Covered Asset Acquisitions, 88103-88110 [2016-28755]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 81, Number 235 (Wednesday, December 7, 2016)]
[Rules and Regulations]
[Pages 88103-88110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28755]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9800]
RIN 1545-BM75


Covered Asset Acquisitions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary Income Tax Regulations under 
section 901(m) of the Internal Revenue Code (Code) with respect to 
transactions that generally are treated as asset acquisitions for U.S. 
income tax purposes and either are treated as stock acquisitions or are 
disregarded for foreign income tax purposes. These regulations are 
necessary to provide guidance on applying section 901(m). The text of 
the temporary regulations also serves in part as the text of the 
proposed regulations under section 901(m) (REG-129128-14) published in 
the Proposed Rules section of this issue of the Federal Register.

DATES: Effective date: These regulations are effective on December 7, 
2016.
    Applicability dates: For dates of applicability, see Sec. Sec.  
1.901(m)-1T(b), 1.901(m)-2T(f), 1.901(m)-4T(g), 1.901(m)-5T(i), and 
1.901(m)-6T(d).

FOR FURTHER INFORMATION CONTACT: Jeffrey L. Parry, (202) 317-6936 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

I. Section 901(m)

    Section 212 of the Education Jobs and Medicaid Assistance Act 
(EJMAA), enacted on August 10, 2010 (Public Law 111-226), added section 
901(m) to the Code. Section 901(m)(1) provides that, in the case of a 
covered asset acquisition (CAA), the disqualified portion of any 
foreign income tax determined with respect to the income or gain 
attributable to relevant foreign assets (RFAs) will not be taken into 
account in determining the foreign tax credit allowed under section 
901(a), and in the case of foreign income tax paid by a section 902 
corporation (as defined in section 909(d)(5)), will not be taken into 
account for purposes of section 902 or 960. Instead, the disqualified 
portion of any foreign income tax (the disqualified tax amount) is 
permitted as a deduction. See section 901(m)(6).
    Under section 901(m)(2), a CAA is (i) a qualified stock purchase 
(as defined in section 338(d)(3)) to which section 338(a) applies; (ii) 
any transaction that is treated as an acquisition of assets for U.S. 
income tax purposes and as the acquisition of stock of a corporation 
(or is disregarded) for purposes of a foreign income tax; (iii) any 
acquisition of an interest in a partnership that has an election in 
effect under section 754; and (iv) to the extent provided by the 
Secretary, any other similar transaction.
    Section 901(m)(3)(A) provides that the term ``disqualified 
portion'' means, with respect to any CAA, for any taxable year, the 
ratio (expressed as a percentage) of (i) the aggregate basis 
differences (but not below zero) allocable to such taxable year with 
respect to all RFAs; divided by (ii) the income on which the foreign 
income tax referenced in section 901(m)(1) is determined. If the 
taxpayer fails to substantiate the income on which the foreign income 
tax is determined to the satisfaction of the Secretary, such income 
will be determined by dividing the amount of such foreign income tax by 
the highest marginal tax rate applicable to the taxpayer's income in 
the relevant jurisdiction.
    Section 901(m)(3)(B)(i) provides the general rule that the basis 
difference with respect to any RFA will be allocated to taxable years 
using the applicable cost recovery method for U.S. income tax purposes. 
Section 901(m)(3)(B)(ii) provides that, except as otherwise provided by 
the Secretary, if there is a disposition of an RFA, the basis 
difference allocated to the taxable year of the disposition will be the 
excess of the basis difference of such asset over the aggregate basis 
difference of such asset that has been allocated to all prior taxable 
years. The statute further provides that no basis difference with 
respect to such asset will be allocated to any taxable year thereafter.
    Section 901(m)(3)(C)(i) provides that basis difference means, with 
respect to any RFA, the excess of (i) the adjusted basis of such asset 
immediately after the CAA, over (ii) the adjusted basis of such asset 
immediately before the CAA. If the adjusted basis of an RFA immediately 
before the CAA exceeds the adjusted basis of the RFA immediately after 
the CAA (that is, where the adjusted basis

[[Page 88104]]

of an asset with a built-in loss is reduced in a CAA), such excess is 
taken into account as a basis difference of a negative amount. See 
section 901(m)(3)(C)(ii).
    Section 901(m)(4) provides that an RFA means, with respect to a 
CAA, an asset (including goodwill, going concern value, or other 
intangible) with respect to such acquisition if income, deduction, 
gain, or loss attributable to such asset is taken into account in 
determining the foreign income tax referenced in section 901(m)(1).
    Section 901(m)(7) provides that the Secretary may issue regulations 
or other guidance as is necessary or appropriate to carry out the 
purposes of section 901(m).

II. Notices 2014-44 and 2014-45

    The Department of the Treasury (Treasury Department) and the IRS 
issued Notice 2014-44 (2014-32 I.R.B 270 (July 21, 2014)) and Notice 
2014-45 (2014-34 I.R.B. 388 (July 29, 2014)), announcing the intent to 
issue regulations addressing the application of section 901(m) to 
dispositions of RFAs following CAAs and to CAAs described in section 
901(m)(2)(C) (regarding section 754 elections).
    The notices were issued in response to certain taxpayers engaging 
in transactions shortly after a CAA with the intention of invoking the 
application of the statutory disposition rule under section 
901(m)(3)(B)(ii) to avoid the purposes of section 901(m). To address 
these transactions, Notice 2014-44 described the definition of 
disposition that would be set forth in future regulations, as well as 
the rules for determining the portion of basis difference that would be 
taken into account upon a disposition of an RFA (the disposition 
amount). In addition, Notice 2014-44 described the computation of basis 
difference and disposition amount with respect to an RFA that is 
subject to a section 743(b) CAA. Notice 2014-44 also announced that 
future regulations would provide successor rules for the continued 
application of section 901(m) after a subsequent transfer of an RFA 
with remaining basis difference. Notice 2014-44 further provided that 
future regulations would provide that, if an asset is an RFA with 
respect to two section 743(b) CAAs involving the same partnership 
interest, the RFA will be treated as having no remaining basis 
difference with respect to the first section 743(b) CAA if the basis 
difference with respect to the second section 743(b) CAA is determined 
independently from the first section 743(b) CAA. In this regard, see 
generally Sec.  1.743-1(f) and proposed Sec.  1.743-1(f)(2).
    Notice 2014-44 provided that the future regulations described 
therein would apply (i) concerning dispositions, to dispositions 
occurring on or after July 21, 2014 (the date Notice 2014-44 was 
issued), (ii) concerning section 743(b) CAAs, to section 743(b) CAAs 
occurring on or after July 21, 2014, unless a taxpayer consistently 
applied those provisions to all section 743(b) CAAs occurring on or 
after January 1, 2011, and (iii) concerning successor rules, to 
remaining basis difference with respect to an RFA as of July 21, 2014, 
and any basis difference with respect to an RFA that arises in a CAA 
occurring on or after July 21, 2014. Notice 2014-45 provided that the 
future regulations described in Notice 2014-44 also would apply to 
determine the tax consequences under section 901(m) of an entity 
classification election made under Sec.  301.7701-3 that is filed on or 
after July 29, 2014 (the date Notice 2014-45 was issued), including 
whether a disposition results from the election for purposes of section 
901(m) and the treatment of any remaining basis difference that results 
from such an election.

III. Proposed Regulations Under Section 901(m)

    Proposed regulations under section 901(m) are being issued at the 
same time as these temporary regulations. In addition to cross-
referencing these temporary regulations, the proposed regulations 
provide guidance under section 901(m) concerning issues not addressed 
in the temporary regulations. Consulting the preamble to the proposed 
regulations is recommended for a better understanding of how these 
temporary regulations are intended to work.

Explanation of Provisions

I. Overview

    Section 1.901(m)-1T provides definitions that apply for purposes of 
the temporary regulations. Section 1.901(m)-2T identifies the 
transactions that are CAAs and the assets that are RFAs with respect to 
a CAA. Section 1.901(m)-4T provides the general rule for determining 
basis difference with respect to an RFA under section 901(m)(3)(C), as 
well as a special rule for determining basis difference with respect to 
an RFA that arises as a result of an acquisition of an interest in a 
partnership that has made a section 754 election (section 743(b) CAA). 
Section 1.901(m)-5T provides rules for taking into account basis 
difference under the applicable cost recovery method or as a result of 
a disposition of an RFA. Section 1.901(m)-6T provides successor rules 
for applying section 901(m) to subsequent transfers of RFAs that have 
basis difference that has not yet been fully taken into account.

II. Effective/Applicability Dates

    The applicability dates of the temporary regulations relate back to 
the issuance of Notices 2014-44 and 2014-45. Accordingly, the temporary 
regulations apply to CAAs occurring on or after July 21, 2014, and to 
CAAs occurring before that date resulting from an entity classification 
election made under Sec.  301.7701-3 that is filed on or after July 29, 
2014, and that is effective on or before July 21, 2014 (referred to as 
the general applicability date). The temporary regulations also apply 
to CAAs occurring on or after January 1, 2011, and before the general 
applicability date (the transition period), but only if the basis 
difference within the meaning of section 901(m)(3)(C)(i) (statutory 
basis difference) in one or more RFAs with respect to such a CAA had 
not been fully taken into account under section 901(m)(3)(B) either as 
of July 21, 2014, or, in the case of an entity classification election 
made under Sec.  301.7701-3 that is filed on or after July 29, 2014, 
and that is effective on or before July 21, 2014, prior to the 
transactions that are deemed to occur under Sec.  301.7701-3(g) as a 
result of the change in classification.
    Taxpayers also may choose to consistently apply Sec.  1.901(m)-
4T(d)(1) (regarding the determination of basis difference in an RFA 
with respect to a section 743(b) CAA) to all section 743(b) CAAs 
occurring on or after January 1, 2011.

III. CAAs and RFAs

    Section 1.901(m)-2T(b) identifies the transactions that are CAAs 
under section 901(m)(2)(A) through (C). Section 1.901(m)-2T(c) provides 
that, with respect to a foreign income tax and a CAA, an RFA is any 
asset (including goodwill, going concern value, or other intangible) 
subject to the CAA that is relevant in determining foreign income for 
purposes of the foreign income tax. An asset is subject to a CAA, if, 
for example (i) in the case of a qualified stock purchase of a target 
corporation (as defined in section 338(d)(3)) to which section 338(a) 
applies, ``new'' target is treated as purchasing the asset from ``old'' 
target; (ii) in the case of a taxable acquisition of a disregarded 
entity that is treated as an acquisition of stock for foreign income 
tax purposes,

[[Page 88105]]

the asset is owned by the disregard entity at that time of the purchase 
and therefore the buyer is treated as purchasing the asset from the 
seller; and (iii) in the case of a section 743(b) CAA, the asset is 
attributable to the partnership interest transferred in the section 
743(b) CAA.
    Section 1.901(m)-2T(d) provides that the statutory definitions 
under section 901(m)(2) and 901(m)(4) apply to determine whether a 
transaction that occurred during the transition period is a CAA and 
which assets are RFAs with respect to those CAAs, respectively.

IV. Determining Basis Difference With Respect to an RFA

    A basis difference is computed separately with respect to each 
foreign income tax for which an asset is an RFA. Consistent with 
section 901(m)(3)(C), Sec.  1.901(m)-4T(b) provides the general rule 
that basis difference with respect to an RFA is the U.S. basis in the 
RFA immediately after the CAA, less the U.S. basis in the RFA 
immediately before the CAA. If, however, an asset is an RFA with 
respect to a section 743(b) CAA, Sec.  1.901(m)-4T(d) provides that 
basis difference with respect to the RFA is the resulting basis 
adjustment under section 743(b) that is allocated to the RFA under 
section 755.
    Section 1.901(m)-2T(e) ``resets'' the basis difference in an RFA 
with respect to a CAA that occurred during the transition period by 
defining basis difference in the RFA as the portion of statutory basis 
difference that had not been taken into account under section 
901(m)(3)(B) either as of July 21, 2014, or, in the case of an entity 
classification election made under Sec.  301.7701-3 that is filed on or 
after July 29, 2014, and that is effective on or before July 21, 2014, 
prior to the transactions that are deemed to occur under Sec.  
301.7701-3(g) as a result of the change in classification. This is the 
basis difference in the RFA for the period to which the temporary 
regulations apply.

V. Basis Difference Taken Into Account

    Section 1.901(m)-5T provides rules for determining the amount of 
basis difference with respect to an RFA that is taken into account in a 
given U.S. taxable year (allocated basis difference). The amount of 
basis difference taken into account in a U.S. taxable year is used to 
compute a disqualified tax amount for the U.S. taxable year. Basis 
difference is taken into account in two ways: Under an applicable cost 
recovery method or as a result of a disposition of the RFA. If an asset 
is an RFA with respect to more than one foreign income tax, basis 
difference with respect to each foreign income tax is separately taken 
into account under Sec.  1.901(m)-5T.

A. Determining Cost Recovery Amounts

    Consistent with section 901(m)(3)(B)(i), Sec.  1.901(m)-5T(b)(2) 
provides that a cost recovery amount for an RFA is determined by 
applying an applicable cost recovery method to the basis difference 
rather than to the U.S. basis of the RFA.

B. Determining Disposition Amounts

1. Overview
    Section 901(m)(3)(B)(ii) provides that, except as otherwise 
provided by the Secretary, if there is a disposition of an RFA, the 
basis difference allocated to the U.S. taxable year of the disposition 
shall be the excess of the basis difference of such RFA over the total 
amount of such basis difference that has been allocated to all prior 
U.S. taxable years (unallocated basis difference). This result is 
appropriate when all the gain or loss from the disposition is 
recognized for both U.S. and foreign income tax purposes. In other 
cases, however, a disposition may not be the appropriate time for all 
of the unallocated basis difference to be taken into account. For 
example, it may not be appropriate for all of the unallocated basis 
difference to be taken into account upon a disposition that is fully 
taxable for U.S. income tax purposes but not for foreign income tax 
purposes. Accordingly, under the specific authority granted to the 
Secretary with respect to dispositions, these temporary regulations 
provide rules to determine when less than all of the unallocated basis 
difference is taken into account as a result of a disposition.
2. Definition of Disposition
    Section 1.901(m)-1T(a)(10) defines a disposition for purposes of 
section 901(m) as an event that results in gain or loss being 
recognized with respect to an RFA for purposes of U.S. income tax or 
foreign income tax, or both. Thus, the definition excludes certain 
transfers that might otherwise be considered dispositions under the 
ordinary meaning of that term. For example, an entity classification 
election by an RFA owner that results in a tax-free deemed liquidation 
for U.S. income tax purposes but that is disregarded for foreign income 
tax purposes does not result in a disposition of the RFAs under section 
901(m), because no gain or loss is recognized for U.S. or foreign 
income tax purposes with respect to the distribution of the RFAs in the 
deemed liquidation. This is the case even though the deemed liquidation 
might otherwise be considered a ``disposition'' of assets under other 
provisions of the Code.
3. Determining a Disposition Amount
    Section 1.901(m)-5T(c)(2) provides rules for determining a 
disposition amount. If a disposition of an RFA is fully taxable for 
U.S. and foreign income tax purposes, the disposition amount will be 
any remaining unallocated basis difference with respect to that RFA. 
This is because there generally will no longer be a disparity in the 
U.S. basis and the foreign basis of the RFA.
    If a disposition is not fully taxable for both U.S. and foreign 
income tax purposes, generally there will continue to be a disparity in 
the U.S. basis and the foreign basis following the disposition, and it 
will be appropriate for the RFA to continue to have unallocated basis 
difference. To the extent that the disparity in the U.S. basis and the 
foreign basis is reduced as a result of the disposition, however, a 
portion of the unallocated basis difference (or, in certain cases, all 
of the unallocated basis difference) should be taken into account. 
Whether the disposition reduces the basis disparity will depend on 
whether the basis difference is positive or negative and the 
jurisdiction in which gain or loss is recognized.
    If an RFA has a positive basis difference, a reduction in basis 
disparity generally will occur upon a disposition of the RFA if (i) a 
foreign disposition gain is recognized, which generally results in an 
increase in the foreign basis of the RFA, or (ii) a U.S. disposition 
loss is recognized, which generally results in a decrease in the U.S. 
basis of the RFA. Accordingly, if an RFA has a positive basis 
difference, the disposition amount equals the lesser of (i) any foreign 
disposition gain plus any U.S. disposition loss (for this purpose, 
expressed as a positive amount), or (ii) unallocated basis difference. 
See Sec.  1.901(m)-5T(c)(2)(ii)(A).
    If an RFA has a negative basis difference, a reduction in basis 
disparity generally will occur upon a disposition of the RFA if (i) a 
foreign disposition loss is recognized, which generally results in a 
decrease in the foreign basis of the RFA, or (ii) a U.S. disposition 
gain is recognized, which generally results in an increase in the U.S. 
basis of the RFA. Accordingly, if an RFA has a negative basis 
difference, the disposition amount equals the greater of (i) any U.S. 
disposition gain (for this purpose, expressed as a negative amount) 
plus any foreign disposition loss, or (ii) unallocated basis 
difference. See Sec.  1.901(m)-5T(c)(2)(ii)(B).

[[Page 88106]]

    For the avoidance of doubt, the determination of whether there is a 
disposition for U.S. income tax purposes, and the amount of U.S. 
disposition gain or U.S. disposition loss, is made without regard to 
whether gain or loss is deferred or disallowed or otherwise not taken 
into account currently (for example, see section 267, which defers or 
disallows certain recognized losses, and Sec.  1.1502-13, which 
provides rules for taking into account items of income, gain, 
deduction, and loss of members of a U.S. consolidated group from 
intercompany transactions). This principle also applies if foreign law 
has an equivalent concept whereby gain or loss that is realized and 
recognized is deferred or disallowed.
    If an asset is an RFA by reason of a section 743(b) CAA and 
subsequently there is a disposition of the RFA, then for purposes of 
determining the disposition amount, foreign disposition gain or foreign 
disposition loss means the amount of gain or loss recognized for 
purposes of a foreign income tax on the disposition of the RFA that is 
allocable to the partnership interest that was transferred in the 
section 743(b) CAA. See Sec.  1.901(m)-5T(c)(2)(iii). In addition, U.S. 
disposition gain or U.S. disposition loss means the amount of gain or 
loss recognized for U.S. income tax purposes on the disposition of the 
RFA that is allocable to the partnership interest that was transferred 
in the section 743(b) CAA, taking into account the basis adjustment 
under section 743(b) that was allocated to the RFA under section 755 in 
the section 743(b) CAA. See id.

VI. Successor Rules for Unallocated Basis Difference

A. General Rules

    Section 1.901(m)-6T(b) provides that section 901(m) continues to 
apply to any unallocated basis difference with respect to an RFA after 
there is a transfer of the RFA for U.S. income tax purposes (successor 
transaction), regardless of whether the transfer is a disposition, a 
CAA, or a non-taxable transaction. A successor transaction does not 
occur if, as a result of the transfer of an RFA, the entire unallocated 
basis difference is taken into account because, for example, the 
transfer results in all realized gain or loss in the RFA being 
recognized for U.S. and foreign income tax purposes.
    Notice 2014-44 stated that the Treasury Department and the IRS are 
continuing to study whether and to what extent section 901(m) should 
apply to an asset received in exchange for an RFA in a transaction in 
which the U.S. basis of the asset is determined by reference to the 
U.S. basis of the transferred RFA. The Treasury Department and the IRS 
have determined that an asset should not become an RFA solely because 
the U.S. basis of that asset is determined by reference to the U.S. 
basis of an RFA for which the asset is exchanged in a successor 
transaction. Accordingly, for example, if, in a successor transaction, 
an RFA owner transfers an RFA to a corporation in a transfer to which 
section 351 applies, the stock of the transferee corporation received 
is not an RFA even though the U.S. basis of the stock is determined 
under section 358 by reference to the U.S. basis of the RFA 
transferred.

B. Successor Transactions That Are CAAs

    An asset may be an RFA with respect to multiple CAAs if a successor 
transaction is also a CAA (subsequent CAA). In this case, the 
subsequent CAA may give rise to additional basis difference. Section 
1.901(m)-6T(b)(4)(i) provides generally that the unallocated basis 
difference with respect to a CAA that occurred prior to the subsequent 
CAA (referred to in the regulations as a ``prior CAA'') will continue 
to be taken into account under section 901(m) after the subsequent CAA.
    Section 1.901(m)-6T(b)(4)(iii) provides an exception to the general 
rule if an RFA is subject to two section 743(b) CAAs (referred to in 
the regulations as a ``prior section 743(b) CAA'' and a ``subsequent 
section 743(b) CAA''). In this case, to the extent the same partnership 
interest is transferred in the section 743(b) CAAs, the RFA will be 
treated as having no unallocated basis difference with respect to the 
prior section 743(b) CAA if basis difference for the subsequent section 
743(b) CAA is determined independently from the prior section 743(b) 
CAA. In this regard, see generally Sec.  1.743-1(f) and proposed Sec.  
1.743-1(f)(2). If the subsequent section 743(b) CAA results from the 
acquisition of only a portion of the partnership interest acquired in 
the prior section 743(b) CAA, the transferor must equitably apportion 
the unallocated basis difference attributable to the prior section 
743(b) CAA between the portion of the interest retained and the portion 
of the interest transferred. With respect to the portion transferred, 
the RFA will be treated as having no unallocated basis difference 
attributable to the prior section 743(b) CAA.

VII. Definition of Foreign Income Tax

    For purposes of section 901(m), the temporary regulations define 
``foreign income tax'' as any income, war profits, or excess profits 
tax for which a credit is allowable under section 901 or 903, other 
than any withholding tax determined on a gross basis as described in 
section 901(k)(1)(B). The Treasury Department and the IRS have 
determined that a withholding tax should not be subject to disallowance 
under section 901(m) because a withholding tax is a gross basis tax 
that is generally unaffected by changes in asset basis.

Effect on Other Documents

    The following publications are obsolete as of December 7, 2016:
    Notice 2014-44 (2014-32 I.R.B. 270) and Notice 2014-45 (2014-34 
I.R.B. 388).

Special Analyses

    Certain IRS regulations, including these, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. For the applicability of the Regulatory Flexibility Act 
(5 U.S.C. chapter 6), refer to the Special Analyses section of the 
preamble of the cross-referenced notice of proposed rulemaking 
published in this issue of the Federal Register. Pursuant to section 
7805(f) of the Internal Revenue Code, these regulations has been 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small businesses.

Drafting Information

    The principal author of these regulations is Jeffrey L. Parry of 
the Office of Associate Chief Counsel (International). However, other 
personnel from the Treasury Department and the IRS participated in 
their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding 
entries in numerical order to read as follows:

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

[[Page 88107]]

    Sections 1.901(m)-1T through -8T also issued under 26 U.S.C. 
901(m)(7).
    Section 1.901(m)-5T also issued under 26 U.S.C. 
901(m)(3)(B)(ii). * * *

0
Par. 2. Section 1.901(m)-1T is added to read as follows:


Sec.  1.901(m)-1T  Definitions (temporary).

    (a) Definitions. For purposes of section 901(m), this section, and 
Sec. Sec.  1.901(m)-2T through 1.901(m)-8T, the following definitions 
apply:
    (1)-(5) [Reserved]
    (6) The term basis difference has the meaning provided in Sec.  
1.901(m)-4T.
    (7) The term cost recovery amount has the meaning provided in Sec.  
1.901(m)-5T(b)(2).
    (8) The term covered asset acquisition (or CAA) has the meaning 
provided in Sec.  1.901(m)-2T.
    (9) [Reserved]
    (10) The term disposition means an event (for example, a sale, 
abandonment, or mark-to-market event) that results in gain or loss 
being recognized with respect to an RFA for purposes of U.S. income tax 
or a foreign income tax, or both.
    (11) The term disposition amount has the meaning provided in Sec.  
1.901(m)-5T(c)(2).
    (12) [Reserved]
    (13) The term disregarded entity means an entity that is 
disregarded as an entity separate from its owner, as described in Sec.  
301.7701-2(c)(2)(i) of this chapter.
    (14) The term fiscally transparent entity means an entity, 
including a Disregarded Entity, that is fiscally transparent under the 
principles of Sec.  1.894-1(d)(3) for purposes of U.S. income tax or a 
foreign income tax (or both).
    (15)-(17) [Reserved].
    (18) The term foreign disposition gain means, with respect to a 
foreign income tax, the amount of gain recognized on a disposition of 
an RFA in determining Foreign Income, regardless of whether the gain is 
deferred or otherwise not taken into account currently. Notwithstanding 
the foregoing, if after a section 743(b) CAA there is a disposition of 
an asset that is an RFA with respect to that section 743(b) CAA, 
foreign disposition gain has the meaning provided in Sec.  1.901(m)-
5T(c)(2)(iii).
    (19) The term foreign disposition loss means, with respect to a 
foreign income tax, the amount of loss recognized on a disposition of 
an RFA in determining Foreign Income, regardless of whether the loss is 
deferred or disallowed or otherwise not taken into account currently. 
Notwithstanding the foregoing, if after a section 743(b) CAA there is a 
disposition of an asset that is an RFA with respect to that section 
743(b) CAA, foreign disposition loss has the meaning provided in Sec.  
1.901(m)-5T(c)(2)(iii).
    (20) The term foreign income means, with respect to a foreign 
income tax, the taxable income (or loss) reflected on a foreign tax 
return (as properly amended or adjusted), even if the taxable income 
(or loss) is reported by an entity that is a fiscally transparent 
entity for purposes of the foreign income tax. If, however, foreign law 
imposes tax on the combined income (within the meaning of Sec.  1.901-
2(f)(3)(ii)) of two or more Foreign Payors, foreign income means the 
combined taxable income (or loss) of such Foreign Payors, regardless of 
whether such income (or loss) is reflected on a single foreign tax 
return.
    (21) The term foreign income tax means an income, war profits, or 
excess profits tax for which a credit is allowable under section 901 or 
903, except that it does not include any withholding tax determined on 
a gross basis as described in section 901(k)(1)(B).
    (22)-(25) [Reserved]
    (26) The term prior CAA has the meaning provided in Sec.  1.901(m)-
6T(b)(2).
    (27) The term prior section 743(b) CAA has the meaning provided in 
Sec.  1.901(m)-6T(b)(4)(iii).
    (28) The term relevant foreign asset (or RFA) has the meaning 
provided in Sec.  1.901(m)-2T.
    (29)-(32) [Reserved]
    (33) The term section 338 CAA has the meaning provided in Sec.  
1.901(m)-2T(b)(1).
    (34) The term section 743(b) CAA has the meaning provided in Sec.  
1.901(m)-2T(b)(3).
    (35) [Reserved]
    (36) The term subsequent CAA has the meaning provided in Sec.  
1.901(m)-6T(b)(4)(i).
    (37) The term subsequent section 743(b) CAA has the meaning 
provided in Sec.  1.901(m)-6T(b)(4)(iii).
    (38) The term successor transaction has the meaning provided in 
Sec.  1.901(m)-6T(b)(2).
    (39) [Reserved]
    (40) The term unallocated basis difference means, with respect to 
an RFA and a foreign income tax, the basis difference reduced by the 
sum of the cost recovery amounts and the disposition amounts that have 
been computed under Sec.  1.901(m)-5T.
    (41) The term U.S. basis means the adjusted basis of an asset 
determined for U.S. income tax purposes.
    (42) [Reserved].
    (43) The term U.S. disposition gain means the amount of gain 
recognized for U.S. income tax purposes on a disposition of an RFA, 
regardless of whether the gain is deferred or otherwise not taken into 
account currently. Notwithstanding the foregoing, if after a section 
743(b) CAA there is a disposition of an asset that is an RFA with 
respect to that section 743(b) CAA, U.S. disposition gain has the 
meaning provided in Sec.  1.901(m)-5T(c)(2)(iii).
    (44) The term U.S. disposition loss means the amount of loss 
recognized for U.S. income tax purposes on a disposition of an RFA, 
regardless of whether the loss is deferred or disallowed or otherwise 
not taken into account currently. Notwithstanding the foregoing, if 
after a section 743(b) CAA there is a disposition of an asset that is 
an RFA with respect to that section 743(b) CAA, U.S. disposition loss 
has the meaning provided in Sec.  1.901(m)-5T(c)(2)(iii).
    (45) The term U.S. taxable year means a taxable year as defined in 
section 7701(a)(23).
    (b) Effective/applicability date. (1) [Reserved].
    (2) Paragraphs (a)(6), (7), (8), (10), (11), (13), (14), (18), 
(19), (20), (21), (26), (27), (28), (33), (34), (36), (37), (38), (40), 
(41), (43), (44), and (45) of this section apply to CAAs occurring on 
or after July 21, 2014, and to CAAs occurring before that date 
resulting from an entity classification election made under Sec.  
301.7701-3 that is filed on or after July 29, 2014, and that is 
effective on or before July 21, 2014. Paragraphs (a)(6), (7), (8), 
(10), (11), (13), (14), (18), (19), (20), (21), (26), (27), (28), (33), 
(34), (36), (37), (38), (40), (41), (43), (44), and (45) of this 
section also apply to CAAs occurring on or after January 1, 2011, and 
before July 21, 2014, other than CAAs occurring before July 21, 2014, 
resulting from an entity classification election made under Sec.  
301.7701-3 that is filed on or after July 29, 2014, and that is 
effective on or before July 21, 2014, but only if the basis difference 
(within the meaning of section 901(m)(3)(C)(i)) in one or more RFAs 
with respect to the CAA had not been fully taken into account under 
section 901(m)(3)(B) either as of July 21, 2014, or, in the case of an 
entity classification election made under Sec.  301.7701-3 that is 
filed on or after July 29, 2014, and that is effective on or before 
July 21, 2014, prior to the transactions that are deemed to occur under 
Sec.  301.7701-3(g) as a result of the change in classification.
    (3) [Reserved].
    (c) Expiration date. The applicability of this section expires on 
December 6, 2019.

[[Page 88108]]


0
Par. 3. Section 1.901(m)-2T is added to read as follows:


Sec.  1.901(m)-2T  Covered asset acquisitions and relevant foreign 
assets (temporary).

    (a) In general. Paragraph (b) of this section sets forth the 
transactions that are covered asset acquisitions (or CAAs). Paragraph 
(c) of this section provides rules for identifying assets that are 
relevant foreign assets (or RFAs) with respect to a CAA. Paragraph (d) 
of this section provides special rules for identifying CAAs and RFAs 
with respect to transactions to which paragraphs (b) and (c) of this 
section do not apply. Paragraph (e) of this section provides examples 
illustrating the rules of this section. Paragraph (f) of this section 
provides the effective/applicability date, and paragraph (g) of this 
section provides the expiration date.
    (b) Covered asset acquisitions. Except as provided in paragraph (d) 
of this section, the transactions set forth in this paragraph (b) are 
CAAs.
    (1) A qualified stock purchase (as defined in section 338(d)(3)) to 
which section 338(a) applies (section 338 CAA);
    (2) Any transaction that is treated as an acquisition of assets for 
U.S. income tax purposes and as an acquisition of stock of a 
corporation (or the transaction is disregarded) for foreign income tax 
purposes;
    (3) Any acquisition of an interest in a partnership that has an 
election in effect under section 754 (section 743(b) CAA);
    (4)-(6) [Reserved].
    (c) Relevant foreign asset--(1) In general. Except as provided in 
paragraph (d) of this section, an RFA means, with respect to a foreign 
income tax and a CAA, any asset (including goodwill, going concern 
value, or other intangible) subject to the CAA that is relevant in 
determining foreign income for purposes of the foreign income tax.
    (2) RFA status with respect to a foreign income tax [Reserved].
    (3) Subsequent RFA status with respect to another foreign income 
tax [Reserved].
    (d) Identifying covered asset acquisitions and relevant foreign 
assets to which paragraphs (b) and (c) of this section do not apply. 
For transactions occurring on or after January 1, 2011, and before July 
21, 2014, other than transactions occurring before July 21, 2014, 
resulting from an entity classification election made under Sec.  
301.7701-3 of this chapter that is filed on or after July 29, 2014, and 
that is effective on or before July 21, 2014, the transactions set 
forth under section 901(m)(2) are CAAs and the assets that are relevant 
foreign assets with respect to the CAA under section 901(m)(4) are 
RFAs.
    (e) Examples. [Reserved].
    (f) Effective/applicability date--(1) Paragraphs (a), (b)(1) 
through (3), and (c)(1) of this section apply to transactions occurring 
on or after July 21, 2014, and to transactions occurring before that 
date resulting from an entity classification election made under Sec.  
301.7701-3 of this chapter that is filed on or after July 29, 2014, and 
that is effective on or before July 21, 2014. Paragraph (d) of this 
section applies to transactions occurring on or after January 1, 2011, 
and before July 21, 2014, other than transactions occurring before July 
21, 2014, resulting from an entity classification election made under 
Sec.  301.7701-3 of this chapter that is filed on or after July 29, 
2014, and that is effective on or before July 21, 2014.
    (2)-(3) [Reserved]
    (g) Expiration date. The applicability of this section expires on 
December 6, 2019.

0
Par. 4. Section 1.901(m)-3T is added and reserved to read as follows:


Sec.  1.901(m)-3T  Disqualified tax amount and aggregate basis 
difference carryover (temporary). [Reserved].

0
Par. 5. Section 1.901(m)-4T is added to read as follows:


Sec.  1.901(m)-4T   Determination of basis difference (temporary).

    (a) In general. This section provides rules for determining for 
each RFA the basis difference that arises as a result of a CAA. A basis 
difference is computed separately with respect to each foreign income 
tax for which an asset subject to a CAA is an RFA. Paragraph (b) of 
this section provides the general rule for determining basis difference 
that references only U.S. basis in the RFA. Paragraph (c) of this 
section provides for an election to determine basis difference by 
reference to foreign basis and sets forth the procedures for making the 
election. Paragraph (d) of this section provides special rules for 
determining basis difference in the case of a section 743(b) CAA. 
Paragraph (e) of this section provides a special rule for determining 
basis difference in an RFA with respect to a CAA to which paragraphs 
(b) through (d) of this section do not apply. Paragraph (f) of this 
section provides examples illustrating the rules of this section. 
Paragraph (g) of this section provides the effective/applicability 
date, and paragraph (h) of this section provides the expiration date.
    (b) General rule. Except as otherwise provided in paragraphs (c), 
(d), and (e) of this section, basis difference is the U.S. basis in the 
RFA immediately after the CAA, less the U.S. basis in the RFA 
immediately before the CAA. Basis difference is an attribute that 
attaches to an RFA.
    (c) Foreign basis election. [Reserved].
    (d) Determination of basis difference in a section 743(b) CAA--(1) 
In general. Except as provided in paragraphs (d)(2) and (e) of this 
section, if there is a section 743(b) CAA, basis difference is the 
resulting basis adjustment under section 743(b) that is allocated to 
the RFA under section 755.
    (2) Foreign basis election. [Reserved].
    (e) Determination of basis difference in an RFA with respect to a 
CAA with respect to which paragraphs (b), (c), and (d) of this section 
do not apply. For CAAs occurring on or after January 1, 2011, and 
before July 21, 2014, other than CAAs occurring before July 21, 2014, 
resulting from an entity classification election made under Sec.  
301.7701-3 of this chapter that is filed on or after July 29, 2014, and 
that is effective on or before July 21, 2014, basis difference in an 
RFA with respect to the CAA is the amount of any basis difference 
(within the meaning of section 901(m)(3)(C)(i)) that had not been taken 
into account under section 901(m)(3)(B) either as of July 21, 2014, or, 
in the case of an entity classification election made under Sec.  
301.7701-3 of this chapter that is filed on or after July 29, 2014, and 
that is effective on or before July 21, 2014, prior to the transactions 
that are deemed to occur under Sec.  301.7701-3(g) as a result of the 
change in classification.
    (f) Examples. [Reserved].
    (g) Effective/applicability date. (1) Paragraphs (a), (b), and 
(d)(1) of this section apply to CAAs occurring on or after July 21, 
2014, and to CAAs occurring before that date resulting from an entity 
classification election made under Sec.  301.7701-3 that is filed on or 
after July 29, 2014, and that is effective on or before July 21, 2014. 
Paragraph (e) of this section applies to CAAs occurring on or after 
January 1, 2011, and before July 21, 2014, other than CAAs occurring 
before July 21, 2014, resulting from an entity classification election 
made under Sec.  301.7701-3 of this chapter that is filed on or after 
July 29, 2014, and that is effective on or before July 21, 2014. 
Taxpayers may, however, consistently apply paragraph (d)(1) of this 
section to all section 743(b) CAAs occurring on or after January 1, 
2011. For this purpose, persons that are related (within the meaning of 
section

[[Page 88109]]

267(b) or 707(b)) will be treated as a single taxpayer.
    (2)-(3) [Reserved]
    (h) Expiration date. The applicability of this section expires on 
December 6, 2019.

0
Par. 6. Section 1.901(m)-5T is added to read as follows:


Sec.  1.901(m)-5T   Basis difference taken into account (temporary).

    (a) In general. [Reserved].
    (b) Basis difference taken into account under applicable cost 
recovery method--(1) In general. [Reserved].
    (2) Determining a cost recovery amount--(i) General rule. A cost 
recovery amount for an RFA is determined by applying the applicable 
cost recovery method to the basis difference rather than to the U.S. 
basis.
    (ii) U.S. basis subject to multiple cost recovery methods. 
[Reserved].
    (3) Applicable cost recovery method. [Reserved].
    (c) Basis difference taken into account as a result of a 
disposition--(1) In general. [Reserved].
    (2) Determining a disposition amount--(i) Disposition is fully 
taxable for purposes of both U.S. income tax and the foreign income 
tax. If a disposition of an RFA is fully taxable (that is, results in 
all gain or loss, if any, being recognized with respect to the RFA) for 
purposes of both U.S. income tax and the foreign income tax, the 
disposition amount is equal to the unallocated basis difference with 
respect to the RFA.
    (ii) Disposition is not fully taxable for purposes of U.S. income 
tax or the foreign income tax (or both). If the disposition of an RFA 
is not fully taxable for purposes of both U.S. income tax and the 
foreign income tax, the disposition amount is determined under this 
paragraph (c)(2)(ii). See Sec.  1.901(m)-6T for rules regarding the 
continued application of section 901(m) if the RFA has any unallocated 
basis difference after determining the disposition amount under 
paragraph (c)(2)(ii)(A) or (B) of this section, as applicable.
    (A) Positive basis difference. If the disposition of an RFA is not 
fully taxable for purposes of both U.S. income tax and the foreign 
income tax, and the RFA has a positive basis difference, the 
disposition amount equals the lesser of:
    (1) Any foreign disposition gain plus any U.S. disposition loss 
(for this purpose, expressed as a positive amount), or
    (2) Unallocated basis difference with respect to the RFA.
    (B) Negative basis difference. If the disposition of an RFA is not 
fully taxable for purposes of both U.S. income tax and the foreign 
income tax, and the RFA has a negative basis difference, the 
disposition amount equals the greater of:
    (1) Any U.S. disposition gain (for this purpose, expressed as a 
negative amount) plus any foreign disposition loss, or
    (2) Unallocated basis difference with respect to the RFA.
    (iii) Disposition of an RFA after a section 743(b) CAA. If an RFA 
was subject to a section 743(b) CAA and subsequently there is a 
disposition of the RFA, then, for purposes of determining the 
disposition amount, foreign disposition gain or foreign disposition 
loss are specially defined to mean the amount of gain or loss 
recognized for purposes of the foreign income tax on the disposition of 
the RFA that is allocable to the partnership interest that was 
transferred in the section 743(b) CAA. In addition, U.S. disposition 
gain or U.S. disposition loss are specially defined to mean the amount 
of gain or loss recognized for U.S. income tax purposes on the 
disposition of the RFA that is allocable to the partnership interest 
that was transferred in the section 743(b) CAA, taking into account the 
basis adjustment under section 743(b) that was allocated to the RFA 
under section 755.
    (d) General rules for allocating and assigning a cost recovery 
amount or a disposition amount when the RFA owner (U.S.) is a fiscally 
transparent entity. [Reserved].
    (e) Special rules for certain section 743(b) CAAs. [Reserved]
    (f) Mid-year transactions. [Reserved]
    (g) Reverse hybrids. [Reserved]
    (h) Examples. [Reserved]
    (i) Effective/applicability date. (1) [Reserved]
    (2) Paragraphs (b)(2)(i) and (c)(2) of this section apply to CAAs 
occurring on or after July 21, 2014, and to CAAs occurring before that 
date resulting from an entity classification election made under Sec.  
301.7701-3 of this chapter that is filed on or after July 29, 2014, and 
that is effective on or before July 21, 2014. Paragraphs (b)(2)(i) and 
(c)(2) of this section also apply to CAAs occurring on or after January 
1, 2011, and before July 21, 2014, other than CAAs occurring before 
July 21, 2014, resulting from an entity classification election made 
under Sec.  301.7701-3 that is filed on or after July 29, 2014, and 
that is effective on or before July 21, 2014, but only with respect to 
basis difference determined under Sec.  1.901(m)-4T(e) with respect to 
the CAA.
    (3) [Reserved]
    (j) Expiration date. The applicability of this section expires on 
December 6, 2019.

0
Par. 7. Section 1.901(m)-6T is added to read as follows:


Sec.  1.901(m)-6T   Successor rules (temporary).

    (a) In general. This section provides successor rules applicable to 
section 901(m). Paragraph (b) of this section provides rules for the 
continued application of section 901(m) after an RFA that has 
unallocated basis difference has been transferred, including special 
rules applicable to successor transactions that are also CAAs or that 
involve partnerships. Paragraph (c) of this section provides rules for 
determining when an aggregate basis difference carryover of a section 
901(m) payor either becomes an aggregate basis difference carryover of 
the section 901(m) payor with respect to another foreign payor or is 
transferred to another section 901(m) payor. Paragraph (d) of this 
section provides the effective/applicability date, and paragraph (e) of 
this section provides the expiration date.
    (b) Successor rules for unallocated basis difference--(1) In 
general. Except as provided in paragraph (b)(4) of this section, 
section 901(m) continues to apply after a successor transaction to any 
unallocated basis difference attached to a transferred RFA until the 
entire basis difference has been taken into account as a cost recovery 
amount or a disposition amount (or both) under Sec.  1.901(m)-5T.
    (2) Definition of a successor transaction. A successor transaction 
occurs with respect to an RFA if, after a CAA (prior CAA), there is a 
transfer of the RFA for U.S. income tax purposes and the RFA has 
unallocated basis difference with respect to the prior CAA, determined 
immediately after the transfer. A successor transaction may occur 
regardless of whether the transfer of the RFA is a disposition, a CAA, 
or a non-taxable transaction for purposes of U.S. income tax. If the 
RFA was subject to multiple prior CAAs, a separate determination must 
be made with respect to each prior CAA as to whether the transfer is a 
successor transaction.
    (3) Special considerations. [Reserved].
    (4) Successor transaction is a CAA--(i) In general. An asset may be 
an RFA with respect to multiple CAAs if a successor transaction is also 
a CAA (subsequent CAA). Except as otherwise provided in this paragraph 
(b)(4), if there is a subsequent CAA, unallocated basis difference with 
respect to any prior CAAs will continue to be taken

[[Page 88110]]

into account under section 901(m) after the subsequent CAA. 
Furthermore, the subsequent CAA may give rise to additional basis 
difference subject to section 901(m).
    (ii) Foreign basis election. [Reserved].
    (iii) Multiple section 743(b) CAAs. If an RFA is subject to two 
section 743(b) CAAs (prior section 743(b) CAA and subsequent section 
743(b) CAA) and the same partnership interest is acquired in both the 
CAAs, the RFA will be treated as having no unallocated basis difference 
with respect to the prior section 743(b) CAA if the basis difference 
for the section 743(b) CAA is determined independently from the prior 
section 743(b) CAA. In this regard, see generally Sec.  1.743-1(f). If 
the subsequent section 743(b) CAA results from the acquisition of only 
a portion of the partnership interest acquired in the prior section 
743(b) CAA, then the transferor will be required to equitably apportion 
the unallocated basis difference attributable to the prior section 
743(b) CAA between the portion retained by the transferor and the 
portion transferred. In this case, with respect to the portion 
transferred, the RFAs will be treated as having no unallocated basis 
difference with respect to the prior section 743(b) CAA if basis 
difference for the subsequent section 743(b) CAA is determined 
independently from the prior section 743(b) CAA.
    (5) Example. The following example illustrates the rules of 
paragraph (b) of this section.

    Example.  (i) Facts. USP, a domestic corporation, wholly owns 
CFC, a foreign corporation organized in Country A and treated as a 
corporation for both U.S. and Country A tax purposes. FT is an 
unrelated foreign corporation organized in Country A and treated as 
a corporation for both U.S. and Country A tax purposes. FT owns one 
asset, a parcel of land (Asset). Country A imposes a single tax that 
is a foreign income tax. On January 1, Year 1, CFC acquires all of 
the stock of FT in exchange for 300u in a qualified stock purchase 
(as defined in section 338(d)(3)) to which section 338(a) applies 
(Acquisition). Immediately before the Acquisition, Asset had a U.S. 
basis of 100u, and immediately after the Acquisition, Asset had a 
U.S. basis of 300u. Effective on February 1, Year 1, FT elects to be 
a disregarded entity pursuant to Sec.  301.7701-3. As a result of 
the election, FT is deemed, for U.S. income tax purposes, to 
distribute Asset to CFC in liquidation (Deemed Liquidation) 
immediately before the closing of the day before the election is 
effective pursuant to Sec.  301.7701-3(g)(1)(iii) and (3)(ii). The 
Deemed Liquidation is disregarded for Country A tax purposes. No 
gain or loss is recognized on the Deemed Liquidation for either U.S. 
or Country A tax purposes.
    (ii) Result. Under Sec.  1.901(m)-2T(b)(1), the Acquisition by 
CFC of the stock of FT is a section 338 CAA. Under Sec.  1.901(m)-
2T(c)(1), Asset is an RFA with respect to Country A tax and the 
Acquisition, because immediately after the Acquisition, Asset is 
relevant in determining foreign income of FT for Country A tax 
purposes, and FT owned Asset when the Acquisition occurred. Under 
Sec.  1.901(m)-4T(b), the basis difference with respect to Asset is 
200u (300u-100u). Under Sec.  1.901(m)-2T(b)(2), the Deemed 
Liquidation is a CAA (subsequent CAA) because the Deemed Liquidation 
is treated as an acquisition of assets for U.S. income tax purposes 
and is disregarded for Country A tax purposes. Because the U.S. 
basis in Asset is 300u immediately before and after the Deemed 
Liquidation, the subsequent CAA does not give rise to any additional 
basis difference. The Deemed Liquidation is not a disposition under 
Sec.  1.901(m)-1T(a)(10) because it did not result in gain or loss 
being recognized with respect to Asset for U.S. or Country A tax 
purposes. Accordingly, no basis difference with respect to Asset is 
taken into account under Sec.  1.901(m)-5T as a result of the Deemed 
Liquidation, and the unallocated basis difference with respect to 
Asset immediately after the Deemed Liquidation is 200u (200u-0u). 
Under paragraph (b)(2) of this section, the Deemed Liquidation is a 
successor transaction because there is a transfer of Asset for U.S. 
income tax purposes from FT to CFC and Asset has unallocated basis 
difference with respect to the Acquisition immediately after the 
Deemed Liquidation. Accordingly, under paragraph (b)(1) of this 
section, section 901(m) will continue to apply to the unallocated 
basis difference with respect to Asset until the entire 200u basis 
difference has been taken into account under Sec.  1.901(m)-5T.

    (c) Successor rules for aggregate basis difference carryover 
[Reserved].
    (d) Effective/applicability date. (1) Paragraphs (a), (b)(1), 
(b)(2), (b)(4)(i), (b)(4)(iii), and (b)(5) of this section apply to 
CAAs occurring on or after July 21, 2014, and to CAAs occurring before 
that date resulting from an entity classification election made under 
Sec.  301.7701-3 of this chapter that is filed on or after July 29, 
2014, and that is effective on or before July 21, 2014. Paragraphs (a), 
(b)(1), (b)(2), (b)(4)(i), (b)(4)(iii), and (b)(5) of this section also 
apply to CAAs occurring on or after January 1, 2011, and before July 
21, 2014, other than CAAs occurring before July 21, 2014, resulting 
from an entity classification election made under Sec.  301.7701-3 that 
is filed on or after July 29, 2014, and that is effective on or before 
July 21, 2014, but only with respect to basis difference determined 
under Sec.  1.901(m)-4T(e) with respect to the CAA.
    (2)-(3) [Reserved]
    (e) Expiration date. The applicability of this section expires on 
December 6, 2019.

0
Par. 8. Sections 1.901(m)-7T and 1.901(m)-8T are added and reserved to 
read as follows:


Sec.  1.901(m)-7T   De minimis rules. [Reserved].


Sec.  1.901(m)-8T   Miscellaneous. [Reserved].

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: November 4, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-28755 Filed 12-6-16; 8:45 am]
 BILLING CODE 4830-01-P