[Federal Register Volume 65, Number 215 (Monday, November 6, 2000)]
[Rules and Regulations]
[Pages 66500-66502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-28433]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8862]
RIN 1545-AI32


Stock Transfer Rules

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendment.

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SUMMARY: This document contains corrections to Treasury Decision 8862, 
which was published in the Federal Register on Monday, January 24, 2000

[[Page 66501]]

(65 FR 3589). The corrections relate to the stock transfer rules under 
section 367(b).

DATES: Effective February 23, 2000.

FOR FURTHER INFORMATION CONTACT: Mark D. Harris, (202) 622-3860 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    The final regulations that are the subject of these corrections are 
under section 367 of the Internal Revenue Code.

Need for Correction

    As published, the final regulations contain errors that may prove 
to be misleading and are in need of clarification.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

PART 1--INCOME TAXES

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:
    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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


Sec. 1.367(b)-0  [Corrected]

    Par. 2. In Sec. 1.367(b)-0, the entry for Sec. 1.367(b)-1(c)(5) is 
revised to read as follows:


Sec. 1.367(b)-0  Table of contents.

* * * * *


Sec. 1.367(b)-1  * * *

    (c) * * *
    (5) Abbreviated notice provision for shareholders that make the 
election described in Sec. 1.367(b)-3(c)(3).
* * * * *


Sec. 1.367(b)-1  [Corrected]

    Par. 3. Section 1.367(b)-1, the heading for paragraph (c)(5) is 
revised to read as follows:


Sec. 1.367(b)-1  Other transfers.

* * * * *
    (c) * * *
    (5) Abbreviated notice provision for shareholders that make the 
election described in Sec. 1.367(b)-3(c)(3). * * *
* * * * *


Sec. 1.367(b)-2  [Corrected]

    Par. 4. Section 1.367(b)-2 is amended as follows:
    1. Paragraph (c)(1)(i) is amended by removing the language 
``corporation, and'' and adding ``corporation; and'' in its place.
    2. Paragraph (e)(4) Example 3, the penultimate sentence, the 
language ``56'' is removed and ``356'' is added in its place.
    3. Revising the introductory text of paragraph (f)(4).
    4. Revising the penultimate sentence of paragraph (j)(2)(i).
    The revisions read as follows:


Sec. 1.367(b)-2  Definition and special rules.

* * * * *
    (f) * * *
    (4) Closing of taxable year. In a reorganization described in 
paragraph (f)(1) of this section, the taxable year of the foreign 
transferor corporation shall end with the close of the date of the 
transfer and, except as otherwise required under the Internal Revenue 
Code (e.g. section 1502 and the regulations thereunder), the taxable 
year of the acquiring corporation shall end with the close of the date 
on which the transferor's taxable year would have ended but for the 
occurrence of the reorganization if--
* * * * *
    (j) * * *
    (2) * * *
    (i) * * * The exchange gain or loss recognized under this paragraph 
(j)(2)(i) will increase or decrease the exchanging shareholder's 
adjusted basis in the stock of the foreign corporation, including for 
purposes of computing gain or loss realized with respect to the stock 
on the transaction. * * *
* * * * *


Sec. 1.367(b)-3  [Corrected]

    Par. 5. Section 1.367(b)-3 is amended as follows:
    1. Revising paragraph (b)(2).
    2. In paragraph (d)(1), the first sentence, the language ``Unused 
foreign tax credits allowable to the foreign acquired corporation under 
section 906'' is removed and ``Excess foreign taxes under section 
904(c) allowable to the foreign acquired corporation under section 
906'' is added in its place.
    The revision reads as follows:


Sec. 1.367(b)-3  Repatriation of foreign corporate assets in certain 
nonrecognition transactions.

* * * * *
    (b) * * *
    (2) United States shareholder. For purposes of this section (and 
for purposes of the other section 367(b) regulation provisions that 
specifically refer to this paragraph (b)(2)), the term United States 
shareholder means any shareholder described in section 951(b) (without 
regard to whether the foreign corporation is a controlled foreign 
corporation), and also any shareholder described in section 
953(c)(1)(A) (but only if the foreign corporation is a controlled 
foreign corporation as defined in section 953(c)(1)(B) subject to the 
rules of section 953(c)).
* * * * *


Sec. 1.367(b)-4  [Corrected]

    Par. 6. Section 1.367(b)-4 is amended as follows:
    1. In paragraph (a) the language ``another'' is removed in the 
first sentence and ``a'' is added in its place.
    2. A new sentence is added after the first sentence of paragraph 
(a).
    3. Paragraph (b)(1)(i)(B)(2) is revised.
    4. Revising the first sentence of paragraph (d) (1).
    The addition and revisions read as follows:


Sec. 1.367(b)-4  Acquisition of foreign corporate stock or assets by 
foreign corporation in certain nonrecognition transactions.

    (a) * * * This section applies notwithstanding that the foreign 
acquiring corporation and the foreign acquired corporation may be the 
same corporation (such as in a section 368(a)(1)(E) reorganization). * 
* *
    (b) * * *
    (1) * * *
    (i) * * *
    (B) * * *
    (2) Immediately after the exchange, the foreign acquiring 
corporation or the foreign acquired corporation (if any, such as in a 
transaction described in section 368(a)(1)(B) and/or section 351), is 
not a controlled foreign corporation as to which the United States 
person described in paragraph (b)(1)(i)(A) of this section is a section 
1248 shareholder.
* * * * *
    (d) * * * (1) In general. If income is not required to be included 
under paragraph (b) of this section in a section 367(b) exchange 
described in paragraph (a) of this section (non-inclusion exchange) 
then, for purposes of applying section 367(b) or 1248 to subsequent 
exchanges and subject to the limitation of Sec. 1.367(b)-2(d)(3)(iii) 
(in the case of a transaction described in Sec. 1.367(b)-3), the 
determination of the earnings and profits attributable to an exchanging 
shareholder's stock received in the non-inclusion exchange shall 
include a computation that refers to the exchanging shareholder's pro 
rata interest in the earnings and profits of the foreign acquiring 
corporation (and, in the case of a stock transfer, the foreign acquired 
corporation) that accumulate after the non-inclusion exchange, as well 
as its pro rata interest in the earnings and profits of the foreign

[[Page 66502]]

acquired corporation that accumulated before the non-inclusion 
exchange. * * *
* * * * *


Sec. 1.367(b)-5  [Corrected]

    Par. 7. Section 1.367(b)-5 is amended as follows:
    1. Paragraph (a)(1) is amended by revising the first sentence.
    2. Paragraph (f) is revised.
    3. Paragraph (g), Example 1(ii)(B), the second sentence is amended 
by removing the language ``$60 and $0'' and by adding ``$0 and $60'' in 
its place.
    4. Revising the fourth sentence of paragraph (g), Example 1(ii)(C) 
by removing the language ``from FC''.
    5. Adding two new sentences after the fourth sentence of paragraph 
(g), Example 1(ii)(C).
    6. Adding a new sentence at the end of paragraph (g), Example 
2(ii)(C).
    The additions and revisions read as follows:


Sec. 1.367(b)-5  Distributions of stock described in section 355.

    (a) * * * (1) Scope. This section provides rules relating to a 
distribution described in section 355 (or so much of section 356 as 
relates to section 355) and to which section 367(b) applies. * * *
* * * * *
    (f) Exclusion of deemed dividend from foreign personal holding 
company income. In the event an amount is included in income as a 
deemed dividend by a foreign corporation under paragraph (c) or (d) of 
this section (including amounts received as an intermediate owner under 
the rule of Sec. 1.367(b)-2(e)(2)), such deemed dividend shall not be 
included as foreign personal holding company income under section 
954(c).
    (g) * * *

    Example 1. * * *
    (ii) * * *
    (C) * * * Under Sec. 1.367(b)-2(e)(2), the $20 deemed dividend 
is considered as having been paid by FC to FD, and by FD to USS, 
immediately prior to the distribution. Under paragraph (f) of this 
section, the deemed dividend is not included by FD as foreign 
personal holding company income under section 954(c). * * *
    Example 2. * * *
    (ii) * * *
    (C) * * * Under paragraph (f) of this section, the deemed 
dividend is not included by FD as foreign personal holding company 
income under section 954(c).

Dale D. Goode,
Federal Register Liaison, Office of Special Counsel (Modernization and 
Strategic Planning).
[FR Doc. 00-28433 Filed 11-3-00; 8:45 am]
BILLING CODE 4830-01-U