[Federal Register Volume 69, Number 165 (Thursday, August 26, 2004)]
[Proposed Rules]
[Pages 52462-52463]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19477]



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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-135898-04]
RIN 1545-BD63


Extension of Time To Elect Method for Determining Allowable Loss

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations.

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SUMMARY: This document contains proposed regulations under section 1502 
of the Internal Revenue Code of 1986. The proposed regulations extend 
the time for consolidated groups to elect to apply a method for 
determining allowable loss on a disposition of subsidiary stock, and 
permit consolidated groups to revoke such elections. The proposed 
regulations affect corporations filing consolidated returns, both 
during and after the period of affiliation, and also affect purchasers 
of the stock of members of a consolidated group. The text of the 
temporary regulations published in this issue of the Federal Register 
serves as the text of these proposed regulations.

DATES: Written or electronic comments must be received by November 24, 
2004.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-135898-04), room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered between the 
hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-135898-04), Courier's 
Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., 
Washington, DC, or sent electronically, via the IRS Internet site at 
http://www.irs.gov/regs or via the Federal eRulemaking Portal at http://www.regulations.gov (IRS and REG-135898-04).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Theresa Abell (202) 622-7700 or Martin Huck, (202) 622-7750; concerning 
submissions of comments, Robin Jones, (202) 622-7180 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collection of information should be 
sent to the Office of Management and Budget, Attn: Desk Officer for the 
Department of Treasury, Office of Information and Regulatory Affairs, 
Washington, DC 20503, with copies to the Internal Revenue Service, 
Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 
20224. Comments on the collection of information should be received by 
October 25, 2004. Comments are specifically requested concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, including whether the 
information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information (see below);
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    The collection of information in this proposed regulation was 
previously approved and reviewed by the Office of Management and Budget 
under control number 1545-1774. The collection of information is 
required to allow the taxpayer to make certain elections to determine 
the amount of allowable loss under Sec.  1.1502-20 in its entirety, 
Sec.  1.1502-20 without regard to the duplicated loss factor, or Sec.  
1.337(d)-2T; to allow the taxpayer to reapportion a section 382 
limitation in certain cases; to allow the taxpayer to waive certain 
loss carryovers; and to ensure that loss is not disallowed under Sec.  
1.337-2T and basis is not reduced underSec.  1.337(d)-2T to the extent 
that the taxpayer establishes that the loss or basis is not 
attributable to the recognition of built-in gain on the disposition of 
an asset.
    This collection of information is modified with respect to 
Sec. Sec.  1.1502-20T and 1.1502-32T. Regarding Sec.  1.1502-20T, the 
collection of information also is necessary to allow the common parent 
of the selling group to reapportion a separate, subgroup or 
consolidated section 382 limitation when the acquiring group amends its 
Sec.  1.1502-32(b)(4) election. With respect to Sec.  1.1502-32T, the 
collection of information also is necessary to allow the acquiring 
group to amend its previous Sec.  1.1502-32(b)(4) election, so that it 
may use previously waived losses of its subsidiary.
    The collection of information is required to obtain a benefit. The 
likely respondents are corporations that file consolidated income tax 
returns.
    Estimated total annual reporting and/or recordkeeping burden: 
36,720 hours.
    Estimated average annual burden per respondent: 2 hours.
    Estimated number of respondents: 18,360.
    Estimated annual frequency of responses: Once.
    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 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 and Explanation of Provisions

    Temporary regulations in the rules and regulations section of this 
issue of the Federal Register amend the Income Tax Regulations (26 CFR 
Part 1) relating to section 1502. The temporary regulations extend the 
time for consolidated groups to elect to apply a method for determining 
allowable loss on a disposition of subsidiary stock, and permit 
consolidated groups to revoke such elections. The temporary regulations 
affect corporations filing consolidated returns, both during and after 
the period of affiliation, and also affect purchasers of the stock of 
members of a consolidated group. The text of those regulations serves 
as the text for these proposed regulations. The preamble to the 
temporary regulations explains the amendments and these proposed 
regulations.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It is hereby 
certified that these proposed regulations will not have a significant 
economic impact on a substantial number of small entities. This 
certification is based on the fact that the regulations provide relief 
to consolidated groups by extending the time in which a group may make, 
or allowing a group to revoke, certain

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elections of methods for determining allowable loss. In addition, 
members of consolidated groups are generally large corporations rather 
than small businesses. Therefore, the Regulatory Flexibility Act (5 
U.S.C. chapter 6) does not apply. Nevertheless, the IRS and Treasury 
Department request comments from small entities that believe they might 
be adversely affected by these regulations. Pursuant to section 7805(f) 
of the Internal Revenue Code, this notice of proposed rulemaking will 
be submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on the impact of these regulations.

Comments and Public Hearing

    Before the proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The IRS and Treasury Department request comments on the 
clarity of the proposed rules and how they can be made easier to 
understand. All comments will be made available for public inspection 
and copying. A public hearing may be scheduled. If a public hearing is 
scheduled, notice of the date, time, and place for the public hearing 
will be published in the Federal Register.

Drafting Information

    The principal authors of these regulations are Theresa Abell and 
Martin Huck of the Office of Associate Chief Counsel (Corporate). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

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

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

    Par. 2. Section 1.1502-20 is amended by:
    1. Revising the first sentence of paragraph (i)(4).
    2. Redesignating paragraph (i)(6) as (i)(7).
    3. Adding new paragraph (i)(6).
    The revisions and addition read as follows:


Sec.  1.1502-20  Disposition or deconsolidation of subsidiary stock.

* * * * *
    (i) * * *
    (4) [The text of proposed Sec.  1.1502-20(i)(4) is the same as the 
text of Sec.  1.1502-20T(i)(4) published elsewhere in this issue of the 
Federal Register.]
* * * * *
    (6) [The text of proposed Sec.  1.1502-20(i)(6) is the same as the 
text of Sec.  1.1502-20T(i)(6) published elsewhere in this issue of the 
Federal Register.]
    Par. 3. Section 1.1502-32(b)(4)(vii)(C) is amended by removing the 
language ``May 7, 2003'' and adding the language ``August 25, 2004'' 
each time it appears.

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 04-19477 Filed 8-25-04; 8:45 am]
BILLING CODE 4830-01-P