Application of Section 367 to a Section 351 Exchange Resulting From a Transaction Described in Section 304(a)(1); Treatment of Gain Recognized Under Section 301(c)(3) for Purposes of Section 1248, 6840-6841 [E9-2836]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 74, Number 27 (Wednesday, February 11, 2009)]
[Proposed Rules]
[Pages 6840-6841]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-2836]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-147636-08]
RIN 1545-BI41


Application of Section 367 to a Section 351 Exchange Resulting 
From a Transaction Described in Section 304(a)(1); Treatment of Gain 
Recognized Under Section 301(c)(3) for Purposes of Section 1248

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations.

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS and Treasury Department are issuing temporary 
regulations under sections 304 and 1248 of the Internal Revenue Code 
(Code). The temporary regulations provide rules under section 367(a) 
and (b) that apply to certain transfers of stock by a United States 
person to a foreign corporation described in section 304(a)(1). The 
temporary regulations under section 1248(a) provide that, for purposes 
of section 1248(a), gain recognized by a shareholder under section 
301(c)(3) in connection with the receipt of a distribution of property 
from a foreign corporation with respect to its stock shall be treated 
as gain from the sale or exchange of the stock of such foreign 
corporation. The temporary regulations affect certain shareholders that 
transfer stock in a corporation to a foreign corporation in a 
transaction to which section 304(a)(1) applies, or that receive a 
distribution from a foreign corporation described in section 301(c)(3). 
The text of the temporary regulations also serves as the text of these 
proposed regulations. The preamble to the temporary regulations 
explains the temporary regulations and these proposed regulations.

DATES: Written or electronic comments and requests for a public hearing 
must be received by May 12, 2009.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-147636-08), room 
5205, Internal Revenue Service, P.O.

[[Page 6841]]

Box 7604, Ben Franklin Station, Washington, DC 20044. 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-147636-08), 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-147636-08).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Sean W. Mullaney, (202) 622-3860; concerning submissions of comments or 
requests for a public hearing, Richard.A.Hurst@irscounsel.treas.gov; at 
(202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

    Temporary regulations in the Rules and Regulations section of this 
issue of the Federal Register amend the Income Tax Regulations (26 CFR 
part 1) relating to sections 304 and 1248 of the Code. The text of 
those regulations also serves as the text of these proposed 
regulations. The preamble to the temporary regulations explains the 
temporary regulations and these proposed regulations.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. These 
regulations are necessary to ensure that the appropriate amount of 
income (dividend income, capital gain or both) is recognized currently 
in the transactions described in the explanation of provisions section 
in this preamble. Accordingly, good cause is found for dispensing with 
notice and public comment pursuant to 5 U.S.C. 553(b) and (c) and with 
a delayed effective date pursuant to 5 U.S.C. 553(d). For applicability 
of the Regulatory Flexibility Act, see the cross-referenced notice of 
proposed rulemaking published elsewhere in this Federal Register. 
Pursuant to section 7805(f) of the Code, these regulations have been 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

    Comments are also requested regarding whether IRS and Treasury 
Department should exercise the regulatory authority under section 
304(b)(6) to permit an increase to the basis of the transferred stock 
in a section 304(a)(1) transaction to the extent the distribution in 
redemption of the shares deemed issued by the acquiring corporation is 
treated as a dividend from the earnings and profits of the issuing 
corporation.
    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The IRS and Treasury Department specifically request 
comments on the clarity of the proposed rules and how they can be made 
easier to understand. All comments will be available for public 
inspection and copying. A public hearing will be scheduled if requested 
in writing by any person that timely submits written comments. If a 
public hearing is scheduled, notice of the date, time, and place for 
the public hearing will be published in the Federal Register.

Drafting Information

    The principal author of these proposed regulations is Sean W. 
Mullaney of the Office of Associate Chief Counsel (International). 
However, other personnel from the IRS and the Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by adding 
an entry to read as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.367(a)-9 also issued under 26 U.S.C. 367(a) and (b). * 
* *

    Par. 2. Section 1.367(a)-9 is added to read as follows:


Sec.  1.367(a)-9  Treatment of deemed section 351 exchanges pursuant to 
section 304(a)(1).

    [The text of proposed Sec.  1.367(a)-9 is the same as the text of 
Sec.  1.367(a)-9T published elsewhere in this issue of the Federal 
Register].
    Par. 3. Section 1.367(b)-4 is amended by revising paragraphs (e), 
(f) and (g) to read as follows:


Sec.  1.367(b)-4  Acquisition of foreign corporate stock or assets by a 
foreign corporation in certain nonrecognition transactions.

* * * * *
    (e) [The text of proposed Sec.  1.367(b)-4(e) is the same as the 
text of Sec.  1.367(b)-4T(e) published elsewhere in this issue of the 
Federal Register].
    (f) [The text of proposed Sec.  1.367(b)-4(f) is the same as the 
text of Sec.  1.367(b)-4T(f) published elsewhere in this issue of the 
Federal Register].
    (g) [The text of proposed Sec.  1.367(b)-4(g) is the same as the 
text of Sec.  1.367(b)-4T(g) published elsewhere in this issue of the 
Federal Register].
    Par. 4. Section 1.1248-1 is amended by revising paragraphs (b) and 
(g) to read as follows:


Sec.  1.1248-1  Treatment of gain from certain sales or exchanges of 
stock in certain foreign corporations.

* * * * *
    (b) [The text of proposed Sec.  1.1248-1(b) is the same as the text 
of Sec.  1.1248-1T(b) published elsewhere in this issue of the Federal 
Register].
* * * * *
    (g) [The text of proposed Sec.  1.1248-1(g) is the same as the text 
of Sec.  1.1248-1T(g) published elsewhere in this issue of the Federal 
Register].

Linda M. Kroening,
Acting Deputy Commissioner for Services and Enforcement.
 [FR Doc. E9-2836 Filed 2-10-09; 8:45 am]
BILLING CODE 4830-01-P