[Federal Register Volume 71, Number 235 (Thursday, December 7, 2006)]
[Rules and Regulations]
[Pages 70875-70876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-20728]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9273]
RIN 1545-AX65


Stock Transfer Rules: Carryover of Earnings and Taxes; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

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SUMMARY: This document contains correction to final regulations (TD 
9273) that were published in the Federal Register on Tuesday, August 8, 
2006 (71 FR 44887) addressing the carryover of certain tax attributes, 
such as earnings and profits and foreign income tax accounts, when two 
corporations combine in a corporate reorganization or liquidation that 
is described in both section 367(b) and section 381 of the Internal 
Revenue Code.

DATES: The correction is effective August 8, 2006.

[[Page 70876]]


FOR FURTHER INFORMATION CONTACT: Jeffrey L. Parry, (202) 622-3850 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    The final regulations that are the subject of this correction are 
under sections 367(b) and 381 of the Internal Revenue Code.

Need for Correction

    As published, final regulations (TD 9273) 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.

Correction of Publication

0
Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read, in 
part, as follows:

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


0
Par. 7. Section 1.367(b)-7(f)(1)(iii)
    Example 1 (iii) is amended by revising the last sentence of 
paragraph (A) and paragraph (B) to read as follows:


Sec.  1.367(b)-7  Carryover of earnings and profits and foreign income 
taxes in certain foreign-to-foreign non-recognition transactions.

* * * * *
    (f) * * *
    (1) * * *
    (iii) * * *
    Example 1 * * *
    (A) * * * The 100u offset under section 952(c)(1)(B) does not 
result in a reduction of the hovering deficit for purposes of 
section 316 or section 902.
    (B) Foreign surviving corporation A's 100u of subpart F income 
not included in income by USP will accumulate and be added to its 
post-1986 undistributed earnings as of the beginning of 2009. This 
100u of post-transaction earnings will be offset by the (100u) 
hovering deficit. Because the amount of earnings offset by the 
hovering deficit is 100% of the total amount of the hovering 
deficit, all $25 of the related taxes are added to the post-1986 
foreign income taxes pool as well. Accordingly, foreign surviving 
corporation A has the following post-1986 undistributed earnings and 
post-1986 foreign income taxes on January 1, 2009:

----------------------------------------------------------------------------------------------------------------
                                                              Earnings & profits             Foreign taxes
                                                         -------------------------------------------------------
                                                                                                       Foreign
                                                                                                        taxes
                    Separate category                                     Hovering       Foreign     associated
                                                          Positive E&P     deficit        taxes         with
                                                                                        available     hovering
                                                                                                       deficit
----------------------------------------------------------------------------------------------------------------
General.................................................           0u          (0u)           $45            $0
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* * * * *

LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
 [FR Doc. E6-20728 Filed 12-6-06; 8:45 am]
BILLING CODE 4830-01-P