Certain Transfers of Property to Regulated Investment Companies [RICs] and Real Estate Investment Trusts [REITs], 22516-22519 [2012-8995]
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Federal Register / Vol. 77, No. 73 / Monday, April 16, 2012 / Proposed Rules
meaning of § 1.381(a)–1(a)). Except as
provided in § 1.312–10, in all other
cases in which property is transferred
from one corporation to another and no
gain or loss is recognized (or is
recognized only to the extent of the
property received other than that
permitted to be received without the
recognition of gain), no allocation of the
earnings and profits of the transferor is
made to the transferee.
*
*
*
*
*
(e) Effective/Applicability date.
Paragraph (a) of this section applies to
transactions occurring on or after the
date of publication of the Treasury
decision adopting this rule as a final
regulation in the Federal Register.
§ 1.381(c)(2)–1(d)
[Removed]
Par. 3. Section 1.381(c)(2)–1(d) is
removed.
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG–139991–08]
RIN 1545–BI84
Certain Transfers of Property to
Regulated Investment Companies
[RICs] and Real Estate Investment
Trusts [REITs]
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking.
AGENCY:
This document contains
proposed amendments to regulations
under section 337(d) of the Internal
Revenue Code. The proposed
regulations provide guidance
concerning certain transfers of property
from a C corporation to a Regulated
Investment Company (RIC) or a Real
Estate Investment Trust (REIT) and will
affect the parties to such transactions.
This document also invites comments
from the public regarding these
proposed regulations.
DATES: Written or electronic comments
and requests for a public hearing must
be received by July 16, 2012.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–139991–08), room
5205, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions
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Concerning the proposed regulations,
Grid Glyer (202) 622–7930 or Maury
Passman (202) 622–7750 with respect to
the corporate issues, and David H. Kirk
(202) 622–3060 with respect to the
partnership issues; concerning
submissions of comments,
Oluwafunmilayo Taylor (202) 622–7180
(not toll-free numbers).
Background
[FR Doc. 2012–9003 Filed 4–13–12; 8:45 am]
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FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
SUMMARY:
may be hand-delivered Monday through
Friday between the hours of 8 a.m. and
4 p.m. to CC:PA:LPD:PR (REG–139991–
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–
139991–08).
Congress repealed the General
Utilities doctrine in the Tax Reform Act
of 1986 (Pub. L. 99–514, 100 Stat. 2085),
as amended by the Technical and
Miscellaneous Revenue Act of 1988
(Pub. L. 100–647, 102 Stat. 3342), when
sections 336 and 337 of the Internal
Revenue Code were amended to require
corporations to recognize gain or loss on
the distribution of property in
connection with complete liquidations
other than certain subsidiary
liquidations. Section 337(d)(1) directs
the Secretary to prescribe regulations as
may be necessary to carry out the
purposes of General Utilities repeal,
including rules to ‘‘ensure that such
purposes may not be circumvented
* * * through the use of a regulated
investment company, a real estate
investment trust, or tax-exempt entity
* * *.’’
On March 18, 2003, regulations under
§ 1.337(d)–7 (the regulations) were
published in the Federal Register (TD
9047, 68 FR 12817). The regulations
generally provide (in paragraphs (a) and
(b)(1)) that if property of a C corporation
(the C corporation transferor) becomes
the property of a RIC or REIT by the
qualification of that C corporation as a
RIC or REIT or by the transfer of assets
of that C corporation to a RIC or REIT
(a conversion transaction), then the RIC
or REIT will be subject to tax on the net
built-in gain in the converted property
under the rules of section 1374 and the
underlying regulations. This treatment,
however, does not apply if the C
corporation transferor elects to
recognize gain and loss as if it sold the
converted property to an unrelated party
at fair market value (deemed sale
treatment).
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Explanation and Summary of
Comments
This preamble first discusses the
proposal as it relates to net built-in gain
property acquired by a RIC or REIT
either in a like-kind exchange (where
the C corporation transferor’s gain is not
recognized by reason of section 1031) or
in an involuntary conversion (where
such gain is not recognized by reason of
section 1033). This preamble then
discusses a proposed revision to the
definition of a C corporation in the
regulations, which provides that a
transfer of property by a tax-exempt
entity to a RIC or REIT is not treated as
a conversion transaction unless the taxexempt entity would have been subject
to tax if a deemed sale election had been
made.
In addition, the proposed regulations
also add definitions for the terms RIC,
REIT, and S corporation. While these
terms are not explicitly defined in the
regulations, their meanings are both
self-evident and unambiguous in that
context. Nonetheless, for clarification
and ease of use, the proposed
regulations add explicit definitions.
A. Like-Kind Exchanges and Involuntary
Conversions
The current regulations generally
provide that if property of a C
corporation becomes the property of a
RIC or REIT in a conversion transaction,
then, absent a deemed sale election, the
RIC or REIT will be subject to tax on the
net built-in gain in the converted
property under the rules of section 1374
and the underlying regulations (as
modified in paragraph (b) of the
regulations), as if the RIC or REIT were
an S corporation.
Commentators have expressed
concern that the general rule may
inappropriately expose property
transferred in certain exchanged basis
transactions—specifically, like-kind
exchanges and involuntary
conversions—to this treatment. In these
transactions, the C corporation
transferor replaces property it
transferred to a RIC or REIT with
property that has an equivalent basis
and built-in gain, and as a result, the
built-in gain remains subject to
corporate tax in the hands of the
transferor. Therefore, there would not be
any circumvention of the purposes of
General Utilities repeal. Section
1.337(d)–4(b)(3) provides an exception
in an analogous context (where a C
corporation transfers all or substantially
all of its assets to a tax-exempt entity)
to the extent the transaction qualifies for
nonrecognition treatment under section
1031 or section 1033.
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Accordingly, the proposed regulations
provide an exception from the general
rule of the current regulations for a
transfer of property by a C corporation
to a RIC or REIT to the extent that the
transfer qualifies for non-recognition
treatment under either section 1031 or
1033. In such a transaction, the C
corporation transferor’s basis in the
property it receives is derived from its
basis in the transferred property, and
thus reflects the built-in gain. At the
same time, the basis of the transferee
RIC or REIT in the converted property
has no relation to the C corporation
transferor’s basis therein.
Treasury and the IRS are not
proposing to extend this treatment to all
exchanged basis transactions, such as
exchanges that would otherwise qualify
for nonrecognition treatment under
section 351 of the Code, out of a concern
that such an exemption could create
opportunities to avoid corporate-level
tax on built-in gains and would give rise
to administrative difficulties that could
be addressed only through extensive
rulemaking.
B. Transfers by Tax-Exempt Entities
The regulations apply to property
transferred by a C corporation directly
to a RIC or REIT, and indirectly through
a partnership to the extent of any C
corporation partner’s proportionate
share of the transferred property (the
partnership rule). The regulations state
that if the partnership elects deemed
sale treatment with respect to such
transfer, then any net gain recognized by
the partnership on the deemed sale
must be allocated to the C corporation
partner.
Commentators have expressed
concern that the partnership rule
presents unintended effects when the
partnership has multiple C corporation
partners including both taxable and taxexempt entities. If such a partnership
transfers built-in gain property to a RIC
or REIT in a conversion transaction
without making a deemed sale election
(that is, section 1374 treatment applies),
and if the transferee RIC or REIT sells
the converted property during the
recognition period, then the RIC or REIT
is subject to a corporate-level tax on the
net built-in gain, including the portion
of the net built-in gain that otherwise
would have been allocated to taxexempt C corporation partners had a
deemed sale election been made. This is
because the net recognized built-in gain
is determined with reference to the
amount of gain that would have been
allocated to all C corporation partners,
regardless of their taxable or tax-exempt
status. In contrast, if the transferring
partnership were to make a deemed sale
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election, the taxable C corporation
partners would recognize gain that
otherwise could have been deferred if
section 1374 treatment had applied.
Treasury and the IRS believe that the
inclusion of direct or indirect transfers
by tax-exempt entities in the scope of
the final regulations furthers the
purposes of General Utilities repeal only
to the extent that those entities would
have been subject to tax had a deemed
sale election been made (for example, if
a deemed sale election would have
generated unrelated business taxable
income or would have adversely
affected the entity’s tax-exempt status).
Accordingly, the proposed regulations
would amend the final regulations to
provide that the definition of a C
corporation excludes tax-exempt
entities within the meaning of
§ 1.337(d)–4(c)(2). As a result, transfers
of property by a tax-exempt entity to a
RIC or REIT (or by a partnership to a RIC
or REIT to the extent of a tax-exempt
partner’s distributive share of the gain
in the transferred property) generally
will not be subject to section 1374
treatment. For this purpose, however, an
entity will not be considered to be taxexempt to the extent it would be subject
to tax (such as under section 511) under
Title 26 of the United States Code with
respect to gain (if any) resulting from a
deemed sale election if such an election
were made under § 1.337(d)–7(c)(5) with
respect to the transfer. Thus, for
example, if a partnership in which a taxexempt C corporation described in
§ 1.337(d)–4(c)(2) is a partner transfers
property to a RIC or REIT in a
conversion transaction, and the taxexempt entity would not have been
subject to unrelated business income tax
under section 511 or to tax under any
other provision of the Code had the
partnership made a deemed sale
election in connection with the transfer,
the transfer would be excluded from the
scope of the final regulations (and the
transferee RIC or REIT will not be
subject to section 1374 treatment) to the
extent of the tax-exempt entity’s
distributive share of the built-in gain or
loss in the converted property.
However, to the extent the tax-exempt
partner would have been subject to
unrelated business income tax under
section 511 or to tax under any other
provision of the Code with respect to its
distributive share of the built-in gain on
the property, the transferee RIC or REIT
would be subject to tax on the built-in
gain on the property under the rules of
section 1374 as if the RIC or REIT were
an S corporation unless the transferring
partnership elects deemed sale
treatment.
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Section 1.337(d)–7(e) provides that
the principles of § 1.337(d)–7 apply to
property transferred by a partnership to
a RIC or REIT to the extent of any C
corporation partner’s distributive share
of the gain or loss in the transferred
property. The proposed regulations
provide that § 1.337(d)–7(e) also applies
to determine the distributive share of
the gain or loss in the transferred
property of a C corporation partner of a
higher-tier partnership in a tiered
partnership structure in which the
transferor partnership is a lower-tier
partnership.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a
significant regulatory action as defined
in Executive Order 12866, as
supplemented by Executive Order
13565. Therefore, a regulatory
assessment is not required. Pursuant to
the Regulatory Flexibility Act (5 U.S.C.
chapter 6), it is hereby certified that
these proposed regulations would not
have a significant economic impact on
a substantial number of small entities
because the proposed regulations limit
the situations in which these regulations
apply to all businesses, including small
businesses. This certification is based
on the fact that these proposed
regulations do not create additional
obligations for, or impose an economic
impact on, small entities. Therefore, a
regulatory flexibility analysis is not
required. Pursuant to section 7805(f) of
the Code, these proposed regulations
will be submitted to the Chief Counsel
for Advocacy of the Small Business
Administration for comment on their
impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations,
consideration will be given to any
written (a signed original and eight (8)
copies) or electronic comments that are
submitted timely to the IRS. Treasury
and the IRS request comments on all
aspects of the proposed rules. All
comments will be available for public
inspection and copying. A public
hearing may be scheduled if requested
in writing by any person that timely
submits written or electronic 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 authors of these
regulations are Grid Glyer and Maury
Passman of the Office of Associate Chief
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Counsel (Corporate). Other personnel
from Treasury Department and the IRS
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 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.337(d)–7 is also issued under 26
U.S.C. 337(d) * * *
Par. 2. Section 1.337(d)–7 is amended
by:
1. Revising paragraphs (a)(2), (d)(1),
(e) and (f)
2. Adding paragraph (d)(3),
The revisions and addition read as
follows:
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§ 1.337(d)–7 Tax on property owned by a C
corporation that becomes property of a RIC
or REIT.
(a) * * *
(2) Definitions. For purposes of this
section:
(i) C corporation. The term C
corporation has the meaning provided
in section 1361(a)(2) except that the
term does not include a RIC, a REIT, or
a tax-exempt entity within the meaning
of paragraph (a)(2)(vi) of this section.
(ii) Conversion transaction. The term
conversion transaction means the
qualification of a C corporation as a RIC
or REIT or the transfer of property
owned by a C corporation to a RIC or
REIT.
(iii) RIC. The term RIC means a
regulated investment company within
the meaning of section 851(a).
(iv) REIT. The term REIT means a real
estate investment trust within the
meaning of section 856(a).
(v) S corporation. The term S
corporation has the meaning provided
in section 1361(a)(1).
(vi) Tax-exempt entity. The term taxexempt entity, with respect to a
conversion transaction, means an
entity—
(A) Described in § 1.337(d)–4(c)(2),
and
(B) That would not be subject to tax
under Title 26 of the United States Code
with respect to gain (if any) resulting
from a deemed sale election if such an
election were made under paragraph
(c)(5) of this section with respect to the
conversion transaction.
*
*
*
*
*
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(d) Exceptions—(1) Gain otherwise
recognized. Paragraph (a) of this section
does not apply to any conversion
transaction to the extent that gain or loss
otherwise is recognized on such
conversion transaction by the C
corporation that either qualifies as a RIC
or a REIT or that transfers property to
a RIC or REIT. See, for example, sections
311(b), 336(a), 351(b), 351(e), 356,
357(c), 367, 368(a)(2)(F), 1001, 1031(b),
and 1033(b).
*
*
*
*
*
(3) Special rules for like-kind
exchanges and involuntary
conversions—(i) In general. Paragraph
(a) of this section does not apply to a
conversion transaction to the extent that
a C corporation transfers property with
a built-in gain to a RIC or REIT and the
C corporation’s gain is not recognized
by reason of either section 1031 or 1033.
(ii) Clarification regarding exchanged
property previously subject to section
1374 treatment. Notwithstanding
paragraph (d)(3)(i) of this section, if, in
a transaction described in paragraph
(d)(3)(i) of this section, a RIC or REIT
surrenders property that was subject to
section 1374 treatment immediately
prior to the transaction, the rules of
section 1374(d)(6) will apply to
continue section 1374 treatment to the
replacement property acquired by the
RIC or REIT in the transaction.
(iii) Examples. The rules of this
paragraph (d)(3) are illustrated by the
following examples. In each of the
examples, X is a REIT, Y is a C
corporation, and X and Y are not
related.
Example 1. Section 1031(a) exchange. (i)
Facts. X owned a building that it leased for
commercial use (Property A). Y owned a
building leased for commercial use (Property
B). On January 1, Year 3, Y transferred
Property B to X in exchange for Property A
in a transaction that qualified for
nonrecognition treatment under section
1031(a). Immediately before the exchange,
Properties A and B each had a value of $100,
X had an adjusted basis of $60 in Property
A, Y had an adjusted basis of $70 in Property
B, and X was not subject to section 1374
treatment with respect to Property A.
(ii) Analysis. The transfer of property
(Property B) by Y (a C corporation) to X (a
REIT) is a conversion transaction within the
meaning of paragraph (a)(2)(ii) of this section.
The conversion transaction qualified for
nonrecognition treatment under section
1031(a) as to Y; thus, Y did not recognize any
of its $30 gain. Therefore, the conversion
transaction is not subject to paragraph (a) of
this section by reason of paragraph (d)(3)(i)
of this section.
Example 2. Section 1031(a) exchange of
section 1374 property. (i) Facts. The facts are
the same as in Example 1, except that X had
acquired Property A in a conversion
transaction in Year 2, and immediately before
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the Year 3 exchange X was subject to section
1374 treatment with respect to $25 of net
built-in gain in Property A.
(ii) Analysis. The Year 3 transfer of
Property B by Y to X is a conversion
transaction within the meaning of paragraph
(a)(2)(ii) of this section. The conversion
transaction qualified for nonrecognition
treatment under section 1031(a) as to Y; thus,
Y did not recognize any of its $30 gain.
Therefore, the Year 3 transfer is not subject
to paragraph (a) of this section by reason of
paragraph (d)(3)(i) of this section. However,
X had been subject to section 1374 treatment
with respect to $25 of net built-in gain in
Property A immediately before the Year 3
transfer, and X’s basis in Property B is
determined (in whole or in part) by reference
to its adjusted basis in Property A.
Accordingly, the rules of section 1374(d)(6)
apply and X is subject to section 1374
treatment on Property B with respect to the
$25 net built-in gain. See paragraph (d)(3)(ii)
of this section.
Example 3. Section 1031(b) exchange. (i)
Facts. The facts are the same as in Example
1, except that immediately before the Year 3
exchange Property A had a value of $92, and
X transferred Property A and $8 to Y in
exchange for Property B in a transaction that
qualified for nonrecognition treatment under
section 1031(b).
(ii) Analysis. The transfer of Property B by
Y to X is a conversion transaction within the
meaning of paragraph (a)(2)(ii) of this section.
The conversion transaction qualified for
nonrecognition treatment as to Y under
section 1031(b) (resulting from the receipt of
$8 in money or other property in addition to
the replacement property); as a result, Y
recognized $8 of its $30 gain, and did not
recognize the remaining $22 of gain.
Paragraph (a) of this section does not apply
to the transaction to the extent of the $8 gain
recognized by Y by reason of paragraph (d)(1)
of this section, or to the extent of the $22 gain
realized but not recognized by Y by reason
of paragraph (d)(3)(i) of this section.
Example 4. Section 1033(a) involuntary
conversion of property held by a C
corporation transferor. (i) Facts. Y owned
uninsured, improved property (Property 1)
that was involuntarily converted (within the
meaning of section 1033(a)) in a fire. Y sold
Property 1 for $100 to X, which owned an
adjacent property and wanted Property 1 for
use as a parking lot. Y had a $70 basis in
Property 1 immediately before the sale. Y
elected to defer gain recognition under
section 1033(a)(2), and purchased qualifying
replacement property (Property 2) for $100
from an unrelated party prior to the
expiration of the period described in section
1033(a)(2)(B).
(ii) Analysis. The transfer of Property 1 by
Y to X is a conversion transaction within the
meaning of paragraph (a)(2)(ii) of this section.
The conversion transaction (combined with
Y’s purchase of Property 2) qualified for
nonrecognition treatment under section
1033(a) as to Y; thus, Y did not recognize any
of its $30 gain. Therefore, the conversion
transaction is not subject to paragraph (a) of
this section by reason of paragraph (d)(3)(i)
of this section.
Example 5. Section 1033(a) involuntary
conversion of property held by a REIT. (i)
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Facts. X owned property (Property 1). On
January 1, Year 2, Property 1 had a fair
market value of $100 and a basis of $70, and
X was not subject to section 1374 treatment
with respect to Property 1. On that date,
when Property 1 was under a threat of
condemnation, X sold Property 1 to an
unrelated party for $100 (First Transaction).
X elected to defer gain recognition under
section 1033(a)(2), and purchased qualifying
replacement property (Property 2) for $100
from Y (Second Transaction) prior to the
expiration of the period described in section
1033(a)(2)(B).
(ii) Analysis. The transfer of Property 2 by
Y to X in the Second Transaction is a
conversion transaction within the meaning of
paragraph (a)(2)(ii) of this section. The
Second Transaction (combined with the First
Transaction) qualified for nonrecognition
treatment under section 1033(a) as to X, but
not as to Y. Assume no nonrecognition
provision applied to Y; thus, Y recognized
gain or loss on its sale of Property 2 in the
Second Transaction, and the Second
Transaction is not subject to paragraph (a) of
this section by reason of paragraph (d)(3)(i)
of this section.
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(e) Special rule for partnerships—(1)
In general. The principles of this section
apply to property transferred by a
partnership to a RIC or REIT to the
extent of any gain or loss in the
converted property that would be
allocated directly or indirectly, through
one or more partnerships, to a C
corporation if the partnership sold the
converted property to an unrelated party
at fair market value on the deemed sale
date (as defined in paragraph (c)(3) of
this section). If the partnership were to
elect deemed sale treatment under
paragraph (c) of this section in lieu of
section 1374 treatment under paragraph
(b) of this section with respect to such
transfer, then any net gain recognized by
the partnership on the deemed sale
must be allocated to the C corporation
partner, but does not increase the
capital account of any partner. Any
adjustment to the partnership’s basis in
the RIC or REIT stock as a result of
deemed sale treatment under paragraph
(c) of this section shall constitute an
adjustment to the basis of that stock
with respect to the C corporation
partner only. The principles of section
743 apply to such basis adjustment.
(2) Example. Transfer by partnership of
property to REIT. (i) Facts. PRS, a partnership
for Federal income tax purposes, has three
partners: TE, a tax-exempt entity (within the
meaning of § 1.337(d)–7(a)(2)(vi)), owns 50
percent of the capital and profits of PRS; A,
an individual, owns 30 percent of the capital
and profits of PRS; and Y, a C corporation
(within the meaning of § 1.337(d)–7(a)(2)(i)),
owns the remaining 20 percent. PRS owns a
building that it leases for commercial use
(Property 1). On January 1, Year 2, when PRS
has an adjusted basis in Property 1 of $100
and Property 1 has a fair market value of
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$500, PRS transfers Property 1 to X, a REIT,
in exchange for stock of X in an exchange
described in section 351. PRS does not elect
deemed sale treatment under paragraph (c) of
this section.
(ii) Analysis. The transfer of Property 1 by
PRS to X is a conversion transaction within
the meaning of paragraph (a)(2)(ii) of this
section to the extent of any gain or loss that
would be allocated to any C corporation
partner if PRS sold Property 1 at fair market
value to an unrelated party on the deemed
sale date. Y is a C corporation, but neither
TE nor A is a C corporation within the
meaning of paragraph (a)(2)(i) of this section.
Therefore, the transfer of Property 1 by PRS
to X is a conversion transaction within the
meaning of paragraph (a)(2)(ii) of this section
to the extent of Y’s share of any such gain
of PRS in Property 1. If PRS were to sell
Property 1 to an unrelated party at fair
market value on the deemed sale date, PRS
would allocate $80 of built-in gain to Y.
Thus, X is subject to section 1374 treatment
on Property 1 with respect to $80 of built-in
gain.
(f) Effective/Applicability date—(1) In
general. Except as provided in paragraph
(f)(2) of this section, this section applies to
conversion transactions that occur on or after
January 2, 2002. For conversion transactions
that occurred on or after June 10, 1987, and
before January 2, 2002, see §§ 1.337(d)–5 and
1.337(d)–6.
(2) Special rule. Paragraphs (a)(2), (d)(1),
(d)(3) and (e) of this section apply to
conversion transactions that occur on or after
[INSERT DATE OF PUBLICATION OF THE
TREASURY DECISION ADOPTING THESE
RULES AS FINAL REGULATIONS IN THE
FEDERAL REGISTER]. However,
taxpayers may apply paragraphs (a)(2), (d)(1),
(d)(3) and (e) of this section to conversion
transactions that occurred before [INSERT
DATE OF PUBLICATION OF THE
TREASURY DECISION ADOPTING THESE
RULES AS FINAL REGULATIONS IN THE
FEDERAL REGISTER]. For conversion
transactions that occurred on or after January
2, 2002 and before [INSERT DATE OF
PUBLICATION OF THE TREASURY
DECISION ADOPTING THESE RULES AS
FINAL REGULATIONS IN THE FEDERAL
REGISTER], see § 1.337(d)–7 as contained
in 26 CFR part 1 in effect on April 1, 2011.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2012–8995 Filed 4–13–12; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF LABOR
Wage and Hour Division
29 CFR Part 825
RIN 1215–AB76 and RIN 1235–AA03
The Family and Medical Leave Act
Wage and Hour Division,
Department of Labor.
AGENCY:
PO 00000
Frm 00010
Fmt 4702
Sfmt 4702
ACTION:
22519
Extension of comment period.
This document extends the
period for filing written comments until
April 30, 2012 on the proposed
revisions to certain regulations of the
Family and Medical Leave Act of 1993
(FMLA). On February 15, 2012, the
Department published a Notice of
Proposed Rulemaking to revise certain
regulations the FMLA, primarily to
implement recent statutory amendments
to the Act. The comment period is
scheduled to close on April 16, 2012.
The Department of Labor (Department)
is taking this action in order to provide
interested parties additional time to
submit comments.
DATES: The agency must receive
comments on or before April 30, 2012.
The period for public comments, which
was to close on April 16, 2012, will be
extended to April 30, 2012.
ADDRESSES: You may submit comments,
identified by Regulatory Information
Number (RIN) 1235–AA03, by electronic
submission through the Federal
eRulemaking Portal https://
www.regulations.gov. Follow
instructions for submitting comments.
You may also submit comments by mail.
Address written submissions to Mary
Ziegler, Director of the Division of
Regulations, Legislation, and
Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S–
3510, 200 Constitution Avenue NW.,
Washington, DC 20210.
Instructions: Please submit only one
copy of your comments by only one
method. All submissions must include
the agency name and RIN, identified
above, for this rulemaking. Please be
advised that comments received will be
posted without change to https://
www.regulations.gov, including any
personal information provided, and
should not include any individual’s
personal medical information. Mailed
written submissions commenting on
these provisions must be received by the
date indicated for consideration in this
rulemaking. For questions concerning
the application of the FMLA provisions,
individuals may contact the Wage and
Hour Division (WHD) local district
offices. Locate the nearest office by
calling the WHD’s toll-free help line at
(866) 4US–WAGE ((866) 487–9243)
between 8 a.m. and 5 p.m. in your local
time zone, or log onto the WHD’s Web
site for a nationwide listing of WHD
district and area offices at https://
www.dol.gov/whd/america2.htm. For
additional information on submitting
comments and the rulemaking process,
see the ‘‘Public Participation’’ heading
of the SUPPLEMENTARY INFORMATION
section of this document.
SUMMARY:
E:\FR\FM\16APP1.SGM
16APP1
]]>Agencies
[Federal Register Volume 77, Number 73 (Monday, April 16, 2012)]
[Proposed Rules]
[Pages 22516-22519]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8995]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-139991-08]
RIN 1545-BI84
Certain Transfers of Property to Regulated Investment Companies
[RICs] and Real Estate Investment Trusts [REITs]
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed amendments to regulations
under section 337(d) of the Internal Revenue Code. The proposed
regulations provide guidance concerning certain transfers of property
from a C corporation to a Regulated Investment Company (RIC) or a Real
Estate Investment Trust (REIT) and will affect the parties to such
transactions. This document also invites comments from the public
regarding these proposed regulations.
DATES: Written or electronic comments and requests for a public hearing
must be received by July 16, 2012.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-139991-08), room
5205, Internal Revenue Service, P.O. 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-
139991-08), 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-139991-08).
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Grid Glyer (202) 622-7930 or Maury Passman (202) 622-7750 with respect
to the corporate issues, and David H. Kirk (202) 622-3060 with respect
to the partnership issues; concerning submissions of comments,
Oluwafunmilayo Taylor (202) 622-7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Congress repealed the General Utilities doctrine in the Tax Reform
Act of 1986 (Pub. L. 99-514, 100 Stat. 2085), as amended by the
Technical and Miscellaneous Revenue Act of 1988 (Pub. L. 100-647, 102
Stat. 3342), when sections 336 and 337 of the Internal Revenue Code
were amended to require corporations to recognize gain or loss on the
distribution of property in connection with complete liquidations other
than certain subsidiary liquidations. Section 337(d)(1) directs the
Secretary to prescribe regulations as may be necessary to carry out the
purposes of General Utilities repeal, including rules to ``ensure that
such purposes may not be circumvented * * * through the use of a
regulated investment company, a real estate investment trust, or tax-
exempt entity * * *.''
On March 18, 2003, regulations under Sec. 1.337(d)-7 (the
regulations) were published in the Federal Register (TD 9047, 68 FR
12817). The regulations generally provide (in paragraphs (a) and
(b)(1)) that if property of a C corporation (the C corporation
transferor) becomes the property of a RIC or REIT by the qualification
of that C corporation as a RIC or REIT or by the transfer of assets of
that C corporation to a RIC or REIT (a conversion transaction), then
the RIC or REIT will be subject to tax on the net built-in gain in the
converted property under the rules of section 1374 and the underlying
regulations. This treatment, however, does not apply if the C
corporation transferor elects to recognize gain and loss as if it sold
the converted property to an unrelated party at fair market value
(deemed sale treatment).
Explanation and Summary of Comments
This preamble first discusses the proposal as it relates to net
built-in gain property acquired by a RIC or REIT either in a like-kind
exchange (where the C corporation transferor's gain is not recognized
by reason of section 1031) or in an involuntary conversion (where such
gain is not recognized by reason of section 1033). This preamble then
discusses a proposed revision to the definition of a C corporation in
the regulations, which provides that a transfer of property by a tax-
exempt entity to a RIC or REIT is not treated as a conversion
transaction unless the tax-exempt entity would have been subject to tax
if a deemed sale election had been made.
In addition, the proposed regulations also add definitions for the
terms RIC, REIT, and S corporation. While these terms are not
explicitly defined in the regulations, their meanings are both self-
evident and unambiguous in that context. Nonetheless, for clarification
and ease of use, the proposed regulations add explicit definitions.
A. Like-Kind Exchanges and Involuntary Conversions
The current regulations generally provide that if property of a C
corporation becomes the property of a RIC or REIT in a conversion
transaction, then, absent a deemed sale election, the RIC or REIT will
be subject to tax on the net built-in gain in the converted property
under the rules of section 1374 and the underlying regulations (as
modified in paragraph (b) of the regulations), as if the RIC or REIT
were an S corporation.
Commentators have expressed concern that the general rule may
inappropriately expose property transferred in certain exchanged basis
transactions--specifically, like-kind exchanges and involuntary
conversions--to this treatment. In these transactions, the C
corporation transferor replaces property it transferred to a RIC or
REIT with property that has an equivalent basis and built-in gain, and
as a result, the built-in gain remains subject to corporate tax in the
hands of the transferor. Therefore, there would not be any
circumvention of the purposes of General Utilities repeal. Section
1.337(d)-4(b)(3) provides an exception in an analogous context (where a
C corporation transfers all or substantially all of its assets to a
tax-exempt entity) to the extent the transaction qualifies for
nonrecognition treatment under section 1031 or section 1033.
[[Page 22517]]
Accordingly, the proposed regulations provide an exception from the
general rule of the current regulations for a transfer of property by a
C corporation to a RIC or REIT to the extent that the transfer
qualifies for non-recognition treatment under either section 1031 or
1033. In such a transaction, the C corporation transferor's basis in
the property it receives is derived from its basis in the transferred
property, and thus reflects the built-in gain. At the same time, the
basis of the transferee RIC or REIT in the converted property has no
relation to the C corporation transferor's basis therein.
Treasury and the IRS are not proposing to extend this treatment to
all exchanged basis transactions, such as exchanges that would
otherwise qualify for nonrecognition treatment under section 351 of the
Code, out of a concern that such an exemption could create
opportunities to avoid corporate-level tax on built-in gains and would
give rise to administrative difficulties that could be addressed only
through extensive rulemaking.
B. Transfers by Tax-Exempt Entities
The regulations apply to property transferred by a C corporation
directly to a RIC or REIT, and indirectly through a partnership to the
extent of any C corporation partner's proportionate share of the
transferred property (the partnership rule). The regulations state that
if the partnership elects deemed sale treatment with respect to such
transfer, then any net gain recognized by the partnership on the deemed
sale must be allocated to the C corporation partner.
Commentators have expressed concern that the partnership rule
presents unintended effects when the partnership has multiple C
corporation partners including both taxable and tax-exempt entities. If
such a partnership transfers built-in gain property to a RIC or REIT in
a conversion transaction without making a deemed sale election (that
is, section 1374 treatment applies), and if the transferee RIC or REIT
sells the converted property during the recognition period, then the
RIC or REIT is subject to a corporate-level tax on the net built-in
gain, including the portion of the net built-in gain that otherwise
would have been allocated to tax-exempt C corporation partners had a
deemed sale election been made. This is because the net recognized
built-in gain is determined with reference to the amount of gain that
would have been allocated to all C corporation partners, regardless of
their taxable or tax-exempt status. In contrast, if the transferring
partnership were to make a deemed sale election, the taxable C
corporation partners would recognize gain that otherwise could have
been deferred if section 1374 treatment had applied.
Treasury and the IRS believe that the inclusion of direct or
indirect transfers by tax-exempt entities in the scope of the final
regulations furthers the purposes of General Utilities repeal only to
the extent that those entities would have been subject to tax had a
deemed sale election been made (for example, if a deemed sale election
would have generated unrelated business taxable income or would have
adversely affected the entity's tax-exempt status). Accordingly, the
proposed regulations would amend the final regulations to provide that
the definition of a C corporation excludes tax-exempt entities within
the meaning of Sec. 1.337(d)-4(c)(2). As a result, transfers of
property by a tax-exempt entity to a RIC or REIT (or by a partnership
to a RIC or REIT to the extent of a tax-exempt partner's distributive
share of the gain in the transferred property) generally will not be
subject to section 1374 treatment. For this purpose, however, an entity
will not be considered to be tax-exempt to the extent it would be
subject to tax (such as under section 511) under Title 26 of the United
States Code with respect to gain (if any) resulting from a deemed sale
election if such an election were made under Sec. 1.337(d)-7(c)(5)
with respect to the transfer. Thus, for example, if a partnership in
which a tax-exempt C corporation described in Sec. 1.337(d)-4(c)(2) is
a partner transfers property to a RIC or REIT in a conversion
transaction, and the tax-exempt entity would not have been subject to
unrelated business income tax under section 511 or to tax under any
other provision of the Code had the partnership made a deemed sale
election in connection with the transfer, the transfer would be
excluded from the scope of the final regulations (and the transferee
RIC or REIT will not be subject to section 1374 treatment) to the
extent of the tax-exempt entity's distributive share of the built-in
gain or loss in the converted property. However, to the extent the tax-
exempt partner would have been subject to unrelated business income tax
under section 511 or to tax under any other provision of the Code with
respect to its distributive share of the built-in gain on the property,
the transferee RIC or REIT would be subject to tax on the built-in gain
on the property under the rules of section 1374 as if the RIC or REIT
were an S corporation unless the transferring partnership elects deemed
sale treatment.
Section 1.337(d)-7(e) provides that the principles of Sec.
1.337(d)-7 apply to property transferred by a partnership to a RIC or
REIT to the extent of any C corporation partner's distributive share of
the gain or loss in the transferred property. The proposed regulations
provide that Sec. 1.337(d)-7(e) also applies to determine the
distributive share of the gain or loss in the transferred property of a
C corporation partner of a higher-tier partnership in a tiered
partnership structure in which the transferor partnership is a lower-
tier partnership.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12866, as supplemented by Executive Order 13565. Therefore, a
regulatory assessment is not required. Pursuant to the Regulatory
Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these
proposed regulations would not have a significant economic impact on a
substantial number of small entities because the proposed regulations
limit the situations in which these regulations apply to all
businesses, including small businesses. This certification is based on
the fact that these proposed regulations do not create additional
obligations for, or impose an economic impact on, small entities.
Therefore, a regulatory flexibility analysis is not required. Pursuant
to section 7805(f) of the Code, these proposed regulations will be
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small business.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written (a signed original and eight
(8) copies) or electronic comments that are submitted timely to the
IRS. Treasury and the IRS request comments on all aspects of the
proposed rules. All comments will be available for public inspection
and copying. A public hearing may be scheduled if requested in writing
by any person that timely submits written or electronic 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 authors of these regulations are Grid Glyer and Maury
Passman of the Office of Associate Chief
[[Page 22518]]
Counsel (Corporate). Other personnel from Treasury Department and the
IRS 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 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.337(d)-7 is also issued under 26 U.S.C. 337(d) * * *
Par. 2. Section 1.337(d)-7 is amended by:
1. Revising paragraphs (a)(2), (d)(1), (e) and (f)
2. Adding paragraph (d)(3),
The revisions and addition read as follows:
Sec. 1.337(d)-7 Tax on property owned by a C corporation that becomes
property of a RIC or REIT.
(a) * * *
(2) Definitions. For purposes of this section:
(i) C corporation. The term C corporation has the meaning provided
in section 1361(a)(2) except that the term does not include a RIC, a
REIT, or a tax-exempt entity within the meaning of paragraph (a)(2)(vi)
of this section.
(ii) Conversion transaction. The term conversion transaction means
the qualification of a C corporation as a RIC or REIT or the transfer
of property owned by a C corporation to a RIC or REIT.
(iii) RIC. The term RIC means a regulated investment company within
the meaning of section 851(a).
(iv) REIT. The term REIT means a real estate investment trust
within the meaning of section 856(a).
(v) S corporation. The term S corporation has the meaning provided
in section 1361(a)(1).
(vi) Tax-exempt entity. The term tax-exempt entity, with respect to
a conversion transaction, means an entity--
(A) Described in Sec. 1.337(d)-4(c)(2), and
(B) That would not be subject to tax under Title 26 of the United
States Code with respect to gain (if any) resulting from a deemed sale
election if such an election were made under paragraph (c)(5) of this
section with respect to the conversion transaction.
* * * * *
(d) Exceptions--(1) Gain otherwise recognized. Paragraph (a) of
this section does not apply to any conversion transaction to the extent
that gain or loss otherwise is recognized on such conversion
transaction by the C corporation that either qualifies as a RIC or a
REIT or that transfers property to a RIC or REIT. See, for example,
sections 311(b), 336(a), 351(b), 351(e), 356, 357(c), 367,
368(a)(2)(F), 1001, 1031(b), and 1033(b).
* * * * *
(3) Special rules for like-kind exchanges and involuntary
conversions--(i) In general. Paragraph (a) of this section does not
apply to a conversion transaction to the extent that a C corporation
transfers property with a built-in gain to a RIC or REIT and the C
corporation's gain is not recognized by reason of either section 1031
or 1033.
(ii) Clarification regarding exchanged property previously subject
to section 1374 treatment. Notwithstanding paragraph (d)(3)(i) of this
section, if, in a transaction described in paragraph (d)(3)(i) of this
section, a RIC or REIT surrenders property that was subject to section
1374 treatment immediately prior to the transaction, the rules of
section 1374(d)(6) will apply to continue section 1374 treatment to the
replacement property acquired by the RIC or REIT in the transaction.
(iii) Examples. The rules of this paragraph (d)(3) are illustrated
by the following examples. In each of the examples, X is a REIT, Y is a
C corporation, and X and Y are not related.
Example 1. Section 1031(a) exchange. (i) Facts. X owned a
building that it leased for commercial use (Property A). Y owned a
building leased for commercial use (Property B). On January 1, Year
3, Y transferred Property B to X in exchange for Property A in a
transaction that qualified for nonrecognition treatment under
section 1031(a). Immediately before the exchange, Properties A and B
each had a value of $100, X had an adjusted basis of $60 in Property
A, Y had an adjusted basis of $70 in Property B, and X was not
subject to section 1374 treatment with respect to Property A.
(ii) Analysis. The transfer of property (Property B) by Y (a C
corporation) to X (a REIT) is a conversion transaction within the
meaning of paragraph (a)(2)(ii) of this section. The conversion
transaction qualified for nonrecognition treatment under section
1031(a) as to Y; thus, Y did not recognize any of its $30 gain.
Therefore, the conversion transaction is not subject to paragraph
(a) of this section by reason of paragraph (d)(3)(i) of this
section.
Example 2. Section 1031(a) exchange of section 1374 property.
(i) Facts. The facts are the same as in Example 1, except that X had
acquired Property A in a conversion transaction in Year 2, and
immediately before the Year 3 exchange X was subject to section 1374
treatment with respect to $25 of net built-in gain in Property A.
(ii) Analysis. The Year 3 transfer of Property B by Y to X is a
conversion transaction within the meaning of paragraph (a)(2)(ii) of
this section. The conversion transaction qualified for
nonrecognition treatment under section 1031(a) as to Y; thus, Y did
not recognize any of its $30 gain. Therefore, the Year 3 transfer is
not subject to paragraph (a) of this section by reason of paragraph
(d)(3)(i) of this section. However, X had been subject to section
1374 treatment with respect to $25 of net built-in gain in Property
A immediately before the Year 3 transfer, and X's basis in Property
B is determined (in whole or in part) by reference to its adjusted
basis in Property A. Accordingly, the rules of section 1374(d)(6)
apply and X is subject to section 1374 treatment on Property B with
respect to the $25 net built-in gain. See paragraph (d)(3)(ii) of
this section.
Example 3. Section 1031(b) exchange. (i) Facts. The facts are
the same as in Example 1, except that immediately before the Year 3
exchange Property A had a value of $92, and X transferred Property A
and $8 to Y in exchange for Property B in a transaction that
qualified for nonrecognition treatment under section 1031(b).
(ii) Analysis. The transfer of Property B by Y to X is a
conversion transaction within the meaning of paragraph (a)(2)(ii) of
this section. The conversion transaction qualified for
nonrecognition treatment as to Y under section 1031(b) (resulting
from the receipt of $8 in money or other property in addition to the
replacement property); as a result, Y recognized $8 of its $30 gain,
and did not recognize the remaining $22 of gain. Paragraph (a) of
this section does not apply to the transaction to the extent of the
$8 gain recognized by Y by reason of paragraph (d)(1) of this
section, or to the extent of the $22 gain realized but not
recognized by Y by reason of paragraph (d)(3)(i) of this section.
Example 4. Section 1033(a) involuntary conversion of property
held by a C corporation transferor. (i) Facts. Y owned uninsured,
improved property (Property 1) that was involuntarily converted
(within the meaning of section 1033(a)) in a fire. Y sold Property 1
for $100 to X, which owned an adjacent property and wanted Property
1 for use as a parking lot. Y had a $70 basis in Property 1
immediately before the sale. Y elected to defer gain recognition
under section 1033(a)(2), and purchased qualifying replacement
property (Property 2) for $100 from an unrelated party prior to the
expiration of the period described in section 1033(a)(2)(B).
(ii) Analysis. The transfer of Property 1 by Y to X is a
conversion transaction within the meaning of paragraph (a)(2)(ii) of
this section. The conversion transaction (combined with Y's purchase
of Property 2) qualified for nonrecognition treatment under section
1033(a) as to Y; thus, Y did not recognize any of its $30 gain.
Therefore, the conversion transaction is not subject to paragraph
(a) of this section by reason of paragraph (d)(3)(i) of this
section.
Example 5. Section 1033(a) involuntary conversion of property
held by a REIT. (i)
[[Page 22519]]
Facts. X owned property (Property 1). On January 1, Year 2, Property
1 had a fair market value of $100 and a basis of $70, and X was not
subject to section 1374 treatment with respect to Property 1. On
that date, when Property 1 was under a threat of condemnation, X
sold Property 1 to an unrelated party for $100 (First Transaction).
X elected to defer gain recognition under section 1033(a)(2), and
purchased qualifying replacement property (Property 2) for $100 from
Y (Second Transaction) prior to the expiration of the period
described in section 1033(a)(2)(B).
(ii) Analysis. The transfer of Property 2 by Y to X in the
Second Transaction is a conversion transaction within the meaning of
paragraph (a)(2)(ii) of this section. The Second Transaction
(combined with the First Transaction) qualified for nonrecognition
treatment under section 1033(a) as to X, but not as to Y. Assume no
nonrecognition provision applied to Y; thus, Y recognized gain or
loss on its sale of Property 2 in the Second Transaction, and the
Second Transaction is not subject to paragraph (a) of this section
by reason of paragraph (d)(3)(i) of this section.
(e) Special rule for partnerships--(1) In general. The principles
of this section apply to property transferred by a partnership to a RIC
or REIT to the extent of any gain or loss in the converted property
that would be allocated directly or indirectly, through one or more
partnerships, to a C corporation if the partnership sold the converted
property to an unrelated party at fair market value on the deemed sale
date (as defined in paragraph (c)(3) of this section). If the
partnership were to elect deemed sale treatment under paragraph (c) of
this section in lieu of section 1374 treatment under paragraph (b) of
this section with respect to such transfer, then any net gain
recognized by the partnership on the deemed sale must be allocated to
the C corporation partner, but does not increase the capital account of
any partner. Any adjustment to the partnership's basis in the RIC or
REIT stock as a result of deemed sale treatment under paragraph (c) of
this section shall constitute an adjustment to the basis of that stock
with respect to the C corporation partner only. The principles of
section 743 apply to such basis adjustment.
(2) Example. Transfer by partnership of property to REIT. (i)
Facts. PRS, a partnership for Federal income tax purposes, has three
partners: TE, a tax-exempt entity (within the meaning of Sec.
1.337(d)-7(a)(2)(vi)), owns 50 percent of the capital and profits of
PRS; A, an individual, owns 30 percent of the capital and profits of
PRS; and Y, a C corporation (within the meaning of Sec. 1.337(d)-
7(a)(2)(i)), owns the remaining 20 percent. PRS owns a building that
it leases for commercial use (Property 1). On January 1, Year 2,
when PRS has an adjusted basis in Property 1 of $100 and Property 1
has a fair market value of $500, PRS transfers Property 1 to X, a
REIT, in exchange for stock of X in an exchange described in section
351. PRS does not elect deemed sale treatment under paragraph (c) of
this section.
(ii) Analysis. The transfer of Property 1 by PRS to X is a
conversion transaction within the meaning of paragraph (a)(2)(ii) of
this section to the extent of any gain or loss that would be
allocated to any C corporation partner if PRS sold Property 1 at
fair market value to an unrelated party on the deemed sale date. Y
is a C corporation, but neither TE nor A is a C corporation within
the meaning of paragraph (a)(2)(i) of this section. Therefore, the
transfer of Property 1 by PRS to X is a conversion transaction
within the meaning of paragraph (a)(2)(ii) of this section to the
extent of Y's share of any such gain of PRS in Property 1. If PRS
were to sell Property 1 to an unrelated party at fair market value
on the deemed sale date, PRS would allocate $80 of built-in gain to
Y. Thus, X is subject to section 1374 treatment on Property 1 with
respect to $80 of built-in gain.
(f) Effective/Applicability date--(1) In general. Except as
provided in paragraph (f)(2) of this section, this section applies
to conversion transactions that occur on or after January 2, 2002.
For conversion transactions that occurred on or after June 10, 1987,
and before January 2, 2002, see Sec. Sec. 1.337(d)-5 and 1.337(d)-
6.
(2) Special rule. Paragraphs (a)(2), (d)(1), (d)(3) and (e) of
this section apply to conversion transactions that occur on or after
[INSERT DATE OF PUBLICATION OF THE TREASURY DECISION ADOPTING THESE
RULES AS FINAL REGULATIONS IN THE FEDERAL REGISTER]. However,
taxpayers may apply paragraphs (a)(2), (d)(1), (d)(3) and (e) of
this section to conversion transactions that occurred before [INSERT
DATE OF PUBLICATION OF THE TREASURY DECISION ADOPTING THESE RULES AS
FINAL REGULATIONS IN THE FEDERAL REGISTER]. For conversion
transactions that occurred on or after January 2, 2002 and before
[INSERT DATE OF PUBLICATION OF THE TREASURY DECISION ADOPTING THESE
RULES AS FINAL REGULATIONS IN THE FEDERAL REGISTER], see Sec.
1.337(d)-7 as contained in 26 CFR part 1 in effect on April 1, 2011.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2012-8995 Filed 4-13-12; 8:45 am]
BILLING CODE 4830-01-P
