[Federal Register Volume 65, Number 25 (Monday, February 7, 2000)]
[Rules and Regulations]
[Pages 5777-5781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1892]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 8870]
RIN 1545-AV39


General Rules for Making and Maintaining Qualified Electing Fund 
Elections

AGENCY:  Internal Revenue Service (IRS), Treasury.

ACTION:  Final regulations.

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SUMMARY:  This document contains final regulations that provide 
guidance to a passive foreign investment company (PFIC) shareholder 
that makes the election under section 1295 (section 1295 election) to 
treat the PFIC as a qualified electing fund (QEF), and for PFIC 
shareholders that wish to make a section 1295 election that will apply 
on a retroactive basis (retroactive election). In addition, this 
document contains a final regulation that provides guidance under 
section 1291 to a PFIC shareholder that is a tax-exempt organization. 
Lastly, this document contains final regulations under section 1293 for 
calculating and reporting net capital gain by a QEF, and also clarifies 
the application of the current income inclusion rules of section 1293 
to interest in a QEF held through a domestic pass through entity.

DATES: Effective Date.
    These regulations are effective February 7, 2000.
    Applicability Date. In general, these regulations are applicable as 
of January 2, 1998. For special dates of applicability see Sec. 1.1295-
1(k).

FOR FURTHER INFORMATION CONTACT:  Margaret A. Fung, (202) 622-3840 (not 
a toll free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information in these final regulations have 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) 
under control number 1545-1555. Responses to these collections of 
information are mandatory for PFIC shareholders that wish to make the 
section 1295 election to treat the PFIC as a QEF.
    Comments on the collections of information should be sent to the 
Office of Management and Budget, Attn: Desk Officer for the Department 
of the Treasury, Office of Information and Regulatory Affairs, 
Washington, DC 20503, with copies to the Internal Revenue Service, 
Attn: IRS Reports Clearance Officer, OP:FS:FP, Washington, DC 20224.
    The estimated average annual burden per respondent and/or 
recordkeeper varies from fifteen minutes to three hours, depending on 
individual circumstances, with an estimated average of twenty-nine 
minutes.
    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 assigned by the Office of 
Management and Budget.
    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

    On January 2, 1998, the Treasury and the IRS published temporary 
regulations regarding the section 1295 election and rules applicable to 
a PFIC shareholder under sections 1291, 1293, 1295 and 1297 
(redesignated as section 1298 by the Taxpayer Relief Act of 1997, and 
hereafter referred to as section 1298) (TD 8750, 63 FR 6). On that same 
date, the Treasury and the IRS published a notice of proposed 
rulemaking in the Federal Register (63 FR 35). The text of the 
temporary regulations served as the text of the proposed regulations.
    Sections 1291, 1293, 1295 and 1298 were added by the Tax Reform Act 
of 1986, effective for taxable years of foreign corporations beginning 
after December 31, 1986. As originally enacted, the section 1295 
election was an election made by the PFIC. The Technical and 
Miscellaneous Revenue Act of 1988 (TAMRA) amended section

[[Page 5778]]

1295, effective for taxable years of foreign corporations beginning 
after December 31, 1986, to change the section 1295 election to a 
shareholder-by-shareholder election. Sections 1291, 1293 and 1298 were 
also amended by TAMRA, and sections 1293 and 1298 were further amended 
by the Omnibus Budget Reconciliation Act of 1993. Section 1298 also was 
amended by the Revenue Reconciliation Act of 1989 and the Small 
Business Job Protection Act of 1996. In addition, the Taxpayer Relief 
Act of 1997 (1997 TRA) amended section 1 to provide categories of long-
term capital gain and the maximum rates of tax to which the categories 
are subject. In certain cases, this amendment affects the calculation 
of net capital gain for purposes of section 1293.
    No written comments were received on the proposed regulations, and 
no public hearing was requested or held. The proposed regulations are 
adopted as final regulations as revised by this Treasury Decision. The 
revisions are summarized in the explanations below.

Explanation of Revisions

    A foreign corporation is a PFIC for a taxable year if the foreign 
corporation satisfies either the income or asset test of section 
1297(a) for that year. A foreign corporation is a PFIC under the income 
test if 75 percent or more of its gross income for its taxable year is 
passive, or investment-type, income. Alternatively, under the asset 
test, a foreign corporation is a PFIC if 50 percent or more of the 
average fair market value of its assets during its taxable year are 
assets that produce or are held for the production of passive income. A 
shareholder of a foreign corporation that qualifies as a PFIC is 
subject to the interest charge regime of section 1291 with respect to 
certain distributions by the PFIC and certain dispositions of its 
stock. Generally, a shareholder of a PFIC may avoid the interest charge 
regime by making a timely election under section 1295 to treat a PFIC 
as a QEF, in which case the shareholder will be taxed annually pursuant 
to section 1293 on its pro rata share of the ordinary earnings and net 
capital gain of the PFIC. Under section 1295(a), a section 1295 
election will apply with respect to the PFIC if the PFIC complies with 
requirements prescribed by the Secretary for purposes of determining 
the ordinary earnings and net capital gain of the PFIC and otherwise 
carrying out the purposes of the PFIC provisions.
    Section 1295(b)(1), as enacted by TAMRA, provides that a 
shareholder may make a section 1295 election with respect to a PFIC for 
any taxable year of the shareholder (shareholder election year). Once 
made, the election will apply to that year and to all subsequent years 
of the shareholder unless revoked by the shareholder with the consent 
of the Secretary. Section 1295(b)(2) prescribes the time for making the 
election. In general, for the section 1295 election to be applicable to 
a taxable year, the shareholder must make the election by the due date, 
as extended under section 6081, for the shareholder's return for that 
taxable year. However, to the extent provided in the regulations, a 
section 1295 election may be made for a taxable year after the 
prescribed due date if the shareholder failed to make a timely election 
because the shareholder reasonably believed that the foreign 
corporation was not a PFIC.
    Under temporary regulations Sec. 1.1295-1T(d)(1) and (f)(1), the 
shareholder, as defined in Sec. 1.1291-9(j)(3), of a PFIC makes the 
section 1295 election by filing a Form 8621 with the shareholder's 
Federal income tax return by the election due date for the shareholder 
election year, and by filing a copy of that form with the Philadelphia 
Service Center. In addition, under temporary regulation Sec. 1.1295-
1T(f)(2), the shareholder must file an annual Form 8621 with its 
Federal income tax return to report the shareholder's pro rata share of 
the ordinary earnings and net capital gain of the QEF. Temporary 
regulation Sec. 1.1295-1T(f)(2) also required that a copy of the annual 
Form 8621 be filed with the Philadelphia Service Center. To reduce 
taxpayer burden, this final regulation eliminates the requirement for 
filing a copy of Form 8621 with the Philadelphia Service Center when 
the shareholder makes the section 1295 election or reports the 
shareholder's annual pro rata share of the ordinary earnings and net 
capital gain of the QEF.
    In addition, this final regulation clarifies the rule in temporary 
regulation Sec. 1.1295-1T(c)(2)(ii) for income inclusion by the 
shareholder of a QEF under section 1293 for any taxable year that the 
foreign corporation is not a PFIC under section 1297(a) and is not 
treated as a PFIC under section 1298(b)(1). This final regulation 
clarifies that in such case, the shareholder is not required to include 
pursuant to section 1293 the shareholder's pro rata share of ordinary 
earnings and net capital gain for such year, and the shareholder shall 
not be required to satisfy the section 1295 annual reporting 
requirement for such year. Cessation of a foreign corporation's status 
as a PFIC will not, however, terminate a section 1295 election. Thus, 
if the foreign corporation is a PFIC in any taxable year after a year 
in which it is not treated as a PFIC, the shareholder's original 
election under section 1295 continues to apply and the shareholder must 
take into account its pro rata share of ordinary earnings and net 
capital gain for such year and comply with the section 1295 annual 
reporting requirement.
    The Taxpayer Relief Act of 1997 added section 1296 to provide PFIC 
shareholders with an alternative method for current income inclusion by 
making a mark-to-market election with respect to their PFIC stock that 
qualifies as marketable stock. The election is available to 
shareholders whose taxable years begin after December 31, 1997 for 
stock in a foreign corporation whose taxable year ends with or within 
the shareholder's taxable year. The effect of a mark-to-market election 
on a section 1295 election will be addressed in subsequent regulations 
under section 1296. In addition, temporary regulation Sec. 1.1297-3T(c) 
governing the deemed dividend election by a United States person that 
is a shareholder of a PFIC will be finalized in a future regulation 
project.
    Notice 98-22 (1998-17 I.R.B. 5) provides that taxpayers will be 
permitted to apply the rules of the temporary regulations under 
Sec. 1.1295-1T(b)(4) (section 1295 election by shareholders who file a 
joint return) and Sec. 1.1295-1T(f) and (g) (procedures for making a 
section 1295 election and annual information requirements by the PFIC 
or intermediary) to taxable years beginning before January 1, 1998, for 
which the statute of limitations on the assessment of tax has not 
expired and, with respect to Sec. 1.1295-1T(b)(4), if certain 
consistency requirements are met. The rule of Notice 98-22 has been 
incorporated into Sec. 1.1295-1(k) of this regulation. Final regulation 
Sec. 1.1295-1(k) is changed to reflect the special effective dates for 
Sec. 1.1295-1(b)(4), (f) and (g) as provided by Notice 98-22. 
Accordingly, Notice 98-22 is obsoleted since the effective date 
provisions are contained in this final regulation.
    Notice 88-125 described the requirements a shareholder must satisfy 
to make and maintain a section 1295 election for taxable years 
beginning before January 1, 1998. As a result of the procedures and 
requirements set forth first in the temporary regulations published on 
January 2, 1998, and now in these final regulations, Notice 88-125 is 
obsoleted effective February 7, 2000.

Effect On Other Documents

    Notice 88-125 and Notice 98-22 are obsoleted as of February 7, 
2000.

[[Page 5779]]

Special Analyses

    It has been determined that the final regulations are not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It has also been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations. Further, it is 
hereby certified, pursuant to sections 603(a) and 605(b) of the 
Regulatory Flexibility Act (5 U.S.C. chapter 6), that the collection of 
information contained in these regulations will not have a significant 
economic impact on substantial number of small entities. The cost of 
collection of information to small entities is insignificant because 
the primary reporting burden is on individual PFIC shareholders who 
make the section 1295 election. Therefore, the collection of 
information will not have a substantial economic impact. Therefore, a 
regulatory flexibility analysis under the Regulatory Flexibility Act is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
the notice of proposed rulemaking preceding these regulations was 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Drafting Information

    The principal author of the final regulations is Margaret A. Fung, 
Office of Associate Chief Counsel (International). 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

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

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

    Sec. 1.1291-1 also issued under 26 U.S.C. 1291. * * *
    Sec. 1.1293-1 also issued under 26 U.S.C. 1293. * * *
    Sec. 1.1295-3 also issued under 26 U.S.C. 1295. * * *


Sec. 1.1291-1T  [Redesignated as Sec. 1.1291-1]

    Par. 2. Section 1.1291-1T is redesignated as Sec. 1.1291-1 and the 
section heading is revised to read as follows:


Sec. 1.1291-1  Taxation of U.S. persons that are shareholders of PFICs 
that are not pedigreed QEFs.

* * * * *


Sec. 1.1293-1T  [Redesignated as Sec. 1.1293-1]

    Par. 3. Section 1.1293-1T is redesignated as Sec. 1.1293-1 and the 
newly designated section is amended by revising the section heading and 
the first sentence of paragraph (c)(1) to read as follows:


Sec. 1.1293-1  Current taxation of income from qualified electing 
funds.

* * * * *
    (c) Application of rules of inclusion with respect to stock held by 
a pass through entity--(1) In general. If a domestic pass through 
entity makes a section 1295 election, as provided in paragraph (d)(2) 
of this section, with respect to the PFIC shares that it owns, directly 
or indirectly, the domestic pass through entity takes into account its 
pro rata share of the ordinary earnings and net capital gain 
attributable to the QEF shares held by the pass through entity. * * *
* * * * *

    Par. 4. Section 1.1295-0 is amended by:
    1. Revising the introductory text of the section.
    2. Removing the entry for the heading of Sec. 1.1295-1T, and adding 
an entry for the heading of Sec. 1.1295-1 in its place.
    3. Revising the entries for Sec. 1.1295-1(d)(3) through (d)(5).
    4. Adding entries for Sec. 1.1295-1 (d)(6) and (e) (1) and (2).
    5. Removing the entry for the heading of Sec. 1.1295-3T, and adding 
an entry for the heading of Sec. 1.195-3 in its place.
    The revisions and additions read as follows:


Sec. 1.1295-0  Table of contents.

    This section contains a listing of the headings for Secs. 1.1295-1 
and 1.1295-3.


Sec. 1.1295-1  Qualified electing funds.

* * * * *
    (d) * * *
    (3) Indirect ownership of a PFIC through other PFICs.
    (4) Member of consolidated return group as shareholder.
    (5) Option holder.
    (6) Exempt organization.
    (e) * * *
    (1) General rule.
    (2) Examples.
* * * * *


Sec. 1.1295-3  Retroactive elections.

* * * * *


Sec. 1.1295-1T  [Redesignated as Sec.  1.1295-1]

    Par. 5. Section Sec. 1.1295-1T is redesignated as Sec. 1.1295-1 and 
the newly designated section is amended by:
    1. Revising the section heading.
    2. Revising paragraph (b)(3)(iv)(B).
    3. Adding paragraph (b)(3)(v).
    4. Adding a sentence to the end of paragraph (b)(4).
    5. Revising paragraphs (c)(2)(ii) and (iii).
    6. Revising the third sentence in paragraph (c)(2)(v) Example 3. 
    7. Redesignating paragraphs (d)(3), (d)(4) and (d)(5) as paragraphs 
(d)(4), (d)(5) and (d)(6), respectively.
    8. Adding a new paragraph (d)(3).
    9. Revising paragraph (e).
    10. In the last sentence of paragraph (f)(1)(iii), the language 
``capital gain; and'' is removed and the language ``capital gain.'' is 
added in its place.
    11. Adding the word ``and'' at the end of paragraph (f)(1)(ii).
    12. Removing paragraph (f)(1)(iv).
    13. Adding the word ``and'' at the end of paragraph (f)(2)(i)(B).
    14. In the last sentence of paragraph (f)(2)(i)(C), the language 
``capital gain; and'' is removed and the language ``capital gain.'' is 
added in its place.
    15. Removing paragraph (f)(2)(i)(D).
    16. Adding a new paragraph (f)(3).
    17. Revising the introductory language of paragraph (g)(3).
    18. Adding paragraph (g)(5).
    19. Revising the first sentence of paragraph (h).
    20. Revising paragraph (k).
    The revisions and additions read as follows:


Sec. 1.1295-1  Qualified electing funds.

* * * * *
    (b) * * *
    (3) * * *
    (iv) * * *
    (B) In the case of PFIC stock transferred by an interest holder or 
beneficiary to a pass through entity in a transaction in which gain is 
not fully recognized (including pursuant to regulations under section 
1291(f)), the pass through entity makes the section 1295 election with 
respect to the PFIC stock transferred for the taxable year in which the 
transfer was made. The PFIC stock transferred will be treated as stock 
of a pedigreed QEF by the pass through

[[Page 5780]]

entity, however, only if that stock was treated as stock of a pedigreed 
QEF with respect to the interest holder or beneficiary at the time of 
the transfer, and the PFIC has been a QEF with respect to the pass 
through entity for all taxable years of the PFIC that are included 
wholly or partly in the pass through entity's holding period of the 
PFIC stock during which the foreign corporation was a PFIC within the 
meaning of Sec. 1.1291-9(j).
    (v) Characterization of stock distributed by a partnership. In the 
case of PFIC stock distributed by a partnership to a partner in a 
transaction in which gain is not fully recognized, the PFIC stock will 
be treated as stock of a pedigreed QEF by the partners only if that 
stock was treated as stock of a pedigreed QEF with respect to the 
partnership for all taxable years of the PFIC that are included wholly 
or partly in the partnership's holding period of the PFIC stock during 
which the foreign corporation was a PFIC within the meaning of 
Sec. 1.1291-9(j), and the partner has a section 1295 election in effect 
with respect to the distributed PFIC stock for the partner's taxable 
year in which the distribution was made. If the partner does not have a 
section 1295 election in effect, the stock shall be treated as stock in 
a section 1291 fund. See paragraph (k) of this section for special 
applicability date of paragraph (b)(3)(v) of this section.
    (4) * * * See paragraph (k) of this section for special 
applicability date of paragraph (b)(4) of this section.
    (c) * * *
    (2) * * *
    (ii) Effect of PFIC status on election. A foreign corporation will 
not be treated as a QEF for any taxable year of the foreign corporation 
that the foreign corporation is not a PFIC under section 1297(a) and is 
not treated as a PFIC under section 1298(b)(1). Therefore, a 
shareholder shall not be required to include pursuant to section 1293 
the shareholder's pro rata share of ordinary earnings and net capital 
gain for such year and shall not be required to satisfy the section 
1295 annual reporting requirement of paragraph (f)(2) of this section 
for such year. Cessation of a foreign corporation's status as a PFIC 
will not, however, terminate a section 1295 election. Thus, if the 
foreign corporation is a PFIC in any taxable year after a year in which 
it is not treated as a PFIC, the shareholder's original election under 
section 1295 continues to apply and the shareholder must take into 
account its pro rata share of ordinary earnings and net capital gain 
for such year and comply with the section 1295 annual reporting 
requirement.
    (iii) Effect on election of complete termination of a shareholder's 
interest in the PFIC. Complete termination of a shareholder's direct 
and indirect interest in stock of a foreign corporation will not 
terminate a shareholder's section 1295 election with respect to the 
foreign corporation. Therefore, if a shareholder reacquires a direct or 
indirect interest in any stock of the foreign corporation, that stock 
is considered to be stock for which an election under section 1295 has 
been made and the shareholder is subject to the income inclusion and 
reporting rules required of a shareholder of a QEF.
* * * * *
    (v) * * *

    Example 3. * * * If P does not make the section 1295 election 
with respect to the FC stock, C will continue to be subject, in C's 
capacity as an indirect shareholder of FC, to the income inclusion 
and reporting rules required of shareholders of QEFs in 1999 and 
subsequent years for that portion of the FC stock C is treated as 
owning indirectly through the partnership. * * *

    (d) * * *
    (3) Indirect ownership of a PFIC through other PFICs--(i) In 
general. An election under section 1295 shall apply only to the foreign 
corporation for which an election is made. Therefore, if a shareholder 
makes an election under section 1295 to treat a PFIC as a QEF, that 
election applies only to stock in that foreign corporation and not to 
the stock in any other corporation which the shareholder is treated as 
owning by virtue of its ownership of stock in the QEF.
    (ii) Example. The following example illustrates the rules of 
paragraph (d)(3)(i) of this section:

    Example. In 1988, T, a U.S. person, purchased stock of FC, a 
foreign corporation that is a PFIC. FC also owns the stock of SC, a 
foreign corporation that is a PFIC. T makes an election under 
section 1295 to treat FC as a QEF. T's section 1295 election applies 
only to the stock T owns in FC, and does not apply to the stock T 
indirectly owns in SC.
* * * * *
    (e) Time for making a section 1295 election--(1) In general. Except 
as provided in Sec. 1.1295-3, a shareholder making the section 1295 
election must make the election on or before the due date, as extended 
under section 6081 (election due date), for filing the shareholder's 
income tax return for the first taxable year to which the election will 
apply. The section 1295 election must be made in the original return 
for that year, or in an amended return, provided the amended return is 
filed on or before the election due date.
    (2) Examples. The following examples illustrate the rules of 
paragraph (e)(1) of this section:

    Example 1. In 1998, C, a domestic corporation, purchased stock 
of FC, a foreign corporation that is a PFIC. Both C and FC are 
calendar year taxpayers. C wishes to make the section 1295 election 
for its taxable year ended December 31, 1998. The section 1295 
election must be made on or before March 15, 1999, the due date of 
C's 1998 income tax return as provided by section 6072(b). On March 
14, 1999, C files a request for a three-month extension of time to 
file its 1998 income tax return under section 6081(b). C's time to 
file its 1998 income tax return and to make the section 1295 
election is thereby extended to June 15, 1999.
    Example 2. The facts are the same as in Example 1 except that on 
May 1, 1999, C filed its 1998 income tax return and failed to 
include the section 1295 election. C may file an amended income tax 
return for 1998 to make the section 1295 election provided the 
amended return is filed on or before the extended due date of June 
15, 1999.
* * * * *
    (f) * * *
    (3) Effective date. See paragraph (k) of this section for special 
applicability date of paragraph (f) of this section.
    (g) * * *
    (3) Annual Intermediary Statement. In the case of a U.S. person 
that is an indirect shareholder of a PFIC that is owned through an 
intermediary, as defined in paragraph (j) of this section, an Annual 
Intermediary Statement issued by an intermediary containing the 
information described in paragraph (g)(1) of this section and reporting 
the indirect shareholder's pro rata share of the ordinary earnings and 
net capital gain of the QEF as described in paragraph (g)(1)(ii)(A) of 
this section, may be provided to the indirect shareholder in lieu of 
the PFIC Annual Information Statement if the following conditions are 
satisfied--
* * * * *
    (5) Effective date. See paragraph (k) of this section for special 
applicability date of paragraph (g) of this section.
    (h) Transition rules. Taxpayers may rely on Notice 88-125 (1988-2 
C.B. 535) (see Sec. 601.601(d)(2) of this chapter), for rules on making 
and maintaining elections for shareholder election years (as defined in 
paragraph (j) of this section) beginning after December 31, 1986, and 
before January 1, 1998. * * *
* * * * *
    (k) Effective dates. Paragraphs (b)(2)(iii), (b)(3), (b)(4) and (c) 
through (j) of this section are applicable to taxable years of 
shareholders beginning after December 31, 1997. However, taxpayers may 
apply the rules under paragraphs (b)(4), (f) and (g) of this section to 
a taxable year beginning before January 1,

[[Page 5781]]

1998, provided the statute of limitations on the assessment of tax has 
not expired as of April 27, 1998 and, in the case of paragraph (b)(4) 
of this section, the taxpayers who filed the joint return have 
consistently applied the rules of that section to all taxable years 
following the year the election was made. Paragraph (b)(3)(v) of this 
section is applicable as of February 7, 2000, however a taxpayer may 
apply the rules to a taxable year prior to the applicable date provided 
the statute of limitations on the assessment of tax for that taxable 
year has not expired.


Sec. 1.1295-3T  [Redesignated as Sec.  1.1295-3]

    Par. 6. Section Sec. 1.1295-3T is redesignated as Sec. 1.1295-3 and 
the newly designated section is amended by revising the section heading 
and paragraphs (b)(1) and (c)(5)(i) to read as follows:


Sec. 1.1295-3  Retroactive elections.

* * * * *
    (b) * * *
    (1) Reasonably believed, within the meaning of paragraph (d) of 
this section, that as of the election due date, as defined in 
Sec. 1.1295-1(e), the foreign corporation was not a PFIC for its 
taxable year that ended during the retroactive election year;
* * * * *
    (c) * * *
    (5) Time of and manner for filing a Protective Statement--(i) In 
general. Except as provided in paragraph (c)(5)(ii) of this section, a 
Protective Statement must be attached to the shareholder's federal 
income tax return for the shareholder's first taxable year to which the 
Protective Statement will apply. The shareholder must file its return 
and the copy of the Protective Statement by the due date, as extended 
under section 6081, for the return.
* * * * *

    Par. 7. In the list below, for each section indicated in the left 
column, remove the language in the middle column and add the language 
in the right column.

----------------------------------------------------------------------------------------------------------------
           Affected Section                        Remove                                 Add
----------------------------------------------------------------------------------------------------------------
1.1293-1(c)(1), last sentence........  Sec.  1.295-1T(j)............  Sec.  1.1295-1(j).
1.1293-1(c)(2)(i), first sentence....  Sec.  1.1295-1T(D)(2)........  Sec.  1.1295-1(d)(2).
1.1295-1(b)(3)(iv)(A)................  stock), and..................  stock) and
1.1295-1(c)(2)(ii), first sentence...  1296(a)......................  1297(a)
1.1295-1(c)(2)(ii), first sentence...  1297(b)(1)...................  1298(b)(1).
1.1295-1(c)(2)(iv), last sentence....  Sec.  1.1293-1T(c)...........  Sec.  1.1293-1(c).
1.1295-1(d)(1), last sentence........  (d)(5).......................  (d)(6)
1.1295-1(d)(2)(i)(A), last sentence..  Sec.  1.1293-1T(c)(1),.......  Sec.  1.1293-1(c)(1),
1.1295-1(d)(2)(ii), last sentence....  Sec.  1.1293-1T(c)(1),.......  Sec.  1.1293-1(c)(1),
1.1295-1(d)(2)(iii), last sentence...  Sec.  1.1293-1T(c)(1),.......  Sec.  1.1293-1(c)(1),
1.1295-1(d)(6), first sentence.......  Sec.  1.1291-1T(e),..........  Sec.  1.1291-1(e),
1.1295-1(f)(1)(iii), last sentence...  QEF calculated the QEF's.....  PFIC calculated the PFIC's
1.1295-1(g)(1) introductory text,      representation--.............  representations--
 second sentence, last word.
1.1295-1(g)(1)(ii)(A)................  Sec.  1.1293-1T(a)(2)........  Sec.  1.1293-1(a)(2)
1.1295-1(h), second sentence.........  Sec.  1.1295-1T..............  Sec.  1.1295-1
1.1295-1(i)(1)(iii), last sentence...  never was made...............  was never made.
1.1295-1(i)(3)(iii)..................  through 1297.................  through 1298
1.1295-3(a), first sentence..........  Sec.  1.1295-1T(j),..........  Sec.  1.1295-1(j),
1.1295-3(a), first sentence..........  Sec.  1.1295-1T(e)...........  Sec.  1.1295-1(e)
1.1295-3(b)(2).......................  and 1297.....................  and 1298
1.1295-3(c)(3).......................  Sec.  1.1295-1T(d)...........  Sec.  1.1295-1(d).
1.1295-3(c)(4)(i)(A), third sentence.  assessment of taxes..........  assessment of all PFIC related taxes
1.1295-3(c)(6)(i), last sentence.....  see Sec.  1.1295-              see Sec.  1.1295-1(c)(2)(iii).
                                        1T(c)(2)(iii)..
1.1295-3(d)(1), first sentence.......  section 1296(a)..............  section 1297(a)
1.1295-3(d)(1), second sentence......  section 1296(a)..............  section 1297(a)
1.1295-3(f)(2)(i) introductory text,   PFIC and the availability....  PFIC and of the availability
 second sentence.
1.1295-3(f)(4)(vi), first sentence...  Sec.  1.1295-1T(d)...........  Sec.  1.1295-1(d).
1.1295-3(g)(3), first sentence.......  Sec.  1.1295-1T(d)...........  Sec.  1.1295-1(d).
----------------------------------------------------------------------------------------------------------------

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

    Par. 8. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

    Par. 9. In 602.101, paragraph (b) is amended by removing the 
entries for Sec. 1.1295-1T and 1.1295-3T and adding entries in 
numerical order to the table to read as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                             Current OMB
     CFR part or section where identified and described      control no.
------------------------------------------------------------------------
                          *    *    *    *    *
1.1295-1...................................................    1545-1555
1.1295-3...................................................    1545-1555
------------------------------------------------------------------------

* * * * *

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
    Approved: January 14, 2000.
Jonathan Talisman,
Acting Assistant Secretary of the Treasury.
[FR Doc. 00-1892 Filed 2-4-00; 8:45 am]
BILLING CODE 4830-01-P