Substantial Business Activities, 34887-34888 [2012-14238]
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Federal Register / Vol. 77, No. 113 / Tuesday, June 12, 2012 / Proposed Rules
mstockstill on DSK4VPTVN1PROD with PROPOSALS
capacity relating to a loan. When a
shareholder makes a payment on bona
fide indebtedness for which the
shareholder has acted as guarantor or in
a similar capacity, based on the facts
and circumstances, the shareholder may
increase its basis of indebtedness to the
extent of that payment.
(iii) Examples. The following
examples illustrate the provisions of
paragraph (a)(2)(i) and (ii) of this
section:
Example 1. Shareholder loan transaction.
A is the sole shareholder of S, an S
corporation. S received a loan from A.
Whether the loan from A to S constitutes
bona fide indebtedness from S to A is
determined under general Federal tax
principles and depends upon all of the facts
and circumstances. See paragraph (a)(2)(i) of
this section. If the loan constitutes bona fide
indebtedness from S to A, A’s loan to S
increases A’s basis of indebtedness under
paragraph (a)(2)(i) of this section. The result
is the same if A made the loan to S through
an entity that is disregarded as an entity
separate from A under § 301.7701–3.
Example 2. Guarantee. A is a shareholder
of S, an S corporation. In 2013, S received
a loan from Bank. Bank required A’s
guarantee as a condition of making the loan
to S. Beginning in 2014, S could no longer
make payments on the loan and A made
payments directly to Bank from A’s personal
funds until the loan obligation was satisfied.
For each payment A made on the note, A
obtains basis of indebtedness under
paragraph (a)(2)(ii) of this section. Thus, A’s
basis of indebtedness is increased during
2014 under paragraph (a)(2)(ii) of this section
to the extent of A’s payments to Bank
pursuant to the guarantee agreement.
Example 3. Back-to-back loan transaction.
A is the sole shareholder of two S
corporations, S1 and S2. S1 loaned $200,000
to A. A then loaned $200,000 to S2. Whether
the loan from A to S2 constitutes bona fide
indebtedness from S2 to A is determined
under general Federal tax principles and
depends upon all of the facts and
circumstances. See paragraph (a)(2)(i) of this
section. If A’s loan to S2 constitutes bona fide
indebtedness from S2 to A, A’s back-to-back
loan increases A’s basis of indebtedness in S2
under paragraph (a)(2)(i) of this section.
Example 4. Loan restructuring through
distributions. A is the sole shareholder of two
S corporations, S1 and S2. In March 2013, S1
made a loan to S2. In December 2013, S1
assigned its creditor position in the note to
A by making a distribution to A of the note.
Under local law, after S1 distributed the note
to A, S2 was relieved of its liability to S1 and
was directly liable to A. Whether S2 is
indebted to A rather than S1 is determined
under general Federal tax principles and
depends upon all of the facts and
circumstances. See paragraph (a)(2)(i) of this
section. If the note constitutes bona fide
indebtedness from S2 to A, the note increases
A’s basis of indebtedness in S2 under
paragraph (a)(2)(i) of this section.
*
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16:28 Jun 11, 2012
Jkt 226001
§ 1.1366–5
[Amended]
Effective/Applicability date.
* * * Upon the publication of the
Treasury decision adopting these rules
as final regulations in the Federal
Register, § 1.1366–2(a)(2) will apply to
transactions entered into on or after the
date these proposed regulations are
published as final in the Federal
Register. In addition, the revisions to
§§ 1.1366–0, 1.1366–2, and this section
are applicable on and after the date
these proposed regulations are
published as final in the Federal
Register.
§ 1.1367–1
[Amended]
Par. 6. Section 1.1367–1(h) Example
5(iii) is amended by removing the
language ‘‘§ 1.1366–2(a)(2)’’ in the third
and fourth sentences and adding the
language ‘‘§ 1.1366–2(a)(3)’’ in its place.
§ 1.1367–3
[Amended]
Par. 7. Section 1.1367–3 is amended
by adding one sentence to the end of the
paragraph to read as follows:
§ 1.1367–3
Effective/Applicability date.
* * * The revisions to citations to
§ 1.1366–2(a) in § 1.1367–1(h) Example
5(iii) are applicable on and after the date
these proposed regulations are
published as final in the Federal
Register.
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2012–14188 Filed 6–11–12; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG 107889–12]
RIN 1545–BK85
Substantial Business Activities
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary
regulations.
AGENCY:
PO 00000
Frm 00034
Fmt 4702
Sfmt 4702
In the Rules and Regulations
section of this issue of the Federal
Register, the IRS and the Treasury
Department are issuing temporary
regulations regarding whether a foreign
corporation has substantial business
activities in a foreign country. These
regulations affect certain domestic
corporations and partnerships (and
certain parties related thereto), and
foreign corporations that acquire
substantially all of the properties of
such domestic corporations or
partnerships. 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 September 10, 2012.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–107889–12), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be handdelivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–107889–12),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue NW.,
Washington, DC, or sent electronically
via the Federal eRulemaking Portal at
www.regulations.gov (IRS and REG–
107889–12).
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations,
Mary W. Lyons, (202) 622–3860 and
David A. Levine, (202) 622–3860;
concerning submissions of comments or
requests for a public hearing,
Oluwafunmilayo (Funmi) Taylor, (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Par. 5. Section 1.1366–5 is amended
by:
1. Removing the language ‘‘Sections
1.1366–2(a)(5)(i), (ii) and (iii)’’, and
adding the language ‘‘Sections 1.1366–
2(a)(6)(i), (ii) and (iii)’’ in its place.
2. Adding two sentences to the end of
the paragraph.
The additions read as follows:
§ 1.1366–5
34887
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 section 7874 of the Code. The
temporary regulations provide guidance
regarding whether a foreign corporation
has substantial business activities in a
foreign country for purposes of whether
a foreign corporation is treated as a
surrogate foreign corporation under
section 7874(a)(2)(B). The text of those
regulations also serves as the text of
these proposed regulations. The
preamble to the temporary regulations
explains these amendments.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a
E:\FR\FM\12JNP1.SGM
12JNP1
34888
Federal Register / Vol. 77, No. 113 / Tuesday, June 12, 2012 / Proposed Rules
significant regulatory action as defined
in Executive Order 12866. Therefore, a
regulatory assessment is not required. It
has also been determined that 5 U.S.C.
553(b) does not apply to these
regulations. These regulations do not
impose a collection of information.
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby
certified that this regulation will not
have a significant economic impact on
a substantial number of small entities.
The complexity and cost of a transaction
to which section 7874 may apply make
it unlikely that a substantial number of
small entities will engage in such a
transaction. In addition, any economic
impact to entities affected by section
7874, large or small, is derived from the
operation of the statute or its intended
application, and not from the temporary
regulations. 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
Drafting Information
mstockstill on DSK4VPTVN1PROD with PROPOSALS
The principal authors of these
proposed regulations are Mary W. Lyons
and David A. Levine of the Office of
Associate Chief Counsel (International).
However, other personnel from the IRS
and the Treasury Department
participated in their development.
Income taxes, Reporting and
recordkeeping requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
proposed to be amended as follows:
VerDate Mar<15>2010
17:55 Jun 11, 2012
Jkt 226001
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.7874–3 is also issued under 26
U.S.C. 7874(c)(6) and (g). * * *
Par. 2. Section 1.7874–3 is added to
read as follows:
§ 1.7874–3
Substantial business activities.
[The text of proposed § 1.7874–3 is
the same as the text of § 1.7874–3T
published elsewhere in this issue of the
Federal Register].
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2012–14238 Filed 6–7–12; 4:15 pm]
BILLING CODE 4830–01–P
DEPARTMENT OF THE INTERIOR
Office of Surface Mining Reclamation
and Enforcement
30 CFR Part 917
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 the 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 who 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.
List of Subjects in 26 CFR Part 1
PART 1—INCOME TAXES
[KY–255–FOR; OSM–2012–0004]
Kentucky Regulatory Program
Office of Surface Mining
Reclamation and Enforcement (OSM),
Interior.
ACTION: Proposed rule; public comment
period and opportunity for public
hearing.
AGENCY:
We are announcing receipt of
a proposed amendment to the Kentucky
Regulatory Program (hereinafter, the
‘‘Kentucky program’’) under the Surface
Mining Control and Reclamation Act of
1977 (SMCRA or the Act). On January
30, 2012, Kentucky submitted to OSM a
proposed Kentucky Administrative
Regulations (KAR) that authorizes
electronic notification of enforcement
documents.
SUMMARY:
We will accept written
comments until 4:00 p.m., e.s.t., July 12,
2012. If requested, we will hold a public
hearing on July 9, 2012. We will accept
requests to speak until 4:00 p.m., e.s.t.,
on June 27, 2012.
ADDRESSES: You may submit comments,
identified by ‘‘Docket Number OSM–
2012–0004’’ by either of the following
two methods:
Federal eRulemaking Portal:
www.regulations.gov. The proposed rule
has been assigned Docket ID: OSM–
2012–0004. If you would like to submit
comments through the Federal
eRulemaking Portal, go to
DATES:
PO 00000
Frm 00035
Fmt 4702
Sfmt 4702
www.regulations.gov and follow the
instructions; or
Mail/Hand Delivery/Courier: Joseph L.
Blackburn, Field Office Director,
Lexington Field Office, Office of
Surface Mining Reclamation and
Enforcement, 2675 Regency Road,
Lexington, Kentucky 40503.
Instructions: For detailed instructions
on submitting comments and additional
information on the rulemaking process,
see the ‘‘Public Comment Procedures’’
heading of the SUPPLEMENTARY
INFORMATION section in this document.
Docket: In addition to obtaining
copies of documents at
www.regulations.gov, you may also
obtain information at the addresses
listed below during normal business
hours, Monday through Friday,
excluding holidays. You may receive
one free copy of the amendment by
contacting OSM’s Lexington Field
Office.
Joseph L. Blackburn, Field Office
Director, Lexington Field Office,
Office of Surface Mining Reclamation
and Enforcement, 2675 Regency Road,
Lexington, Kentucky 40503, (859)
260–3900.
Steve Hohmann, Commissioner,
Department for Natural Resources, 2
Hudson Hollow, Frankfort, Kentucky
40601, Telephone: (502) 564–6940.
FOR FURTHER INFORMATION CONTACT:
Joseph L. Blackburn, Telephone: (859)
260–3900. Email:
jblackburn@osmre.gov.
SUPPLEMENTARY INFORMATION:
I. Background on the Kentucky Program
II. Description of the Proposed Amendment
III. Public Comment Procedures
IV. Procedural Determinations
I. Background on the Kentucky
Program
Section 503(a) of the Act permits a
State to assume primacy for the
regulation of surface coal mining and
reclamation operations on non-Federal
and non-Indian lands within its borders
by demonstrating that its program
includes, among other things, ‘‘a State
law which provides for the regulation of
surface coal mining and reclamation
operations in accordance with the
requirements of this Act * * *; and
rules and regulations consistent with
regulations issued by the Secretary
pursuant to this Act.’’ See 30 U.S.C.
1253(a)(1) and (7). On the basis of these
criteria, the Secretary of the Interior
conditionally approved the Kentucky
program on May 18, 1982. You can find
background information on the
Kentucky program, including the
Secretary’s findings, the disposition of
comments, and conditions of approval
E:\FR\FM\12JNP1.SGM
12JNP1
Agencies
[Federal Register Volume 77, Number 113 (Tuesday, June 12, 2012)]
[Proposed Rules]
[Pages 34887-34888]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14238]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG 107889-12]
RIN 1545-BK85
Substantial Business Activities
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking by cross-reference to temporary
regulations.
-----------------------------------------------------------------------
SUMMARY: In the Rules and Regulations section of this issue of the
Federal Register, the IRS and the Treasury Department are issuing
temporary regulations regarding whether a foreign corporation has
substantial business activities in a foreign country. These regulations
affect certain domestic corporations and partnerships (and certain
parties related thereto), and foreign corporations that acquire
substantially all of the properties of such domestic corporations or
partnerships. 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 September 10, 2012.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-107889-12), room
5203, Internal Revenue Service, PO 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-
107889-12), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue NW., Washington, DC, or sent electronically via the Federal
eRulemaking Portal at www.regulations.gov (IRS and REG-107889-12).
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Mary W. Lyons, (202) 622-3860 and David A. Levine, (202) 622-3860;
concerning submissions of comments or requests for a public hearing,
Oluwafunmilayo (Funmi) Taylor, (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 section 7874 of the Code. The temporary regulations
provide guidance regarding whether a foreign corporation has
substantial business activities in a foreign country for purposes of
whether a foreign corporation is treated as a surrogate foreign
corporation under section 7874(a)(2)(B). The text of those regulations
also serves as the text of these proposed regulations. The preamble to
the temporary regulations explains these amendments.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a
[[Page 34888]]
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It has also been
determined that 5 U.S.C. 553(b) does not apply to these regulations.
These regulations do not impose a collection of information. Pursuant
to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby
certified that this regulation will not have a significant economic
impact on a substantial number of small entities. The complexity and
cost of a transaction to which section 7874 may apply make it unlikely
that a substantial number of small entities will engage in such a
transaction. In addition, any economic impact to entities affected by
section 7874, large or small, is derived from the operation of the
statute or its intended application, and not from the temporary
regulations. 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
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 the 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 who 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 authors of these proposed regulations are Mary W.
Lyons and David A. Levine 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 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.7874-3 is also issued under 26 U.S.C. 7874(c)(6) and
(g). * * *
Par. 2. Section 1.7874-3 is added to read as follows:
Sec. 1.7874-3 Substantial business activities.
[The text of proposed Sec. 1.7874-3 is the same as the text of
Sec. 1.7874-3T published elsewhere in this issue of the Federal
Register].
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2012-14238 Filed 6-7-12; 4:15 pm]
BILLING CODE 4830-01-P