Treasury Inflation-Protected Securities Issued at a Premium, 75781-75782 [2011-31179]
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Federal Register / Vol. 76, No. 233 / Monday, December 5, 2011 / Rules and Regulations
paragraph (d)(9) of this section to
taxable years ending before December 5,
2011 for designations made by the
Secretary after October 22, 2004.
Approved: November 22, 2011.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury
(Tax Policy).
[FR Doc. 2011–31169 Filed 12–2–11; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9561]
RIN 1545–BK46
Treasury Inflation-Protected Securities
Issued at a Premium
Internal Revenue Service (IRS),
Treasury.
ACTION: Temporary regulations.
AGENCY:
This document contains
temporary regulations that provide
guidance on the tax treatment of
Treasury Inflation-Protected Securities
issued with more than a de minimis
amount of premium. The text of these
temporary regulations also serves as the
text of the proposed regulations (REG–
130777–11) set forth in the Proposed
Rules section in this issue of the Federal
Register.
DATES: Effective Date: These regulations
are effective on December 5, 2011.
Applicability Date: For the date of
applicability, see § 1.1275–7T(k).
FOR FURTHER INFORMATION CONTACT:
William E. Blanchard, (202) 622–3950
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
pmangrum on DSK3VPTVN1PROD with RULES
Background
Treasury Inflation-Protected
Securities (TIPS) are securities issued by
the Department of the Treasury. The
principal amount of a TIPS is adjusted
for any inflation or deflation that occurs
over the term of the security. The rules
for the taxation of inflation-indexed
debt instruments, including TIPS, are
contained in § 1.1275–7 of the Income
Tax Regulations. See also § 1.171–3(b)
(rules for inflation-indexed debt
instruments with bond premium).
The coupon bond method described
in § 1.1275–7(d) has applied to TIPS
rather than the more complex discount
bond method described in § 1.1275–7(e).
VerDate Mar<15>2010
14:16 Dec 02, 2011
Jkt 226001
Under § 1.1275–7(d)(2)(i), however, the
coupon bond method is not available
with respect to inflation-indexed debt
instruments that are issued with more
than a de minimis amount of premium
(that is, an amount greater than .0025
times the stated principal amount of the
security times the number of complete
years to the security’s maturity).
In Notice 2011–21 (2011–19 IRB 761),
to provide a more uniform method for
the federal income taxation of TIPS, the
Department of the Treasury and the
Internal Revenue Service announced
that regulations would be issued to
provide that taxpayers must use the
coupon bond method described in
§ 1.1275–7(d) for TIPS issued with more
than a de minimis amount of premium.
As a result, the discount bond method
described in § 1.1275–7(e) would not
apply to TIPS issued with more than a
de minimis amount of premium. Notice
2011–21 provided that the regulations
would be effective for TIPS issued on or
after April 8, 2011.
Explanation of Provisions
The temporary regulations in this
document contain the rules described in
Notice 2011–21. Under the temporary
regulations, a taxpayer must use the
coupon bond method described in
§ 1.1275–7(d) for a TIPS that is issued
with more than a de minimis amount of
premium. The temporary regulations
contain an example of how to apply the
coupon bond method to a TIPS issued
with more than a de minimis amount of
premium. As stated in Notice 2011–21,
the temporary regulations apply to TIPS
issued on or after April 8, 2011. See
§ 601.601(d)(2)(ii)(b).
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866. Therefore, a
regulatory assessment is not required. It
has also been determined that section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations, and because the
regulations do not impose a collection
of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. 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 their impact on small business.
Drafting Information
The principal author of these
regulations is William E. Blanchard,
Office of Associate Chief Counsel
(Financial Institutions and Products).
PO 00000
Frm 00011
Fmt 4700
Sfmt 4700
75781
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.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
Section 1.1275–7T also issued under
26 U.S.C. 1275(d). * * *
Par. 2. Section 1.1275–7T is added to
read as follows:
■
§ 1.1275–7T Inflation-indexed debt
instruments (temporary).
(a) through (h) [Reserved]. For further
guidance, see § 1.1275–7(a) through (h).
(i) [Reserved]
(j) Treasury Inflation-Protected
Securities issued with more than a de
minimis amount of premium—(1)
Coupon bond method. Notwithstanding
§ 1.1275–7(d)(2)(i), the coupon bond
method described in § 1.1275–7(d)
applies to Treasury Inflation-Protected
Securities (TIPS) issued with more than
a de minimis amount of premium. For
this purpose, the de minimis amount is
determined using the principles of
§ 1.1273–1(d).
(2) Example. The following example
illustrates the application of the bond
premium rules to a TIPS issued with
bond premium:
Example. (i) Facts. X, a calendar year
taxpayer, purchases at original issuance TIPS
with a stated principal amount of $100,000
and a stated interest rate of .125 percent,
compounded semiannually. For purposes of
this example, assume that the TIPS are issued
in Year 1 on January 1, stated interest is
payable on June 30 and December 31 of each
year, and that the TIPS mature on December
31, Year 5. X pays $102,000 for the TIPS,
which is the issue price for the TIPS as
determined under § 1.1275–2(d)(1). Assume
that the inflation-adjusted principal amount
for the first coupon in Year 1 is $101,225
(resulting in an interest payment of $63.27)
and for the second coupon in Year 1 is
$102,500 (resulting in an interest payment of
$64.06). X elects to amortize bond premium
under § 1.171–4. (For simplicity, contrary to
actual practice, the TIPS in this example
were issued on the date with respect to
which the calculation of the first coupon
began.)
(ii) Bond premium. The stated interest on
the TIPS is qualified stated interest under
§ 1.1273–1(c). X acquired the TIPS with bond
premium of $2,000 (basis of $102,000 minus
E:\FR\FM\05DER1.SGM
05DER1
pmangrum on DSK3VPTVN1PROD with RULES
75782
Federal Register / Vol. 76, No. 233 / Monday, December 5, 2011 / Rules and Regulations
the TIPS’ stated principal amount of
$100,000). See §§ 1.171–1(d), 1.171–3(b), and
1.1275–7(f)(3). The $2,000 is more than the
de minimis amount of premium for the TIPS
of $1,250 (.0025 times the stated principal
amount of the TIPS ($100,000) times the
number of complete years to the TIPS’
maturity (5 years)). Under paragraph (j)(1) of
this section, X must use the coupon bond
method to determine X’s income from the
TIPS.
(iii) Allocation of bond premium. Under
§ 1.171–3(b), the bond premium of $2,000 is
allocable to each semiannual accrual period
by assuming that there will be no inflation
or deflation over the term of the TIPS.
Moreover, for purposes of § 1.171–2, the
yield of the securities is determined by
assuming that there will be no inflation or
deflation over their term. Based on this
assumption, for purposes of section 171, the
TIPS provide for semiannual interest
payments of $62.50 and a $100,000 payment
at maturity. As a result, the yield of the
securities for purposes of section 171 is
¥0.2720 percent, compounded
semiannually. Under § 1.171–2, the bond
premium allocable to an accrual period is the
excess of the qualified stated interest
allocable to the accrual period ($62.50 for
each accrual period) over the product of the
taxpayer’s adjusted acquisition price at the
beginning of the accrual period (determined
without regard to any inflation or deflation)
and the taxpayer’s yield. Therefore, the
$2,000 of bond premium is allocable to each
semiannual accrual period in Year 1 as
follows: $201.22 to the accrual period ending
on June 30, Year 1 (the excess of the stated
interest of $62.50 over ($102,000 ×
¥0.002720/2)); and $200.95 to the accrual
period ending on December 31, Year 1 (the
excess of the stated interest of $62.50 over
($101,798.78 × ¥0.002720/2)). The adjusted
acquisition price at the beginning of the
accrual period ending on December 31, Year
1 is $101,798.78 (the adjusted acquisition
price of $102,000 at the beginning of the
accrual period ending on June 30, Year 1
reduced by the $201.22 of premium allocable
to that accrual period).
(iv) Income determined by applying the
coupon bond method and the bond premium
rules. Under § 1.1275–7(d)(4), the application
of the coupon bond method to the TIPS
results in a positive inflation adjustment in
Year 1 of $2,500, which is includible in X’s
income for Year 1. However, because X
acquired the TIPS at a premium and elected
to amortize the premium, the premium
allocable to Year 1 will offset the income on
the TIPS as follows: The premium allocable
to the first accrual period of $201.22 first
offsets the interest payable for that period of
$63.27. The remaining $137.95 of premium is
treated as a deflation adjustment that offsets
the positive inflation adjustment. See
§ 1.171–3(b). The premium allocable to the
second accrual period of $200.95 first offsets
the interest payable for that period of $64.06.
The remaining $136.89 of premium is treated
as a deflation adjustment that further offsets
the positive inflation adjustment. As a result,
X does not include in income any of the
stated interest received in Year 1 and
includes in Year 1 income only $2,225.16 of
VerDate Mar<15>2010
14:16 Dec 02, 2011
Jkt 226001
the positive inflation adjustment for Year 1
($2,500¥$137.94¥$136.89).
(k) Effective/applicability date.
Notwithstanding § 1.1275–7(h), this
section applies to Treasury InflationProtected Securities issued on or after
April 8, 2011.
(l) Expiration date. The applicability
of this section expires on or before
December 2, 2014.
Approved: November 21, 2011.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury
(Tax Policy).
[FR Doc. 2011–31179 Filed 12–2–11; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF LABOR
Occupational Safety and Health
Administration
29 CFR Part 1910
[Docket No. OSHA–2011–0183]
RIN 1218–AC64
Revising Standards Referenced in the
Acetylene Standard
Occupational Safety and Health
Administration (OSHA), Department of
Labor.
ACTION: Direct final rule; request for
comments.
AGENCY:
In this direct final rule, the
Agency is revising its Acetylene
Standard for general industry by
updating a reference to a standard
published by a standards-developing
organization (‘‘SDO standards’’). This
rulemaking is a continuation of OSHA’s
ongoing effort to update references to
SDO standards used throughout its
rules.
SUMMARY:
This direct final rule will
become effective on March 5, 2012
unless OSHA receives significant
adverse comment by January 4, 2012. If
OSHA receives adverse comment, it will
publish a timely withdrawal of the rule
in the Federal Register. Submit
comments to this direct final rule
(including comments to the
information-collection (paperwork)
determination described under the
section titled Procedural
Determinations), hearing requests, and
other information by January 4, 2012.
All submissions must bear a postmark
or provide other evidence of the
submission date. (The following section
DATES:
PO 00000
Frm 00012
Fmt 4700
Sfmt 4700
titled ADDRESSES describes methods
available for making submissions.)
The Director of the Federal Register
approved the incorporation by reference
of specific publications listed in this
direct final rule as of March 5, 2012.
ADDRESSES: Submit comments, hearing
requests, and other information as
follows:
• Electronic: Submit comments
electronically to https://
www.regulations.gov, which is the
Federal eRulemaking Portal. Follow the
instructions online for submitting
comments.
• Facsimile: OSHA allows facsimile
transmission of comments and hearing
requests that are 10 pages or fewer in
length (including attachments). Send
these documents to the OSHA Docket
Office at (202) 693–1648; OSHA does
not require hard copies of these
documents. Instead of transmitting
facsimile copies of attachments that
supplement these documents (e.g.,
studies, journal articles), commenters
must submit these attachments to the
OSHA Docket Office, Technical Data
Center, Room N–2625, OSHA, U.S.
Department of Labor, 200 Constitution
Ave. NW., Washington, DC 20210.
These attachments must clearly identify
the sender’s name, date, subject, and
docket number (OSHA–2011–0183) so
that the Agency can attach them to the
appropriate document.
• Regular mail, express delivery,
hand (courier) delivery, and messenger
service: Submit comments and any
additional material (e.g., studies, journal
articles) to the OSHA Docket Office,
Docket No. OSHA–2011–0183 or
Regulation Identification Number (RIN)
1218–AC08, Technical Data Center,
Room N–2625, OSHA, U.S. Department
of Labor, 200 Constitution Ave. NW.,
Washington, DC 20210; telephone: (202)
693–2350. (OSHA’s TTY number is
(877) 889–5627.) Note that securityrelated procedures may result in
significant delays in receiving
comments and other written materials
by regular mail. Please contact the
OSHA Docket Office for information
about security procedures concerning
delivery of materials by express
delivery, hand delivery, and messenger
service. The hours of operation for the
OSHA Docket Office are 8:15 a.m. to
4:45 p.m., e.t.
• Instructions: All submissions must
include the Agency name and the OSHA
docket number (OSHA–2011–0183).
OSHA will place comments and other
material, including any personal
information, in the public docket
without revision, and these materials
will be available online at https://
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05DER1
]]>Agencies
[Federal Register Volume 76, Number 233 (Monday, December 5, 2011)]
[Rules and Regulations]
[Pages 75781-75782]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31179]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9561]
RIN 1545-BK46
Treasury Inflation-Protected Securities Issued at a Premium
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains temporary regulations that provide
guidance on the tax treatment of Treasury Inflation-Protected
Securities issued with more than a de minimis amount of premium. The
text of these temporary regulations also serves as the text of the
proposed regulations (REG-130777-11) set forth in the Proposed Rules
section in this issue of the Federal Register.
DATES: Effective Date: These regulations are effective on December 5,
2011.
Applicability Date: For the date of applicability, see Sec.
1.1275-7T(k).
FOR FURTHER INFORMATION CONTACT: William E. Blanchard, (202) 622-3950
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Treasury Inflation-Protected Securities (TIPS) are securities
issued by the Department of the Treasury. The principal amount of a
TIPS is adjusted for any inflation or deflation that occurs over the
term of the security. The rules for the taxation of inflation-indexed
debt instruments, including TIPS, are contained in Sec. 1.1275-7 of
the Income Tax Regulations. See also Sec. 1.171-3(b) (rules for
inflation-indexed debt instruments with bond premium).
The coupon bond method described in Sec. 1.1275-7(d) has applied
to TIPS rather than the more complex discount bond method described in
Sec. 1.1275-7(e). Under Sec. 1.1275-7(d)(2)(i), however, the coupon
bond method is not available with respect to inflation-indexed debt
instruments that are issued with more than a de minimis amount of
premium (that is, an amount greater than .0025 times the stated
principal amount of the security times the number of complete years to
the security's maturity).
In Notice 2011-21 (2011-19 IRB 761), to provide a more uniform
method for the federal income taxation of TIPS, the Department of the
Treasury and the Internal Revenue Service announced that regulations
would be issued to provide that taxpayers must use the coupon bond
method described in Sec. 1.1275-7(d) for TIPS issued with more than a
de minimis amount of premium. As a result, the discount bond method
described in Sec. 1.1275-7(e) would not apply to TIPS issued with more
than a de minimis amount of premium. Notice 2011-21 provided that the
regulations would be effective for TIPS issued on or after April 8,
2011.
Explanation of Provisions
The temporary regulations in this document contain the rules
described in Notice 2011-21. Under the temporary regulations, a
taxpayer must use the coupon bond method described in Sec. 1.1275-7(d)
for a TIPS that is issued with more than a de minimis amount of
premium. The temporary regulations contain an example of how to apply
the coupon bond method to a TIPS issued with more than a de minimis
amount of premium. As stated in Notice 2011-21, the temporary
regulations apply to TIPS issued on or after April 8, 2011. See Sec.
601.601(d)(2)(ii)(b).
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It has also been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations, and because the
regulations do not impose a collection of information on small
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. 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 their impact on small business.
Drafting Information
The principal author of these regulations is William E. Blanchard,
Office of Associate Chief Counsel (Financial Institutions and
Products). 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.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1275-7T also issued under 26 U.S.C. 1275(d). * * *
0
Par. 2. Section 1.1275-7T is added to read as follows:
Sec. 1.1275-7T Inflation-indexed debt instruments (temporary).
(a) through (h) [Reserved]. For further guidance, see Sec. 1.1275-
7(a) through (h).
(i) [Reserved]
(j) Treasury Inflation-Protected Securities issued with more than a
de minimis amount of premium--(1) Coupon bond method. Notwithstanding
Sec. 1.1275-7(d)(2)(i), the coupon bond method described in Sec.
1.1275-7(d) applies to Treasury Inflation-Protected Securities (TIPS)
issued with more than a de minimis amount of premium. For this purpose,
the de minimis amount is determined using the principles of Sec.
1.1273-1(d).
(2) Example. The following example illustrates the application of
the bond premium rules to a TIPS issued with bond premium:
Example. (i) Facts. X, a calendar year taxpayer, purchases at
original issuance TIPS with a stated principal amount of $100,000
and a stated interest rate of .125 percent, compounded semiannually.
For purposes of this example, assume that the TIPS are issued in
Year 1 on January 1, stated interest is payable on June 30 and
December 31 of each year, and that the TIPS mature on December 31,
Year 5. X pays $102,000 for the TIPS, which is the issue price for
the TIPS as determined under Sec. 1.1275-2(d)(1). Assume that the
inflation-adjusted principal amount for the first coupon in Year 1
is $101,225 (resulting in an interest payment of $63.27) and for the
second coupon in Year 1 is $102,500 (resulting in an interest
payment of $64.06). X elects to amortize bond premium under Sec.
1.171-4. (For simplicity, contrary to actual practice, the TIPS in
this example were issued on the date with respect to which the
calculation of the first coupon began.)
(ii) Bond premium. The stated interest on the TIPS is qualified
stated interest under Sec. 1.1273-1(c). X acquired the TIPS with
bond premium of $2,000 (basis of $102,000 minus
[[Page 75782]]
the TIPS' stated principal amount of $100,000). See Sec. Sec.
1.171-1(d), 1.171-3(b), and 1.1275-7(f)(3). The $2,000 is more than
the de minimis amount of premium for the TIPS of $1,250 (.0025 times
the stated principal amount of the TIPS ($100,000) times the number
of complete years to the TIPS' maturity (5 years)). Under paragraph
(j)(1) of this section, X must use the coupon bond method to
determine X's income from the TIPS.
(iii) Allocation of bond premium. Under Sec. 1.171-3(b), the
bond premium of $2,000 is allocable to each semiannual accrual
period by assuming that there will be no inflation or deflation over
the term of the TIPS. Moreover, for purposes of Sec. 1.171-2, the
yield of the securities is determined by assuming that there will be
no inflation or deflation over their term. Based on this assumption,
for purposes of section 171, the TIPS provide for semiannual
interest payments of $62.50 and a $100,000 payment at maturity. As a
result, the yield of the securities for purposes of section 171 is -
0.2720 percent, compounded semiannually. Under Sec. 1.171-2, the
bond premium allocable to an accrual period is the excess of the
qualified stated interest allocable to the accrual period ($62.50
for each accrual period) over the product of the taxpayer's adjusted
acquisition price at the beginning of the accrual period (determined
without regard to any inflation or deflation) and the taxpayer's
yield. Therefore, the $2,000 of bond premium is allocable to each
semiannual accrual period in Year 1 as follows: $201.22 to the
accrual period ending on June 30, Year 1 (the excess of the stated
interest of $62.50 over ($102,000 x -0.002720/2)); and $200.95 to
the accrual period ending on December 31, Year 1 (the excess of the
stated interest of $62.50 over ($101,798.78 x -0.002720/2)). The
adjusted acquisition price at the beginning of the accrual period
ending on December 31, Year 1 is $101,798.78 (the adjusted
acquisition price of $102,000 at the beginning of the accrual period
ending on June 30, Year 1 reduced by the $201.22 of premium
allocable to that accrual period).
(iv) Income determined by applying the coupon bond method and
the bond premium rules. Under Sec. 1.1275-7(d)(4), the application
of the coupon bond method to the TIPS results in a positive
inflation adjustment in Year 1 of $2,500, which is includible in X's
income for Year 1. However, because X acquired the TIPS at a premium
and elected to amortize the premium, the premium allocable to Year 1
will offset the income on the TIPS as follows: The premium allocable
to the first accrual period of $201.22 first offsets the interest
payable for that period of $63.27. The remaining $137.95 of premium
is treated as a deflation adjustment that offsets the positive
inflation adjustment. See Sec. 1.171-3(b). The premium allocable to
the second accrual period of $200.95 first offsets the interest
payable for that period of $64.06. The remaining $136.89 of premium
is treated as a deflation adjustment that further offsets the
positive inflation adjustment. As a result, X does not include in
income any of the stated interest received in Year 1 and includes in
Year 1 income only $2,225.16 of the positive inflation adjustment
for Year 1 ($2,500-$137.94-$136.89).
(k) Effective/applicability date. Notwithstanding Sec. 1.1275-
7(h), this section applies to Treasury Inflation-Protected Securities
issued on or after April 8, 2011.
(l) Expiration date. The applicability of this section expires on
or before December 2, 2014.
Approved: November 21, 2011.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Emily S. McMahon,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2011-31179 Filed 12-2-11; 8:45 am]
BILLING CODE 4830-01-P
