Treatment of Related Person Factoring Income; Certain Investments in United States Property; and Stock Redemptions Through Related Corporations, 76544-76545 [2016-26423]
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Federal Register / Vol. 81, No. 213 / Thursday, November 3, 2016 / Proposed Rules
FPRS is determined in accordance with FS’s
liquidation value percentage. However,
because FS does not control FPRS within the
meaning of paragraph (b)(2)(iii) of this
section and because the special allocation
does not have a principal purpose of
avoiding the purposes of section 956, under
paragraph (b)(2)(ii) of this section, FS’s
attributable share of the FPRS property is
determined by reference to its special
allocation. FS’s special allocation percentage
for the FPRS property is 80%, and thus FS’s
attributable share of the FPRS property is
80% and its attributable share of FPRS’s basis
in the FPRS property is $80x. Accordingly,
for purposes of determining the amount of
United States property held by FS as of the
close of quarter 1 of year 1, FS is treated as
holding United States property with an
adjusted basis of $80x.
Example 3. (i) Facts. USP, a domestic
corporation, wholly owns FS, a controlled
foreign corporation, which, in turn, owns a
25% capital and profits interest in FPRS, a
foreign partnership. The remaining 75%
capital and profits interest in FPRS is owned
by an unrelated foreign person. Thus, FS
does not control FPRS within the meaning of
paragraph (b)(2)(iii) of this section. FPRS
holds property (the ‘‘FPRS property’’) that
would be United States property if held by
FS directly. The FPRS property has an
adjusted basis of $100x and is anticipated to
appreciate in value but generate relatively
little income. The FPRS partnership
agreement, which satisfies the requirements
of section 704(b), specially allocates 80% of
the income with respect to the FPRS property
to the unrelated foreign person and 80% of
the gain with respect to the disposition of
FPRS property to FS. The special allocation
does not have a principal purpose of
avoiding the purposes of section 956.
(ii) Result. Because FPRS is not controlled
by FS within the meaning of paragraph
(b)(2)(iii) of this section, and the special
allocation does not have a principal purpose
of avoiding the purposes of section 956,
under paragraph (b)(2)(ii) of this section, FS’s
attributable share of the FPRS property is
determined by reference to a special
allocation with respect to the FPRS property.
Given the income and gain anticipated with
respect to the FPRS property, it is
appropriate to determine FS’s attributable
share of the property in accordance with the
special allocation of gain. Accordingly, for
purposes of determining the amount of
United States property held by FS in each
year that FPRS holds the FPRS property, FS’s
attributable share of the FPRS property is
80% and its attributable share of FPRS’s basis
in the FPRS property is $80x. Thus, FS is
treated as holding United States property
with an adjusted basis of $80x.
Example 4. (i) Facts. The facts are the
same as in Example 3 of this paragraph (b)(3),
except that USP owns the 75% capital and
profits interest in FPRS rather than an
unrelated foreign person. Thus, FS controls
FPRS within the meaning of paragraph
(b)(2)(iii) of this section. At the close of
quarter 1 of year 1, the liquidation value
percentage, as determined under paragraph
(b)(2) of this section, for FS with respect to
FPRS is 25%.
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(ii) Result. Because FPRS is controlled by
FS within the meaning of paragraph (b)(2)(iii)
of this section, under paragraph (b)(2)(iii) of
this section, FS’s attributable share of the
FPRS property is not determined by reference
to the special allocation of gain with respect
to the FPRS property. Accordingly, for
purposes of determining the amount of
United States property held by FS in each
year that FPRS holds the FPRS property, FS’s
attributable share of the FPRS property is
determined under paragraph (b)(2)(i) in
accordance with FS’s liquidation value
percentage, which is 25%, and its
attributable share of FPRS’s basis in the FPRS
property is $25x. Thus, FS is treated as
holding United States property with an
adjusted basis of $25x.
*
*
*
*
*
(f) * * *
(1) Except as otherwise provided in
this paragraph (f)(1), paragraph (b) of
this section applies to taxable years of
controlled foreign corporations ending
on or after November 3, 2016, and
taxable years of United States
shareholders in which or with which
such taxable years end, with respect to
property acquired on or after November
3, 2016. Paragraphs (b)(2)(ii) and (iii) of
this section, as well as Example 2,
Example 3, and Example 4 of paragraph
(b)(3) of this section, apply to taxable
years of controlled foreign corporations
ending on or after the date of
publication in the Federal Register of
the Treasury decision adopting this rule
as a final regulation, and taxable years
of United States shareholders in which
or with which such taxable years end,
with respect to property acquired on or
after the date of publication in the
Federal Register of the Treasury
decision adopting this rule as a final
regulation. For purposes of this
paragraph (f)(1), a deemed exchange of
property pursuant to section 1001 on or
after November 3, 2016 constitutes an
acquisition of the property on or after
that date, and a deemed exchange of
property pursuant to section 1001 on or
after the date of publication in the
Federal Register of the Treasury
decision adopting this rule as a final
regulation constitutes an acquisition of
the property on or after that date.
See § 1.956–2(a)(3), as contained in 26
CFR part 1 revised as of April 1, 2016,
for the rules applicable to taxable years
of a controlled foreign corporation
beginning on or after July 23, 2002, and
ending before November 3, 2016, and
with respect to property acquired before
November 3, 2016, to taxable years of a
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controlled foreign corporation beginning
on or after July 23, 2002.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2016–26424 Filed 11–2–16; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG–122387–16]
RIN 1545–BL86
Treatment of Related Person Factoring
Income; Certain Investments in United
States Property; and Stock
Redemptions Through Related
Corporations
Internal Revenue Service (IRS),
Treasury.
ACTION: Partial withdrawal of notice of
proposed rulemaking.
AGENCY:
This document withdraws
portions of a notice of proposed
rulemaking (INTL–49–86, subsequently
converted to REG–209001–86)
published in the Federal Register (53
FR 22186) on June 14, 1988, (the 1988
NPRM). The withdrawn portions relate
to stock redemptions through related
corporations, the application of section
956 to United States property indirectly
held by a controlled foreign corporation
(CFC), and certain related party
factoring transactions, as well as the
definition of the term ‘‘obligation’’ for
purposes of section 956.
DATES: Sections 1.304–4, 1.956–1(b)(4),
1.956–2(d)(2), and 1.956–3(b)(2)(ii) of
proposed rules published in the Federal
Register on June 14, 1988, are
withdrawn as of November 3, 2016.
FOR FURTHER INFORMATION CONTACT: Rose
E. Jenkins, (202) 317–6934 (not a tollfree number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
On June 14, 1988, the Department of
Treasury (Treasury Department) and the
IRS published in the Federal Register
proposed regulations (INTL–49–86,
subsequently converted to REG–
209001–86, 53 FR 22186), including: (i)
Proposed 1.304–4, which provides a
special rule regarding the use of a
related corporation to acquire for
property the stock of another commonly
owned corporation; (ii) proposed
§ 1.956–1(b)(4), which describes United
States property indirectly held by a CFC
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mstockstill on DSK3G9T082PROD with PROPOSALS
Federal Register / Vol. 81, No. 213 / Thursday, November 3, 2016 / Proposed Rules
for purposes of section 956; (iii)
proposed § 1.956–2(d)(2), which sets
forth the definition of ‘‘obligation’’ for
purposes of section 956; and (iv)
proposed § 1.956–3, which provides
guidance on the treatment of certain
trade or service receivables received in
factoring transactions as United States
property for purposes of section 956,
including rules in proposed § 1.956–
3(b)(2)(ii) that address the acquisition of
a trade or service receivable by a
nominee or pass-through entity. The
regulations were proposed by crossreference to temporary regulations in
§§ 1.304–4T, 1.956–1T(b)(4), 1.956–
2T(d), and 1.956–3T that were
published in the same issue of the
Federal Register (TD 8209, 53 FR
22163). This document withdraws
certain of these proposed regulations
because the rules in the proposed
regulations are supplanted by final
regulations or other proposed
regulations.
Specifically, in the Rules and
Regulations section of this issue of the
Federal Register, the Treasury
Department and the IRS are issuing final
regulations that contain rules in
§ 1.956–1(b) concerning United States
property indirectly held by a CFC for
purposes of section 956, and rules in
§ 1.956–3(b)(2)(ii) concerning the
acquisition by a nominee, pass-through
entity, or related foreign corporation for
purposes of the section 956 rules
governing factoring transactions. The
final regulations in §§ 1.956–1(b) and
1.956–3(b)(2)(ii) were included in a
notice of proposed rulemaking (REG–
155164–09) published in the Federal
Register on September 2, 2015 (80 FR
53058, as corrected at 80 FR 66485).
Thus, the rules in proposed §§ 1.956–
1(b)(4) and 1.956–3(b)(2)(ii) provided in
the 1988 NPRM are withdrawn. As
described in the preamble to the final
regulations published in the Rules and
Regulations section of this issue of the
Federal Register, the remainder of the
rules in § 1.956–3 proposed in the 1988
NPRM also are included in the final
regulations, with minor modifications.
Additionally, on December 30, 2009,
the Treasury Department and the IRS
published in the Federal Register
proposed regulations (74 FR 69043),
which contain in proposed § 1.304–4
special rules regarding the use of related
corporations to avoid the application of
section 304 that supplant the rules set
forth in the 1988 NPRM. On December
26, 2012, final regulations including
§ 1.304–4 as proposed in 2009 were
published in the Federal Register (TD
9606, 77 FR 75844). Accordingly, the
rule in the 1988 NPRM that addresses
section 304 is withdrawn.
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Furthermore, on April 8, 2016, the
Treasury Department and the IRS
published in the Federal Register
proposed regulations (81 FR 20588),
which contain in proposed § 1.956–2(d)
a definition of obligation for purposes of
section 956, as well as several
exceptions from the definition,
including those set forth in the 1988
NPRM. Accordingly, the rule in the
1988 NPRM that addresses the
definition of obligation is withdrawn.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Partial Withdrawal of a Notice of
Proposed Rulemaking
Accordingly, under the authority of
26 U.S.C. 7805, §§ 1.304–4, 1.956–
1(b)(4), 1.956–2(d)(2), and 1.956–
3(b)(2)(ii) of the notice of proposed
rulemaking (INTL–49–86) published in
the Federal Register on June 14, 1988,
(53 FR 22186) are withdrawn.
John M. Dalrymple,
Deputy Commissioner for Services and
Enforcement.
[FR Doc. 2016–26423 Filed 11–2–16; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 165
[Docket Number USCG–2016–0799]
RIN 1625–AA87
Safety and Security Zones; New York
Marine Inspection and Captain of the
Port Zone
Coast Guard, DHS.
Advance notice of proposed
rulemaking.
AGENCY:
ACTION:
The Coast Guard is requesting
public comments from any and all
waterway users regarding the permanent
security zone that encompasses all
waters within 150 yards of the bridge
connecting Liberty State Park and Ellis
Island. The Coast Guard is considering
restoring navigational access to the
waterway between Ellis Island and
Liberty State Park by modifying the
security zone around the Ellis Island
Bridge. The purpose removal of the
security zone would be to increase
navigational safety in New York Harbor
by allowing vessels to transit under the
Ellis Island Bridge, rather than being
required to transit the Anchorage
Channel.
SUMMARY:
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76545
Comments and related material
must be received by the Coast Guard on
or before January 3, 2017.
ADDRESSES: You may submit comments
identified by docket number USCG–
2016–0799 using the Federal
eRulemaking Portal at https://
www.regulations.gov. See the ‘‘Public
Participation and Request for
Comments’’ portion of the
SUPPLEMENTARY INFORMATION section for
further instructions on submitting
comments.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this rule, call or
email MST1 Kristina Pundt, Waterways
Management, U.S. Coast Guard;
telephone (718) 354–4352, email
Kristina.H.Pundt@uscg.mil.
SUPPLEMENTARY INFORMATION:
DATES:
Table of Acronyms
ANPRM Advance notice of proposed
rulemaking
NPRM Notice of proposed rulemaking
DHS Department of Homeland Security
FR Federal Register
MARSEC Maritime Security
NYCWTA New York City Water Trail
Association
A. Public Participation and Request for
Comments
We view public participation as
essential to effective rulemaking, and
will consider all comments and material
received during the comment period.
Your comment can help shape the
outcome of this possible rulemaking. If
you submit a comment, please include
the docket number for this rulemaking,
indicate the specific section of this
document to which each comment
applies, indicate the specific question
number to which each comment
applies, and provide a reason for each
suggestion or recommendation.
We encourage you to submit
comments through the Federal
eRulemaking Portal at https://
www.regulations.gov. If your material
cannot be submitted using https://
www.regulations.gov, contact the person
in the FOR FURTHER INFORMATION
CONTACT section of this document for
alternate instructions.
We accept anonymous comments. All
comments received will be posted
without change to https://
www.regulations.gov and will include
any personal information you have
provided. For more about privacy and
the docket, you may review a Privacy
Act notice regarding the Federal Docket
Management System in the March 24,
2005, issue of the Federal Register (70
FR 15086).
Documents mentioned in this ANPRM
as being available in the docket, and all
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]]>Agencies
[Federal Register Volume 81, Number 213 (Thursday, November 3, 2016)]
[Proposed Rules]
[Pages 76544-76545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26423]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-122387-16]
RIN 1545-BL86
Treatment of Related Person Factoring Income; Certain Investments
in United States Property; and Stock Redemptions Through Related
Corporations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Partial withdrawal of notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This document withdraws portions of a notice of proposed
rulemaking (INTL-49-86, subsequently converted to REG-209001-86)
published in the Federal Register (53 FR 22186) on June 14, 1988, (the
1988 NPRM). The withdrawn portions relate to stock redemptions through
related corporations, the application of section 956 to United States
property indirectly held by a controlled foreign corporation (CFC), and
certain related party factoring transactions, as well as the definition
of the term ``obligation'' for purposes of section 956.
DATES: Sections 1.304-4, 1.956-1(b)(4), 1.956-2(d)(2), and 1.956-
3(b)(2)(ii) of proposed rules published in the Federal Register on June
14, 1988, are withdrawn as of November 3, 2016.
FOR FURTHER INFORMATION CONTACT: Rose E. Jenkins, (202) 317-6934 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On June 14, 1988, the Department of Treasury (Treasury Department)
and the IRS published in the Federal Register proposed regulations
(INTL-49-86, subsequently converted to REG-209001-86, 53 FR 22186),
including: (i) Proposed 1.304-4, which provides a special rule
regarding the use of a related corporation to acquire for property the
stock of another commonly owned corporation; (ii) proposed Sec. 1.956-
1(b)(4), which describes United States property indirectly held by a
CFC
[[Page 76545]]
for purposes of section 956; (iii) proposed Sec. 1.956-2(d)(2), which
sets forth the definition of ``obligation'' for purposes of section
956; and (iv) proposed Sec. 1.956-3, which provides guidance on the
treatment of certain trade or service receivables received in factoring
transactions as United States property for purposes of section 956,
including rules in proposed Sec. 1.956-3(b)(2)(ii) that address the
acquisition of a trade or service receivable by a nominee or pass-
through entity. The regulations were proposed by cross-reference to
temporary regulations in Sec. Sec. 1.304-4T, 1.956-1T(b)(4), 1.956-
2T(d), and 1.956-3T that were published in the same issue of the
Federal Register (TD 8209, 53 FR 22163). This document withdraws
certain of these proposed regulations because the rules in the proposed
regulations are supplanted by final regulations or other proposed
regulations.
Specifically, in the Rules and Regulations section of this issue of
the Federal Register, the Treasury Department and the IRS are issuing
final regulations that contain rules in Sec. 1.956-1(b) concerning
United States property indirectly held by a CFC for purposes of section
956, and rules in Sec. 1.956-3(b)(2)(ii) concerning the acquisition by
a nominee, pass-through entity, or related foreign corporation for
purposes of the section 956 rules governing factoring transactions. The
final regulations in Sec. Sec. 1.956-1(b) and 1.956-3(b)(2)(ii) were
included in a notice of proposed rulemaking (REG-155164-09) published
in the Federal Register on September 2, 2015 (80 FR 53058, as corrected
at 80 FR 66485). Thus, the rules in proposed Sec. Sec. 1.956-1(b)(4)
and 1.956-3(b)(2)(ii) provided in the 1988 NPRM are withdrawn. As
described in the preamble to the final regulations published in the
Rules and Regulations section of this issue of the Federal Register,
the remainder of the rules in Sec. 1.956-3 proposed in the 1988 NPRM
also are included in the final regulations, with minor modifications.
Additionally, on December 30, 2009, the Treasury Department and the
IRS published in the Federal Register proposed regulations (74 FR
69043), which contain in proposed Sec. 1.304-4 special rules regarding
the use of related corporations to avoid the application of section 304
that supplant the rules set forth in the 1988 NPRM. On December 26,
2012, final regulations including Sec. 1.304-4 as proposed in 2009
were published in the Federal Register (TD 9606, 77 FR 75844).
Accordingly, the rule in the 1988 NPRM that addresses section 304 is
withdrawn.
Furthermore, on April 8, 2016, the Treasury Department and the IRS
published in the Federal Register proposed regulations (81 FR 20588),
which contain in proposed Sec. 1.956-2(d) a definition of obligation
for purposes of section 956, as well as several exceptions from the
definition, including those set forth in the 1988 NPRM. Accordingly,
the rule in the 1988 NPRM that addresses the definition of obligation
is withdrawn.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Partial Withdrawal of a Notice of Proposed Rulemaking
Accordingly, under the authority of 26 U.S.C. 7805, Sec. Sec.
1.304-4, 1.956-1(b)(4), 1.956-2(d)(2), and 1.956-3(b)(2)(ii) of the
notice of proposed rulemaking (INTL-49-86) published in the Federal
Register on June 14, 1988, (53 FR 22186) are withdrawn.
John M. Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2016-26423 Filed 11-2-16; 8:45 am]
BILLING CODE 4830-01-P
