the column, line 7, the language ``to a nonmember in a one or more
fully'' is corrected to read ``to a nonmember in one or more fully''.
5. On page 53939, column 3, in the preamble, under the paragraph
heading ``i. Treatment of Intercompany Debt'', first paragraph, line 7,
the language ``more like to capital transactions than'' is corrected to
read ``more like capital transactions than''.
6. On page 53940, column 3, in the preamble, under the paragraph
heading ``i. Lower-Tier Subsidiary Rules'', second paragraph, line 7,
the language
[[Page 62204]]
``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 Sec. 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
