Modification to Consolidated Return Regulation Permitting an Election To Treat a Liquidation of a Target, Followed by a Recontribution to a New Target, as a Cross-Chain Reorganization, 36914-36916 [2012-14979]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 77, Number 119 (Wednesday, June 20, 2012)]
[Rules and Regulations]
[Pages 36914-36916]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14979]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 9594]
RIN 1545-BI31


Modification to Consolidated Return Regulation Permitting an 
Election To Treat a Liquidation of a Target, Followed by a 
Recontribution to a New Target, as a Cross-Chain Reorganization

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations under section 1502 of 
the Internal Revenue Code (Code). These final regulations modify the 
election under which a consolidated group can avoid immediately taking 
into account an intercompany item after the liquidation of a target 
corporation. These regulations apply to corporations filing 
consolidated income tax returns.

DATES: Effective Date: These regulations are effective on June 20, 
2012.
    Applicability Date: The changes reflected in these final 
regulations

[[Page 36915]]

(Sec.  1.1502-13(f)(5)(ii)(B)(1) and (2)) generally apply to 
transactions in which T's liquidation into B occurs on or after October 
25, 2007. For transactions in which T's liquidation into B occurs 
before October 25, 2007, Sec.  1.1502-13(f)(5)(ii)(B)(1) and (2) in 
effect prior to October 25, 2007 as contained in 26 CFR part 1, revised 
April 1, 2009, continue to apply.

FOR FURTHER INFORMATION CONTACT: Michael R. Gould, (202) 622-7550 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information contained in these regulations has 
been reviewed and approved by the Office of Management and Budget in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) 
under control number 1545-1433. The collection of information in these 
final regulations is required in order for the parent of a consolidated 
group to make the election found in Sec.  1.1502-13(f)(5)(ii)(B).
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background and Explanation of Provisions

    This document contains amendments to 26 CFR part 1. On September 4, 
2009, the IRS and Treasury Department published temporary (TD 9458, 
2009-43 IRB 547) and proposed (REG-139068-08, 2009-43 IRB 558) 
regulations in the Federal Register (74 FR 45757 and 74 FR 45789, 
respectively). The regulations modify the election under which a 
consolidated group can avoid immediately taking into account an 
intercompany item after the liquidation of a target corporation. On 
March 4, 2011, the IRS and Treasury Department published final 
regulations in the Federal Register (TD 9515, 76 FR 11956), which 
republished the 2009 temporary regulations without substantive change, 
to make a minor correction to the ordering of the regulations as they 
appeared in the Federal Register. The IRS and the Treasury Department 
received no comments responding to the proposed and temporary 
regulations. No public hearing was requested or held. Therefore, this 
document adopts the provisions of the proposed regulations with no 
substantive change and the corresponding temporary regulations are 
removed. See Sec.  601.601(d)(2).

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866 as 
supplemented by Executive Order 13563. Therefore, a regulatory 
assessment is not required. It also has been determined that section 
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does 
not apply to these regulations. Pursuant to the Regulatory Flexibility 
Act (5 U.S.C. chapter 6), it is hereby certified that this rule will 
not have a significant economic impact on a substantial number of small 
entities. This certification is based on the fact that this regulation 
primarily affects members of consolidated groups which tend to be large 
corporations. Accordingly, a regulatory flexibility analysis is not 
required. Pursuant to section 7805(f) of the Internal Revenue Code, the 
notice of proposed rulemaking preceding this regulation was submitted 
to the Chief Counsel for Advocacy of the Small Business Administration 
for comment on their impact on small business. No comments were 
received.

Drafting Information

    The principal authors of these final regulations are Mary W. Lyons, 
formerly of the Office of Associate Chief Counsel (Corporate), and 
Michael R. Gould of the Office of Associate Chief Counsel (Corporate). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by removing 
the entry for Sec.  1.1502-13T to read in part as follows:

    Authority:  26 U.S.C. 7805 * * *

    Section 1.1502-13 also issued under 26 U.S.C. 1502. * * *


0
Par. 2. Section 1.1502-13 is amended by revising paragraphs 
(f)(5)(ii)(B)(1) and (2) and adding new paragraph (f)(5)(ii)(F) to read 
as follows:


Sec.  1.1502-13  Intercompany transactions.

* * * * *
    (f) * * *
    (5) * * *
    (ii) * * *
    (B) Section 332--(1) In general. If section 332 would otherwise 
apply to T's (old T's) liquidation into B, and B transfers 
substantially all of old T's assets to a new member (new T), and if a 
direct transfer of substantially all of old T's assets to new T would 
qualify as a reorganization described in section 368(a), then, for all 
Federal income tax purposes, T's liquidation into B and B's transfer of 
substantially all of old T's assets to new T will be disregarded and 
instead, the transaction will be treated as if old T transferred 
substantially all of its assets to new T in exchange for new T stock 
and the assumption of T's liabilities in a reorganization described in 
section 368(a). (Under paragraph (j)(1) of this section, B's stock in 
new T would be a successor asset to B's stock in old T, and S's gain 
would be taken into account based on the new T stock.)
    (2) Time limitation and adjustments. The transfer of old T's assets 
to new T qualifies under paragraph (f)(5)(ii)(B)(1) of this section 
only if B has entered into a written plan, on or before the due date of 
the group's consolidated income tax return (including extensions) for 
the tax year that includes the date of old T's liquidation, to transfer 
the old T assets to new T, and the statement described in paragraph 
(f)(5)(ii)(E) of this section is included on or with a timely filed 
consolidated income tax return (including extensions) for the tax year 
that includes the date of the liquidation. However, in the case of a 
liquidation of old T on or after October 25, 2007, by a taxpayer whose 
original tax return for the year of liquidation was filed on or before 
November 3, 2009, see Sec.  1.1502-13T(f)(5)(ii)(F)(3) as contained in 
26 CFR part 1, revised April 1, 2012. In either case, the transfer of 
substantially all of T's assets to new T must be completed within 12 
months of the filing of the return. Appropriate adjustments are made to 
reflect any events occurring before the formation of new T and to 
reflect any assets not transferred to new T, or liabilities not assumed 
by new T. For example, if B retains an asset of old T, the asset is 
treated under paragraph (f)(3) of this section as acquired by new T but

[[Page 36916]]

distributed to B immediately after the reorganization.
* * * * *
    (F) Effective/applicability date--(1) General rule. Paragraphs 
(f)(5)(ii)(B)(1) and (2) of this section apply to transactions in which 
old T's liquidation into B occurs on or after October 25, 2007.
    (2) Prior periods. For transactions in which old T's liquidation 
into B occurs before October 25, 2007, see paragraphs (f)(5)(ii)(B)(1) 
and (2) of this section in effect prior to October 25, 2007, as 
contained in 26 CFR part 1, revised April 1, 2009.
* * * * *


Sec.  1.1502-13T  [Removed]

0
Par. 3. Section Sec.  1.1502-13T is removed.

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

0
Par. 4. The authority citation for part 602 continues to read as 
follows:

    Authority:  26 U.S.C. 7805.


0
Par. 5. In Sec.  602.101, paragraph (b) is amended by adding the 
following entry in numerical order to the table to read as follows:


Sec.  602.101  OMB Control numbers

* * * * *
    (b) * * *

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                                                           Current OMB
  CFR part or section where identified and described       control No.
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                                * * * * *
1.1502-13.............................................         1545-1433
 
                                * * * * *
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Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
    Approved: June 11, 2012.
Emily S. McMahon,
(Acting) Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2012-14979 Filed 6-19-12; 8:45 am]
BILLING CODE 4830-01-P