[Federal Register Volume 67, Number 94 (Wednesday, May 15, 2002)]
[Rules and Regulations]
[Pages 34603-34610]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11792]



[[Page 34603]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 8995]
RIN 1545-AY31


Mid-Contract Change in Taxpayer

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations concerning a mid-
contract change in taxpayer of a contract accounted for under a long-
term contract method of accounting. A taxpayer that is a party to such 
a contract will be affected by these regulations.

DATES: Effective Date: These regulations are effective May 15, 2002.
    Applicability Date: These regulations apply to transactions on or 
after May 15, 2002.

FOR FURTHER INFORMATION CONTACT: John Aramburu at (202) 622-4960 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these final regulations 
has been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)) under control number 1545-1732.
    The collection of information in these final regulations is in 
Sec. 1.460-6(g)(3)(ii)(D). This information is required to enable 
taxpayers to make look-back computations when the income from a long-
term contract has been previously reported by another taxpayer.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number.
    The estimated average annual disclosure burden per respondent is 2 
hours.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be sent to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, W:CAR:MP:FP, 
Washington, DC 20224, and 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.
    Books or records relating to a collection of information must be 
retained as long as their contents might 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

    Section 460 generally requires that long-term contracts be 
accounted for under the percentage-of-completion method (PCM), under 
which a taxpayer must recognize income according to the estimated 
percentage of the contract that is completed during each taxable year 
and make a look-back computation of interest to compensate the 
government (or the taxpayer) for any underestimation (or 
overestimation) of income from the contract. However, home construction 
contracts and certain contracts of smaller construction contractors are 
exempt from these requirements. Moreover, residential builders are 
entitled to use the 70/30 percentage-of-completion/capitalized cost 
method (PCCM), and certain shipbuilders are entitled to use the 40/60 
PCCM. A long-term contract or a portion of a long-term contract that is 
exempt from the PCM may be accounted for under any permissible method, 
including the completed contract method (CCM), under which a taxpayer 
does not report income until a contract is complete, even though 
progress payments are received in years prior to completion.
    This document contains amendments to 26 CFR part 1. On February 16, 
2001, a notice of proposed rulemaking (REG-105946-00) relating to a 
mid-contract change in taxpayer of a contract accounted for under a 
long-term contract method of accounting was published in the Federal 
Register (66 FR 10643). Written comments were received from the public 
in response to the notice of proposed rulemaking. No public hearing was 
requested or held. After consideration of all comments, the proposed 
regulations are adopted as amended by this Treasury decision.

Explanation and Summary of Comments

    The proposed regulations divide the rules regarding a mid-contract 
change in taxpayer of a contract accounted for under a long-term 
contract method of accounting into two categories--constructive 
completion transactions and step-in-the-shoes transactions. Generally, 
a constructive completion transaction results in the taxpayer 
originally accounting for the long-term contract (old taxpayer) 
recognizing income from the contract based on a contract price that 
takes into account any amounts realized from the transaction or paid by 
the old taxpayer to the taxpayer subsequently accounting for the long-
term contract (new taxpayer) that are allocable to the contract. 
Similarly, the new taxpayer in a constructive completion transaction is 
treated as though it entered into a new contract as of the date of the 
transaction, with the contract price taking into account the purchase 
price and any amount paid by the old taxpayer that is allocable to the 
contract. In the case of a step-in-the-shoes transaction, the old 
taxpayer's obligation to account for the contract terminates on the 
date of the transaction and is assumed by the new taxpayer. The new 
taxpayer must assume the old taxpayer's methods of accounting for the 
contract, with both the contract price and allocable contract costs 
based on amounts taken into account by both parties.
    Commentators raised concerns regarding the general application of 
step-in-the-shoes treatment to contracts of S corporations accounted 
for using the CCM. For example, these commentators were concerned with 
the potential for income shifting that can occur when the stock of an S 
corporation that is accounting for a long-term contract using the CCM 
is sold to a party with a lower marginal tax rate or to a tax 
indifferent shareholder. Similarly, income from a CCM contract could be 
shifted to a party with a lower tax rate or a tax indifferent party by 
making an S election or transferring the contract in a section 351 
transaction, followed by an S election and a sale of stock. To prevent 
such a shifting of income, these commentators generally recommend that 
the transferor be required to apply the PCM to CCM contracts in 
progress as of the transaction date.
    While these commentators' concerns and recommendations relate 
solely to CCM contracts, the potential for such income shifting also 
exists with PCM contracts due to the fact that recognition of income 
under both the PCM and the CCM does not correspond to the receipt of 
progress payments. In addition, many of the commentators' concerns are 
not unique to the section 460 regulations as similar opportunities are 
presented whenever an S corporation or an electing S corporation has 
assets with built-in gain or loss. Moreover, adoption of the 
commentators' recommendation would trigger tax as of the transaction 
date and thus would be inconsistent with the policy of providing for 
tax-free reorganizations of going concerns. Thus, the commentators' 
proposals for

[[Page 34604]]

addressing this potential abuse were not adopted. However, as in the 
proposed regulations, the final regulations contain an anti-abuse rule 
that is designed to prevent such income shifting.
    Commentators suggested that for purposes of the section 1374 built-
in gain rules applicable to S corporation elections, long-term 
contracts should be valued at the amount of income reportable under the 
PCM on the date of the election. The section 1374 regulations currently 
measure recognized built-in gain attributable to a long-term contract 
accounted for using the CCM based on the amount of income reportable 
under the PCM on the date of the election. See Sec. 1.1374-4(g). These 
final regulations, however, do not provide a specific rule to determine 
the value of a long-term contract because the fair market value of a 
long-term contract reflects a variety of factors, including the amount 
earned by the old taxpayer as compared to the progress payments 
received and retained by the old taxpayer, and the new taxpayer's 
estimates of future revenues and costs.
    One commentator pointed out that while the preamble indicates the 
treatment of partnership transactions (i.e., transactions described in 
sections 721 and 731, and transfers of partnership interests) have been 
reserved, the proposed regulations, by default, place these 
transactions in the taxable, constructive completion category. This 
commentator suggested that the regulations reserve the treatment of 
partnership transactions and provide only that taxpayers use reasonable 
methods.
    The final regulations provide that a contribution to a partnership 
in a transaction described in section 721(a), a transfer of a 
partnership interest, and a distribution by a partnership to which 
section 731 applies (other than a distribution of a contract accounted 
for using a long-term contract method of accounting) are step-in-the-
shoes transactions. The final regulations, however, reserve on the 
special rules that will apply to such transfers. As described in Notice 
2002-37 (2002-23 I.R.B.), the IRS and Treasury Department intend to 
publish regulations that will set forth the special rules that will 
apply to such partnership transactions in a separate project. These 
regulations will be effective for contributions of long-term contracts 
to partnerships and transfers of interests in partnerships that are 
engaged in long-term contracts on or after May 15, 2002.
    One commentator objected to the required use of the simplified 
marginal impact method of computing look back interest in the case of a 
step-in-the-shoes transaction. In response to this comment, the final 
regulations give taxpayers the option of using this method without 
requiring it, except in those cases in which the existing regulations 
require its use. See Sec. 1.460-6(d)(4).
    Questions have arisen as to whether the implementation of these 
rules requires a taxpayer to request a change in method of accounting 
by filing a Form 3115, ``Application for Change in Accounting Method.'' 
In response to these questions, the final regulations clarify that the 
application of these rules to a transaction occurring after the 
effective date is not a change in method of accounting and, therefore, 
does not require the filing of Form 3115.
    In addition to changes made in response to the comments and 
questions described above, the final regulations clarify the 
application of the step-in-the-shoes rules to certain transfers of 
contracts that result in the old taxpayer recognizing income with 
respect to the contract. Specifically, the final regulations explain 
how the old taxpayer calculates the gain realized with respect to the 
contract in these transactions, clarify the operation of the basis 
adjustment rule in certain cases of successive transfers of a contract, 
and provide that the contract price of a new taxpayer should be reduced 
to the extent that the old taxpayer recognizes income with respect to 
the contract in connection with these transactions. The final 
regulations also clarify that a taxpayer is not entitled to a loss in 
the amount of its basis in the contract (including the uncompleted 
property, if applicable) where that basis is determined under section 
362 or 334. In addition, to the extent the basis of the contract 
(including the uncompleted property, if applicable) reflects the old 
taxpayer's recognition of income attributable to the contract in the 
step-in-the-shoes transaction, such income recognition reduces the 
total contract price. Accordingly, the new taxpayer recovers this 
additional basis over the time that it performs the contract. To the 
extent the basis of the contract (including the uncompleted property, 
if applicable) reflects costs incurred by the old taxpayer that have 
not yet been deducted (i.e., in the case of a CCM contract), such costs 
will give rise to a deduction upon completion of the contract. 
Therefore, disallowing the new taxpayer a loss for its basis in the 
contract (including the uncompleted property, if applicable) is 
necessary to prevent the new taxpayer from benefitting twice from the 
same item. Finally, the final regulations include new examples to 
illustrate these rules.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations. It is hereby 
certified that the collection of information in this Treasury decision 
will not have a significant economic impact on a substantial number of 
small entities. This certification is based on the fact that the 
relevant information is already maintained by taxpayers. Therefore, a 
Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 
U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the 
Code, the proposed regulations preceding these regulations were 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Drafting Information

    The principal author of these regulations is John Aramburu, Office 
of Associate Chief Counsel (Income Tax and Accounting). 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 part 1 is amended as follows:

PART 1--INCOME TAXES

    1. The authority citation for part 1 continues to read in part as 
follows:

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

    2. In Sec. 1.358-1, a sentence is added at the end of paragraph (a) 
to read as follows:


Sec. 1.358-1  Basis to distributees.

    (a) * * * See Sec. 1.460-4(k)(3)(iv)(A) for rules relating to stock 
basis adjustments required where a contract accounted for using a long-
term contract method of accounting is transferred in a transaction 
described in section 351 or a reorganization described in section

[[Page 34605]]

368(a)(1)(D) with respect to which the requirements of section 355 (or 
so much of section 356 as relates to section 355) are met.
* * * * *

    3. In Sec. 1.334-1, a sentence is added at the end of paragraph (b) 
to read as follows:


Sec. 1.334-1  Basis of property received in liquidations.

* * * * *
    (b) * * * See Sec. 1.460-4(k)(3)(iv)(B)(2) for rules relating to 
adjustments to the basis of certain contracts accounted for using a 
long-term contract method of accounting that are acquired in certain 
liquidations described in section 332.
* * * * *

    4. In Sec. 1.362-1, a sentence is added at the end of paragraph (a) 
to read as follows:


Sec. 1.362-1  Basis to corporations.

    (a) * * * See Sec. 1.460-4(k)(3)(iv)(B)(2) for rules relating to 
adjustments to the basis of certain contracts accounted for using a 
long-term contract method of accounting that are acquired in certain 
transfers described in section 351 and certain reorganizations 
described in section 368(a).
* * * * *

    5. In Sec. 1.381(c)(4)-1, a sentence is added at the end of 
paragraph (a)(2) to read as follows:


Sec. 1.381(c)(4)-1  Method of accounting.

    (a) * * *
    (2) * * * See Sec. 1.460-4(k) for rules relating to transfers of 
contracts accounted for using a long-term contract method of accounting 
in a transaction to which section 381 applies.
* * * * *

    6. Section 1.460-0 is amended by:
    1. Revising the entry for paragraph (k) of Sec. 1.460-4.
    2. Adding entries for paragraphs (k)(1) through (k)(6) of 
Sec. 1.460-4.
    3. Adding entries for paragraphs (g) through (g)(4) of Sec. 1.460-
6.


Sec. 1.460-0  Outline of regulations under section 460.

* * * * *


Sec. 1.460-4  Methods of accounting for long-term contracts.

* * * * *
    (k) Mid-contract change in taxpayer.
    (1) In general.
    (2) Constructive completion transactions.
    (i) Scope.
    (ii) Old taxpayer.
    (iii) New taxpayer.
    (iv) Special rules relating to distributions of certain contracts 
by a partnership. [Reserved.]
    (3) Step-in-the-shoes transactions.
    (i) Scope.
    (ii) Old taxpayer.
    (A) In general.
    (B) Gain realized on the transaction.
    (iii) New taxpayer.
    (A) Method of accounting.
    (B) Contract price.
    (C) Contract costs.
    (iv) Special rules related to certain corporate transactions.
    (A) Old taxpayer--basis adjustment.
    (1) In general.
    (2) Basis adjustment in excess of stock basis.
    (3) Subsequent dispositions of certain contracts.
    (B) New taxpayer.
    (1) Contract price adjustment.
    (2) Basis in contract.
    (v) Special rules related to certain partnership transactions. 
[Reserved.]
    (4) Anti-abuse rule.
    (5) Examples.
    (6) Effective date.
* * * * *


Sec. 1.460-6  Look-back method.

* * * * *
    (g) Mid-contract change in taxpayer.
    (1) In general.
    (2) Constructive completion transactions.
    (3) Step-in-the-shoes transactions.
    (i) General rules.
    (ii) Application of look-back method to pre-transaction period.
    (A) Contract Price
    (B) Method.
    (C) Interest accrual period.
    (D) Information old taxpayer must provide.
    (iii) Application of look-back method to post-transaction years.
    (iv) S corporation elections.
    (4) Effective date.
* * * * *

    7. Section 1.460-4 is amended by:
    1. Adding a sentence at the end of paragraph (a).
    2. Adding paragraph (k).
    The additions read as follows:


Sec. 1.460-4  Methods of accounting for long-term contracts.

    (a) * * * Finally, paragraph (k) of this section provides rules 
relating to a mid-contract change in taxpayer of a contract accounted 
for using a long-term contract method of accounting.
* * * * *
    (k) Mid-contract change in taxpayer--(1) In general. The rules in 
this paragraph (k) apply if prior to the completion of a long-term 
contract accounted for using a long-term contract method by a taxpayer 
(old taxpayer), there is a transaction that makes another taxpayer (new 
taxpayer) responsible for accounting for income from the same contract. 
For purposes of this paragraph (k) and Sec. 1.460-6(g), an old taxpayer 
also includes any old taxpayer(s) (e.g., predecessors) of the old 
taxpayer. In addition, a change in status from taxable to tax exempt or 
from domestic to foreign, or vice versa, will be considered a change in 
taxpayer. Finally, a contract will be treated as the same contract if 
the terms of the contract are not substantially changed in connection 
with the transaction, whether or not the customer agrees to release the 
old taxpayer from any or all of its obligations under the contract. The 
rules governing constructive completion transactions are provided in 
paragraph (k)(2) of this section, while the rules governing step-in-
the-shoes transactions are provided in paragraph (k)(3) of this 
section. Special rules related to the treatment of certain partnership 
transactions are reserved under paragraphs (k)(2)(iv) and (k)(3)(v) of 
this section. For application of the look-back method to mid-contract 
changes in taxpayers for contracts accounted for using the PCM, see 
Sec. 1.460-6(g).
    (2) Constructive completion transactions--(i) Scope. The 
constructive completion rules in this paragraph (k)(2) apply to 
transactions (constructive completion transactions) that result in a 
change in the taxpayer responsible for reporting income from a contract 
and that are not described in paragraph (k)(3)(i) of this section. 
Constructive completion transactions generally include, for example, 
taxable sales under section 1001 and deemed asset sales under section 
338.
    (ii) Old taxpayer. The old taxpayer is treated as completing the 
contract on the date of the transaction. The total contract price (or, 
gross contract price in the case of a long-term contract accounted for 
under the CCM) for the old taxpayer is the sum of any amounts realized 
from the transaction that are allocable to the contract and any amounts 
the old taxpayer has received or reasonably expects to receive under 
the contract. Total contract price (or gross contract price) is reduced 
by any amount paid by the old taxpayer to the new taxpayer, and by any 
transaction costs, that are allocable to the contract. Thus, the old 
taxpayer's allocable contract costs determined under paragraph (b)(5) 
of this section do not include any consideration paid, or costs 
incurred, as a result of the transaction that are allocable to the 
contract. In the case of a transaction subject to section

[[Page 34606]]

338 or 1060, the amount realized from the transaction allocable to the 
contract is determined by using the residual method under Secs. 1.338-6 
and 1.338-7.
    (iii) New taxpayer. The new taxpayer is treated as entering into a 
new contract on the date of the transaction. The new taxpayer must 
evaluate whether the new contract should be classified as a long-term 
contract within the meaning of Sec. 1.460-1(b) and account for the 
contract under a permissible method of accounting. For a new taxpayer 
who accounts for a contract using the PCM, the total contract price is 
any amount the new taxpayer reasonably expects to receive under the 
contract consistent with paragraph (b)(4) of this section. Total 
contract price is reduced by the amount of any consideration paid by 
the new taxpayer as a result of the transaction, and by any transaction 
costs, that are allocable to the contract and is increased by the 
amount of any consideration received by the new taxpayer as a result of 
the transaction that is allocable to the contract. Similarly, the gross 
contract price for a contract accounted for using the CCM is all 
amounts the new taxpayer is entitled by law or contract to receive 
consistent with paragraph (d)(3) of this section, adjusted for any 
consideration paid (or received) by the new taxpayer as a result of the 
transaction, and for any transaction costs, that are allocable to the 
contract. Thus, the new taxpayer's allocable contract costs determined 
under paragraph (b)(5) of this section do not include any consideration 
paid, or costs incurred, as a result of the transaction that are 
allocable to the contract. In the case of a transaction subject to 
sections 338 or 1060, the amount of consideration paid that is 
allocable to the contract is determined by using the residual method 
under Secs. 1.338-6 and 1.338-7.
    (iv) Special rules relating to distributions of certain contracts 
by a partnership. [Reserved]
    (3) Step-in-the-shoes transactions--(i) Scope. The step-in-the-
shoes rules in this paragraph (k)(3) apply to the following 
transactions that result in a change in the taxpayer responsible for 
reporting income from a contract accounted for using a long-term 
contract method of accounting (step-in-the-shoes transactions)--
    (A) Transfers to which section 361 applies if the transfer is in 
connection with a reorganization described in section 368(a)(1)(A), (C) 
or (F);
    (B) Transfers to which section 361 applies if the transfer is in 
connection with a reorganization described in section 368(a)(1)(D) or 
(G), provided the requirements of section 354(b)(1)(A) and (B) are met;
    (C) Distributions to which section 332 applies, provided the 
contract is transferred to an 80-percent distributee;
    (D) Transfers described in section 351;
    (E) Transfers to which section 361 applies if the transfer is in 
connection with a reorganization described in section 368(a)(1)(D) with 
respect to which the requirements of section 355 (or so much of section 
356 as relates to section 355) are met;
    (F) Transfers (e.g., sales) of S corporation stock;
    (G) Conversion to or from an S corporation;
    (H) Members joining or leaving a consolidated group;
    (I) Contributions to which section 721(a) applies;
    (J) Transfers of partnership interests;
    (K) Distributions to which section 731 applies (other than the 
distribution of the contract); and
    (L) Any other transaction designated in the Internal Revenue 
Bulletin by the Internal Revenue Service. See Sec. 601.601(d)(2)(ii) of 
this chapter.
    (ii) Old taxpayer--(A) In general. The new taxpayer will ``step 
into the shoes'' of the old taxpayer with respect to the contract. 
Thus, the old taxpayer's obligation to account for the contract 
terminates on the date of the transaction and is assumed by the new 
taxpayer, as set forth in paragraph (k)(3)(iii) of this section. As a 
result, an old taxpayer using the PCM is required to recognize income 
from the contract based on the cumulative allocable contract costs 
incurred as of the date of the transaction. Similarly, an old taxpayer 
using the CCM is not required to recognize any revenue and may not 
deduct allocable contract costs incurred with respect to the contract.
    (B) Gain realized on the transaction. The amount of gain the old 
taxpayer realizes on the transfer of a contract in a step-in-the-shoes 
transaction must be determined after application of paragraph 
(k)(3)(ii)(A) of this section using the rules of paragraph (k)(2) of 
this section that apply to constructive completion transactions. (The 
amount of gain realized on a transfer of a contract is relevant, for 
example, in determining the amount of gain recognized with respect to 
the contract in a section 351 transaction in which the old taxpayer 
receives from the new taxpayer money or property other than stock of 
the transferee.)
    (iii) New taxpayer--(A) Method of accounting. Beginning on the date 
of the transaction, the new taxpayer must account for the long-term 
contract by using the same method of accounting used by the old 
taxpayer prior to the transaction. The same method of accounting must 
be used for such contract regardless of whether the old taxpayer's 
method is the new taxpayer's principal method of accounting under 
Sec. 1.381(c)(4)-1(b)(3) or whether the new taxpayer is otherwise 
eligible to use the old taxpayer's method. Thus, if the old taxpayer 
uses the PCM to account for the contract, the new taxpayer steps into 
the shoes of the old taxpayer with respect to its completion factor and 
percentage of completion methods (such as the 10-percent method), even 
if the new taxpayer has not elected such methods for similarly 
classified contracts. Similarly, if the old taxpayer uses the CCM, the 
new taxpayer steps into the shoes of the old taxpayer with respect to 
the CCM, even if the new taxpayer is not otherwise eligible to use the 
CCM. However, the new taxpayer is not necessarily bound by the old 
taxpayer's method for similarly classified contracts entered into by 
the new taxpayer subsequent to the transaction and must apply general 
tax principles, including section 381, to determine the appropriate 
method to account for these subsequent contracts. To the extent that 
general tax principles allow the taxpayer to account for similarly 
classified contracts using a method other than the old taxpayer's 
method, the taxpayer is not required to obtain the consent of the 
Commissioner to begin using such other method.
    (B) Contract price. In the case of a long-term contract that has 
been accounted for under PCM, the total contract price for the new 
taxpayer is the sum of any amounts the old taxpayer or the new taxpayer 
has received or reasonably expects to receive under the contract 
consistent with paragraph (b)(4) of this section. Similarly, the gross 
contract price in the case of a long-term contract accounted for under 
the CCM includes all amounts the old taxpayer or the new taxpayer is 
entitled by law or by contract to receive consistent with paragraph 
(d)(3) of this section.
    (C) Contract costs. Total allocable contract costs for the new 
taxpayer are the allocable contract costs as defined under paragraph 
(b)(5) of this section incurred by either the old taxpayer prior to, or 
the new taxpayer after, the transaction. Thus, any payments between the 
old taxpayer and the new taxpayer with respect to the contract in 
connection with the transaction are not treated as allocable contract 
costs.
    (iv) Special rules related to certain corporate transactions--(A) 
Old taxpayer--basis adjustment--(1) In general. Except as provided in

[[Page 34607]]

paragraph (k)(3)(iv)(A)(2) of this section, in the case of a 
transaction described in paragraph (k)(3)(i)(D) or (E) of this section, 
the old taxpayer must adjust its basis in the stock of the new taxpayer 
by--
    (i) Increasing such basis by the amount of gross receipts the old 
taxpayer has recognized under the contract; and
    (ii) Reducing such basis by the amount of gross receipts the old 
taxpayer has received or reasonably expects to receive under the 
contract.

    (2) Basis adjustment in excess of stock basis. If the old and new 
taxpayer do not join in the filing of a consolidated Federal income tax 
return, the old taxpayer may not adjust its basis in the stock of the 
new taxpayer under paragraph (k)(3)(iv)(A)(1) of this section below 
zero and the old taxpayer must recognize ordinary income to the extent 
the basis in the stock of the new taxpayer otherwise would be adjusted 
below zero. If the old and new taxpayer join in the filing of a 
consolidated Federal income tax return, the old taxpayer must create an 
(or increase an existing) excess loss account to the extent the basis 
in the stock of the new taxpayer otherwise would be adjusted below zero 
under paragraph (k)(3)(iv)(A)(1) of this section. See Secs. 1.1502-19 
and 1.1502-32(a)(3)(ii).
    (3) Subsequent dispositions of certain contracts. If the old 
taxpayer disposes of a contract in a transaction described in paragraph 
(k)(3)(i)(D) or (E) of this section that the old taxpayer acquired in a 
transaction described in paragraph (k)(3)(i)(D) or (E) of this section, 
the basis adjustment rule of this paragraph (k)(3)(iv)(A) is applied by 
treating the old taxpayer as having recognized the amount of gross 
receipts recognized by the previous old taxpayer under the contract and 
any amount recognized by the previous old taxpayer with respect to the 
contract in connection with the transaction in which the old taxpayer 
acquired the contract. In addition, the old taxpayer is treated as 
having received or as reasonably expecting to receive under the 
contract any amount the previous old taxpayer received or reasonably 
expects to receive under the contract. Similar principles will apply in 
the case of multiple successive transfers described in paragraph 
(k)(3)(i)(D) or (E) of this section involving the contract.
    (B) New Taxpayer--(1) Contract price adjustment. Generally, 
payments between the old taxpayer and the new taxpayer with respect to 
the contract in connection with the transaction do not affect the 
contract price. Notwithstanding the preceding sentence and paragraph 
(k)(3)(iii)(B) of this section, however, in the case of transactions 
described in paragraph (k)(3)(i)(B), (D) or (E) of this section, the 
total contract price (or gross contract price) must be reduced to the 
extent of any amount recognized by the old taxpayer with respect to the 
contract in connection with the transaction (e.g., any amount 
recognized under section 351(b) or 357 that is attributable to the 
contract and any income recognized by the old taxpayer pursuant to the 
basis adjustment rule of paragraph (k)(3)(iv)(A)).
    (2) Basis in Contract. The new taxpayer's basis in a contract 
(including the uncompleted property, if applicable) acquired in a 
transaction described in paragraphs (k)(3)(i)(A) through (E) of this 
section will be computed under section 362 or section 334, as 
applicable. Upon a new taxpayer's completion (actual or constructive) 
of a CCM or a PCM contract acquired in a transaction described in 
paragraphs (k)(3)(i)(A) through (E) of this section, the new taxpayer's 
basis in the contract (including the uncompleted property, if 
applicable) is reduced to zero. The new taxpayer is not entitled to a 
deduction or loss in connection with any basis reduction pursuant to 
this paragraph (k)(3)(iv)(B)(2).
    (v) Special rules related to certain partnership transactions. 
[Reserved]
    (4) Anti-abuse rule. Notwithstanding this paragraph (k), in the 
case of a transaction entered into with a principal purpose of shifting 
the tax consequences associated with a long-term contract in a manner 
that substantially reduces the aggregate U.S. Federal income tax 
liability of the parties with respect to that contract, the 
Commissioner may allocate to the old (or new) taxpayer the income from 
that contract properly allocable to the old (or new) taxpayer. For 
example, the Commissioner may reallocate income from a long-term 
contract in a transaction in which a contract accounted for using the 
CCM, or using the PCM where the old taxpayer has received advance 
payments in excess of its contribution to the contract, is transferred 
to a tax indifferent party (e.g., a foreign person not subject to U.S. 
Federal income tax).
    (5) Examples. The following examples illustrate the rules of this 
paragraph (k).
    For purposes of these examples, it is assumed that the contract is 
a long-term construction contract accounted for using the PCM prior to 
the transaction unless stated otherwise and the contract is not 
transferred with a principal purpose of shifting the tax consequences 
associated with a long-term contract in a manner that substantially 
reduces the aggregate U.S. Federal income tax liability of the parties 
with respect to that contract. The examples are as follows:

    Example 1. Constructive completion--PCM--(i) Facts. In Year 1, X 
enters into a contract. The total contract price is $1,000,000 and 
the estimated total allocable contract costs are $800,000. In Year 
1, X incurs costs of $200,000. In Year 2, X incurs additional costs 
of $400,000 before selling the contract as part of a taxable sale of 
its business in Year 2 to Y, an unrelated party. At the time of 
sale, X has received $650,000 in progress payments under the 
contract. The consideration allocable to the contract under section 
1060 is $150,000. Pursuant to the sale, the new taxpayer Y 
immediately assumes X's contract obligations and rights. Y is 
required to account for the contract using the PCM. In Year 2, Y 
incurs additional allocable contract costs of $50,000. Y correctly 
estimates at the end of Year 2 that it will have to incur an 
additional $75,000 of allocable contract costs in Year 3 to complete 
the contract.
    (ii) Old taxpayer. For Year 1, X reports receipts of $250,000 
(the completion factor multiplied by total contract price ($200,000/
$800,000 x $1,000,000)) and costs of $200,000, for a profit of 
$50,000. X is treated as completing the contract in Year 2 because 
it sold the contract. For purposes of applying the PCM in Year 2, 
the total contract price is $800,000 (the sum of the amounts 
received under the contract and the amount realized in the sale 
($650,000 + $150,000)) and the total allocable contract costs are 
$600,000 (the sum of the costs incurred in Year 1 and Year 2 
($200,000 + $400,000)). Thus, in Year 2, X reports receipts of 
$550,000 (total contract price minus receipts already reported 
($800,000 - $250,000)) and costs incurred in year 2 of $400,000, for 
a profit of $150,000.
    (iii) New taxpayer. Y is treated as entering into a new contract 
in Year 2. The total contract price is $200,000 (the amount 
remaining to be paid under the terms of the contract less the 
consideration paid allocable to the contract ($1,000,000 - $650,000 
- $150,000)). The estimated total allocable contract costs at the 
end of Year 2 are $125,000 (the allocable contract costs that Y 
reasonably expects to incur to complete the contract ($50,000 + 
$75,000)). In Year 2, Y reports receipts of $80,000 (the completion 
factor multiplied by the total contract price [($50,000/$125,000) x 
$200,000] and costs of $50,000 (the costs incurred after the 
purchase), for a profit of $30,000. For Year 3, Y reports receipts 
of $120,000 (total contract price minus receipts already reported 
($200,000 - $80,000)) and costs of $75,000, for a profit of $45,000.
    Example 2. Constructive completion--CCM--(i) Facts. The facts 
are the same as in Example 1, except that X and Y properly account 
for the contract under the CCM.
    (ii) Old taxpayer. X does not report any income or costs from 
the contract in Year 1. In Year 2, the contract is deemed complete 
for X, and X reports its gross contract price of $800,000 (the sum 
of the amounts received under the contract and the amount realized 
in the sale

[[Page 34608]]

($650,000 + $150,000)) and its total allocable contract costs of 
$600,000 (the sum of the costs incurred in Year 1 and Year 2 
($200,000 + $400,000)) in that year, for a profit of $200,000.
    (iii) New taxpayer. Y is treated as entering into a new contract 
in Year 2. Under the CCM, Y reports no gross receipts or costs in 
Year 2. Y reports its gross contract price of $200,000 (the amount 
remaining to be paid under the terms of the contract less the 
consideration paid allocable to the contract ($1,000,000 - $650,000 
- $150,000)) and its total allocable contract costs of $125,000 (the 
allocable contract costs that Y incurred to complete the contract 
($50,000 + $75,000)) in Year 3, the completion year, for a profit of 
$75,000.
    Example 3. Step-in-the-shoes--PCM--(i) Facts. The facts are the 
same as in Example 1, except that X transfers the contract 
(including the uncompleted property) to Y in exchange for stock of Y 
in a transaction that qualifies as a statutory merger described in 
section 368(a)(1)(A) and does not result in gain or loss to X under 
section 361(a).
    (ii) Old taxpayer. For Year 1, X reports receipts of $250,000 
(the completion factor multiplied by total contract price ($200,000/
$800,000 x $1,000,000)) and costs of $200,000, for a profit of 
$50,000. Because the mid-contract change in taxpayer results from a 
transaction described in paragraph (k)(3)(i) of this section, X is 
not treated as completing the contract in Year 2. In Year 2, X 
reports receipts of $500,000 (the completion factor multiplied by 
the total contract price and minus the Year 1 gross receipts 
[($600,000/$800,000  x  $1,000,000)-$250,000]) and costs of 
$400,000, for a profit of $100,000.
    (iii) New taxpayer. Because the mid-contract change in taxpayer 
results from a step-in-the-shoes transaction, Y must account for the 
contract using the same methods of accounting used by X prior to the 
transaction. Total contract price is the sum of any amounts that X 
and Y have received or reasonably expect to receive under the 
contract, and total allocable contract costs are the allocable 
contract costs of X and Y. Thus, the estimated total allocable 
contract costs at the end of Year 2 are $725,000 (the cumulative 
allocable contract costs of X and the estimated total allocable 
contract costs of Y ($200,000 + $400,000 + $50,000 + $75,000)). In 
Year 2, Y reports receipts of $146,552 (the completion factor 
multiplied by the total contract price minus receipts reported by 
the old taxpayer ([($650,000/$725,000)  x  $1,000,000]-$750,000) and 
costs of $50,000, for a profit of $96,552. For Year 3, Y reports 
receipts of $103,448 (the total contract price minus prior year 
receipts ($1,000,000-$896,552)) and costs of $75,000, for a profit 
of $28,448.
    Example 4. Step-in-the-shoes--CCM--(i) Facts. The facts are the 
same as in Example 3, except that X properly accounts for the 
contract under the CCM.
    (ii) Old taxpayer. X reports no income or costs from the 
contract in Years 1, 2 or 3.
    (iii) New taxpayer. Because the mid-contract change in taxpayer 
results from a step-in-the-shoes transaction, Y must account for the 
contract using the same method of accounting used by X prior to the 
transaction. Thus, in Year 3, the completion year, Y reports 
receipts of $1,000,000 and total contract costs of $725,000, for a 
profit of $275,000.
    Example 5. Step in the shoes--PCM--basis adjustment.
    The facts are the same as in Example 3, except that X transfers 
the contract (including the uncompleted property) with a basis of $0 
and $125,000 of cash to a new corporation, Z, in exchange for all of 
the stock of Z in a section 351 transaction. Thus, under section 
358(a), X's basis in the Z stock is $125,000. Pursuant to paragraph 
(k)(3)(iv)(A)(1) of this section, X must increase its basis in the Z 
stock by the amount of gross receipts X recognized under the 
contract, $750,000 ($250,000 receipts in Year 1 + $500,000 receipts 
in Year 2), and reduce its basis by the amount of gross receipts X 
received under the contract, the $650,000 in progress payments. 
Accordingly, X's basis in the Z stock is $225,000. All other results 
are the same.
    Example 6. Step in the shoes--CCM--basis adjustment--(i) Facts. 
The facts are the same as in Example 4, except that X receives 
progress payments of $800,000 (rather than $650,000) and transfers 
the contract (including the uncompleted property) with a basis of 
$600,000 and $125,000 of cash to a new corporation, Z, in exchange 
for all of the stock of Z in a section 351 transaction. X and Z do 
not join in filing a consolidated Federal income tax return.
    (ii) Old taxpayer. X reports no income or costs under the 
contract in Years 1, 2, or 3. Under section 358(a), X's basis in Z 
is $725,000. Pursuant to paragraph (k)(3)(iv)(A)(1), X must reduce 
its basis in the stock of Z by $800,000, the progress payments 
received by X. However, X may not reduce its basis in the Z stock 
below zero pursuant paragraph (k)(3)(iv)(A)(2) of this section. 
Accordingly, X's basis in the Z stock is reduced by $725,000 to zero 
and X must recognize ordinary income of $75,000.
    (iii) New taxpayer. Upon completion of the contract in Year 3, Z 
reports gross receipts of $925,000 ($1,000,000 original contract 
price--$75,000 income recognized by the old taxpayer pursuant to the 
basis adjustment rule of paragraph (k)(3)(iv)(A)) and total contract 
costs of $725,000, for a profit of $200,000.
    Example 7. Step in the shoes--PCM--gain recognized in 
transaction--(i) Facts. The facts are the same as in Example 3, 
except that X transfers the contract (including the uncompleted 
property) with a basis of $0 and an unrelated capital asset with a 
value of $100,000 and a basis of $0 to a new corporation, Z, in 
exchange for stock of Z with a value of $200,000 and $50,000 of cash 
in a section 351 transaction.
    (ii) Old taxpayer. For year 1, X reports receipts of $250,000 
($200,000/$800,000  x  $1,000,000) and costs of $200,000, for a 
profit of $50,000. X is not treated as completing the contract in 
Year 2. In Year 2, X reports receipts of $500,000 (($600,000/
$800,000  x  $1,000,000 = $750,000 cumulative gross receipts)--
$250,000 prior year cumulative gross receipts) and costs of 
$400,000, for a profit of $100,000. Under paragraph (k)(3)(ii)(B) of 
this section, X determines that the gain realized on the transfer of 
the contract to Z under the constructive completion rules of 
paragraph (k)(2)(ii) of this section is $50,000 (total contract 
price of $800,000 ($150,000 value allocable to the contract + 
$650,000 progress payments)--$750,000 previously recognized 
cumulative gross receipts--$0 costs incurred but not recognized). 
The gain realized on the transfer of the unrelated capital asset to 
Z is $100,000. The amount of gain X must recognize due to the 
receipt of $50,000 cash in the exchange is $50,000, of which $30,000 
is allocated to the contract ($150,000 value of contract/$250,000 
total value of property transferred to Z  x  $50,000) and is treated 
as ordinary income, and $20,000 is allocated to the unrelated 
capital asset ($100,000 value of capital asset/$250,000 total value 
of property transferred to Z  x  $50,000). Under section 358(a), X's 
basis in the Z stock is $0. However, pursuant to paragraph 
(k)(3)(iv)(A)(1) of this section, X must increase its basis in the Z 
stock by $750,000, the amount of gross receipts recognized under the 
contract, and must reduce its basis in the Z stock by $650,000, the 
amount of gross receipts X received under the contract. Therefore, 
X's basis in the Z stock is $100,000.
    (iii) New taxpayer. Z must account for the contract using the 
same PCM method used by X prior to the transaction. Pursuant to 
paragraph (k)(3)(iv)(B)(1) of this section, the total contract price 
is $970,000 ($1,000,000 amount X and Z have received or reasonably 
expect to receive under the contract--$30,000 income recognized by X 
with respect to the contract as a result of the receipt of $50,000 
cash in the transaction). In Year 2, Z reports gross receipts of 
$119,655 ($650,000/$725,000  x  $970,000 = $869,655 current year 
cumulative gross receipts--$750,000 cumulative gross receipts 
reported by the old taxpayer) and costs of $50,000, for a profit of 
$69,655. In Year 3, Z reports gross receipts of $100,345 ($970,000-
$869,655) and costs of $75,000, for a profit of $25,345.
    Example 8. Step in the shoes--CCM--gain recognized in 
transaction--(i) Facts. The facts are the same as in Example 4, 
except that X transfers the contract (including the uncompleted 
property) with a basis of $600,000 and an unrelated capital asset 
with a value of $125,000 and a basis of $0 to a new corporation, Z, 
in exchange for all the stock of Z with a value of $175,000 and 
$100,000 of cash in a section 351 transaction. X and Z do not join 
in filing a consolidated Federal income tax return.
    (ii) Old taxpayer. X reports no income or costs under the 
contract in Years 1, 2, or 3. Under paragraph (k)(3)(ii)(B), X 
determines that the gain realized on the transfer of the contract to 
Z under the constructive completion rules of paragraph (k)(2)(ii) of 
this section is $200,000 ($800,000 total contract price ($150,000 
value allocable to the contract + $650,000 progress payments)--
$600,000 costs incurred but not recognized). The gain realized on 
the transfer of the unrelated capital asset to Z is $125,000. The 
amount of gain X must recognize due to the receipt of $100,000 of 
cash in the exchange is $100,000, of which $54,545 is allocated to 
the contract ($150,000 value of the contract/

[[Page 34609]]

$275,000 total value of property transferred to Z  x  $100,000) and 
is treated as ordinary income, and $45,455 is allocated to the 
unrelated capital asset ($125,000 value of capital asset/$275,000 
total value of property transferred to Z  x  $100,000). Under 
section 358(a), X's basis in the Z stock is $600,000 ($600,000 basis 
in the contract and unrelated capital asset transferred--$100,000 
cash received + $100,000 gain recognized). Pursuant to paragraph 
(k)(3)(iv)(A)(1) of this section, X must reduce its basis in the 
stock of Z by $650,000, the progress payments received under the 
contract. However, X may not reduce its basis in the Z stock below 
zero pursuant to paragraph (k)(3)(iv)(A)(2) of this section. 
Accordingly, X's basis in the Z stock is reduced by $600,000 to zero 
and X must recognize income of $50,000.
    (iii) New taxpayer. Z must account for the contract using the 
same CCM used by X prior to the transaction. Pursuant to paragraph 
(k)(3)(iv)(B)(1) of this section, the total contract price is 
$895,455 ($1,000,000 original contract price--$54,545 income 
recognized by old taxpayer with respect to the contract as a result 
of the receipt of cash in the transaction--$50,000 income recognized 
by the old taxpayer pursuant to the basis adjustment rule of 
paragraph (k)(3)(iv)(A)). Accordingly, upon completion of the 
contract in Year 3, Z reports gross receipts of $895,455 and total 
contract costs of $725,000, for a profit of $170,455.

    (6) Effective date. This paragraph (k) is applicable for 
transactions on or after May 15, 2002. Application of the rules of this 
paragraph (k) to a transaction that occurs on or after May 15, 2002 is 
not a change in method of accounting.

    8. In Sec. 1.460-6, paragraph (g) is revised to read as follows:


Sec. 1.460-6  Look-back method.

* * * * *
    (g) Mid-contract change in taxpayer--(1) In general. The rules in 
this paragraph (g) apply if, as described in Sec. 1.460-4(k), prior to 
the completion of a long-term contract accounted for using the PCM or 
the PCCM by a taxpayer (old taxpayer), there is a transaction that 
makes another taxpayer (new taxpayer) responsible for accounting for 
income from the same contract. The rules governing constructive 
completion transactions are provided in paragraph (g)(2) of this 
section, while the rules governing step-in-the-shoes transactions are 
provided in paragraph (g)(3) of this section. For purposes of this 
paragraph, pre-transaction years are all taxable years of the old 
taxpayer in which the old taxpayer accounted for (or should have 
accounted for) gross receipts from the contract, and post-transaction 
years are all taxable years of the new taxpayer in which the new 
taxpayer accounted for (or should have accounted for) gross receipts 
from the contract.
    (2) Constructive completion transactions. In the case of a 
transaction described in Sec. 1.460-4(k)(2)(i) (constructive completion 
transaction), the look-back method is applied by the old taxpayer with 
respect to pre-transaction years upon the date of the transaction and, 
if the new taxpayer uses the PCM or the PCCM to account for the 
contract, by the new taxpayer with respect to post-transaction years 
upon completion of the contract. The contract price and allocable 
contract costs to be taken into account by the old taxpayer or the new 
taxpayer in applying the look-back method are described in Sec. 1.460-
4(k)(2).
    (3) Step-in-the-shoes transactions--(i) General rules. In the case 
of a transaction described in Sec. 1.460-4(k)(3)(i) (step-in-the-shoes 
transaction), the look-back method is not applied at the time of the 
transaction, but is instead applied for the first time when the 
contract is completed by the new taxpayer. Upon completion of the 
contract, the look-back method is applied by the new taxpayer with 
respect to both pre-transaction years and post-transaction years, 
taking into account all amounts reasonably expected to be received by 
either the old or new taxpayer and all allocable contract costs 
incurred during both periods as described in Sec. 1.460-4(k)(3). The 
new taxpayer is liable for filing the Form 8697 and for interest 
computed on hypothetical underpayments of tax, and is entitled to 
receive interest with respect to hypothetical overpayments of tax, for 
both pre- and post-transaction years. The old taxpayer will be 
secondarily liable for any interest required to be paid with respect to 
pre-transaction years reduced by any interest on pre-transaction 
overpayments.
    (ii) Application of look-back method to pre-transaction period--(A) 
Contract price. The actual contract price for pre-transaction taxable 
years must be determined by the new taxpayer without regard to any 
contract price adjustment described in paragraph (k)(3)(iv)(B)(1) of 
this section.
    (B) Method. The new taxpayer may apply the look-back method to each 
pre-transaction taxable year that is a redetermination year using the 
simplified marginal impact method described in paragraph (d) of this 
section (regardless of whether or not the old taxpayer would have 
actually used that method and without regard to the tax liability 
ceiling). But see paragraph (d)(4) of this section, which requires use 
of the simplified marginal impact method by certain pass-through 
entities.
    (C) Interest accrual period. With respect to any hypothetical 
underpayment or overpayment of tax for a pre-transaction taxable year, 
interest accrues from the due date of the old taxpayer's tax return 
(not including extensions) for the taxable year of the underpayment or 
overpayment until the due date of the new taxpayer's return (not 
including extensions) for the completion year or the year of a post-
completion adjustment, whichever is applicable.
    (D) Information old taxpayer must provide. In order to help the new 
taxpayer to apply the look-back method with respect to pre-transaction 
taxable years, any old taxpayer that accounted for income from a long-
term contract under the PCM or PCCM for either regular or alternative 
minimum tax purposes is required to provide the information described 
in this paragraph to the new taxpayer by the due date (not including 
extensions) of the old taxpayer's income tax return for the first 
taxable year ending on or after a step-in-the-shoes transaction 
described in Sec. 1.460-4(k)(3)(i). The required information is as 
follows--
    (1) The portion of the contract reported by the old taxpayer under 
PCM for regular and alternative minimum tax purposes (i.e., whether the 
old taxpayer used PCM, the 40/60 PCCM method, or the 70/30 PCCM 
method);
    (2) Any submethods used in the application of PCM (e.g., the 
simplified cost-to-cost method or the 10-percent method);
    (3) The amount of total contract price reported by year;
    (4) The numerator and the denominator of the completion factor by 
year;
    (5) The due date (not including extensions) of the old taxpayer's 
income tax returns for each taxable year in which income was required 
to be reported;
    (6) Whether the old taxpayer was a corporate or a noncorporate 
taxpayer by year; and
    (7) Any other information required by the Commissioner by 
administrative pronouncement.
    (iii) Application of look-back method to post-transaction years. 
With respect to post-transaction taxable years, the new taxpayer must 
use the same look-back method it uses for other contracts (i.e., the 
simplified marginal impact method or the actual method) to determine 
the amount of any hypothetical overpayment or underpayment of tax and 
the time period for computing interest on these amounts.
    (iv) S corporation elections. Following the conversion of a C 
corporation into an S corporation, the look-back method is applied at 
the entity level with

[[Page 34610]]

respect to contracts entered into prior to the conversion, 
notwithstanding section 460(b)(4)(B)(i).
    (4) Effective date. This paragraph (g) is applicable for 
transactions on or after May 15, 2002.


Sec. 1.1362-2  [Amended]

    9. In Sec. 1.1362-2, paragraph (c)(6) Example 2, first sentence is 
amended by removing the language ``Sec. 1.451-3(b)'' and adding 
``Sec. 1.460-1(b)(1)'' in its place, and removing the language 
``Sec. 1.451-3(c)(1)'' and adding ``Sec. 1.460-4(b)'' in its place.


Sec. 1.1374-4  [Amended]

    10. In Sec. 1.1374-4, paragraph (g), first sentence is amended by 
removing the language ``Sec. 1.451-3(d)'' and adding ``Sec. 1.460-
4(d)'' in its place, and removing the language ``Sec. 1.451-3(c)'' and 
adding ``Sec. 1.460-4(b)'' in its place.

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

    11. The authority section for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.


    12. In Sec. 602.101, paragraph (b) is amended by revising the entry 
for 1.460-6 to read as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (b) * * *

 
 CFR part or section where identified    Current OMB  control
            and described                        No.
 
 
                          *         *         *         *         *         *         *
1.460-6..............................  1545-1031;.............  1545-1572;.............  1545-1732
 
                          *         *         *         *         *         *         *
 


Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
    Approved: May 2, 2002.
Pamela F. Olson,
Acting Assistant Secretary of the Treasury.
[FR Doc. 02-11792 Filed 5-14-02; 8:45 am]
BILLING CODE 4830-01-P