[Federal Register Volume 72, Number 114 (Thursday, June 14, 2007)]
[Rules and Regulations]
[Pages 32794-32809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-11148]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 301, and 602

[TD 9329]
RIN 1545-BF26


Guidance Necessary To Facilitate Business Electronic Filing and 
Burden Reduction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations that affect taxpayers 
filing Federal income tax returns. They simplify, clarify, or eliminate 
reporting burdens and also eliminate regulatory impediments to the 
electronic filing of certain statements that taxpayers are required to 
include on or with their Federal income tax returns. This document also 
makes conforming changes to certain current regulations.

DATES: Effective Date: These regulations are effective on June 14, 
2007.
    Applicability Date: For dates of applicability, see Sec. Sec.  
1.302-2(d), 1.302-4(h), 1.331-1(f), 1.332-6(e), 1.338-10(c), 1.351-
3(f), 1.355-5(e), 1.368-3(e), 1.381(b)-1(e), 1.382-8(j)(4), 1.382-
11(b), 1.1081-11(f), 1.1221-2(j), 1.1502-13(m), 1.1502-31(j), 1.1502-
32(j), 1.1502-33(k), 1.1502-95(g), 1.1563-3(e) and 1.6012-2(k).

FOR FURTHER INFORMATION CONTACT: For all sections except Sec.  1.6012-
2, Grid Glyer, (202) 622-7930; for Sec.  1.6012-2, William T. Sullivan 
(202) 622-7052 (not toll-free numbers).

SUPPLEMENTARY INFORMATON:

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 1545-2019.
    The collection of information in these final regulations is in 
Sec. Sec.  1.302-2, 1.302-4, 1.331-1, 1.332-6, 1.338-10, 1.351-3, 
1.355-5, 1.368-3, 1.381(b)-1, 1.382-8, 1.382-11, 1.1081-11, 1.1221-2, 
1.1502-13, 1.1502-31, 1.1502-32, 1.1502-33, 1.1502-95, 1.1563-3 and 
1.6012-2. This information is required to enable the IRS to verify that 
a taxpayer is reporting the correct amount of the fair market value of 
any property (including stock) received and the basis of any property

[[Page 32795]]

(including stock) surrendered in the transaction described in such 
section.
    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 by the Office of Management 
and Budget.
    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

    On May 30, 2006, the IRS and Treasury Department published 
temporary regulations (TD 9264) under 26 CFR part 1 and 26 CFR part 
602. See 71 FR 30591, 2006-26 IRB 1150. The IRS and Treasury Department 
issued a notice of proposed rulemaking (REG-134317-05) cross-
referencing those temporary regulations on the same day. See 71 FR 
30640, 2006-26 IRB 1184.
    In general, the regulations simplify, clarify, or eliminate 
reporting burdens for corporations and shareholders for certain 
transactions, including distributions, exchanges and reorganizations. 
They also eliminate impediments to the electronic filing of statements 
that taxpayers, primarily large corporations that are members of 
consolidated or controlled groups, are required to include on their 
Federal income tax returns.
    These regulations were part of a series of regulations published by 
the IRS and Treasury Department that are designed to eliminate 
impediments to the electronic filing of forms and statements that 
taxpayers are required to include on their Federal income tax returns. 
See, for example, TD 9300, 71 FR 71040, 2007-2 IRB 246, and TD 9243, 71 
FR 4276, 2006-8 IRB 475.

Explanation of Provisions

    Except as provided in the following paragraph, this Treasury 
decision adopts the proposed regulations with no substantive changes. 
In addition, this Treasury decision removes the corresponding temporary 
regulations.
    This Treasury decision does not adopt the following proposed 
regulations: Sec.  1.1502-35(c)(4)(i), Sec.  1.1502-76(b)(2)(ii)(D) and 
Sec.  1.1563-1(c)(2)(i) through (iii). These proposed regulations will 
be addressed as part of other guidance projects.
    The IRS and Treasury Department received no written or electronic 
comments from the public in response to the notice of proposed 
rulemaking and no public hearing was requested or held. However, three 
questions were raised informally and are addressed in this preamble.

Section 1.302-2

    The first question involves a reporting requirement under Sec.  
1.302-2 (redemptions not taxable as dividends). Specifically, the 
question involved proposed Sec.  1.302-2(b)(2), which requires all 
``significant holders'' receiving property from a corporation in 
exchange for the corporation's stock (``redemption exchanges'') to 
include a brief information statement on their return. The statement 
sets forth certain information necessary to determine the proper 
treatment of the redemption exchange. Under proposed Sec.  1.302-
2(b)(3)(i), a significant holder is any stockholder owning 5 percent or 
more of the stock of a publicly traded company and any stockholder 
owning 1 percent or more of the stock of a company that is not publicly 
traded.
    The specific question raised was whether the statement is necessary 
in all redemption exchanges, whether the exchange is treated as a 
distribution that is essentially equivalent to a dividend or not. Under 
the proposed regulations, all redemption exchanges are subject to this 
reporting requirement. The IRS and Treasury Department determined that 
the simplified information to be provided in the statement is necessary 
for the identification and evaluation of redemptions that are 
essentially equivalent to dividends. Furthermore, the required 
information is information that taxpayers should already have or be 
prepared to produce. Finally, as noted in this preamble, the 
regulations limit any remaining burden by imposing the reporting 
requirement only on significant holders. For all these reasons, the IRS 
and Treasury Department have concluded that the requirement does not 
impose an unnecessary or inappropriate burden on taxpayers. 
Accordingly, the final regulations adopt the rule proposed in Sec.  
1.302-2(b)(2) and do not limit the application of the reporting 
requirement.

Section 1.302-4

    The second question involves a reporting requirement under Sec.  
1.302-4 (termination of shareholder's interest). Specifically, the 
question involved the statement in proposed Sec.  1.302-4(a) regarding 
the waiver of family attribution. Under this section and section 
302(c)(2), a redeeming shareholder can avoid being treated as receiving 
a dividend equivalent distribution by waiving the application of the 
family attribution rules of section 318(a)(1). Prior to the 
promulgation of Sec.  1.302-4T(a), Sec.  1.302-4(a)(1) provided that 
taxpayers were required to file family attribution waiver agreements 
and Sec.  1.302-4(a)(2) prescribed conditions under which a taxpayer 
that had failed to timely file the agreement could obtain an extension 
of time to file from the appropriate district director. Section 1.302-
4T(a) removed the requirement that an agreement be filed as well as the 
instructions regarding late filing. Instead, that regulation provided 
that a statement must be filed and set forth the information that must 
be included. Section 1.302-4T(a) did not include instructions for late 
filers.
    The specific question raised was whether the change affected 
taxpayers' ability to remedy late filing. The IRS and Treasury 
Department did not intend any change to taxpayers' ability to remedy 
late filing. However, the final regulations do not incorporate 
instructions for late filing because the statement required is a 
regulatory election and the late filing of all regulatory elections is 
addressed by Sec.  301.9100-1. Accordingly, such instructions are not 
necessary and could inadvertently imply that the general rules would 
not otherwise apply.

Section 1.6012-2

    Finally, a question was also raised concerning the reporting 
requirements applicable to foreign insurance corporations electing 
under section 953(d) to be treated as domestic insurance corporations. 
Specifically, the question raised was whether such corporations have a 
reporting requirement.
    Section 1.6012-2(c)(1)(i) requires that a domestic life insurance 
company file with its return a copy of its annual statement which shows 
the reserves used by the company in computing the taxable income 
reported on its return, and a copy of Schedule A (real estate) and of 
Schedule D (bonds and stocks), or any successor thereto, of such annual 
statement. Section 1.6012-2(c)(2) similarly requires that a domestic 
nonlife insurance company file with its return a copy of its annual 
statement, including the underwriting and investment exhibit (or any 
successor thereto), for the year covered by such return. Section 953(d) 
provides that a foreign insurance company that satisfies the 
requirements of section 953(d), including the making of an election 
under section 953(d)(1)(D), shall be treated as a domestic corporation 
for purposes of the Internal Revenue Code. Thus, a foreign insurance 
company that elects under section 953(d) to be treated

[[Page 32796]]

as a domestic corporation generally is required under Sec.  1.6012-
2(c)(1) or (2), as appropriate, to file with its return a copy of its 
annual statement. Under Sec.  1.6012-2(c)(5), the term ``annual 
statement'' includes a pro forma annual statement if the insurance 
company is not required to file the NAIC annual statement.
    Because the reporting requirements of electing corporations are 
addressed in the current regulations, the IRS and Treasury Department 
are not modifying the regulations to address this point further.

Special Analysis

    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 has also been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to Sec. Sec.  1.302-2, 1.302-4, 1.331-
1, 1.332-6, 1.351-3, 1.355-5, 1.368-3, 1.381(b)-1, 1.1081-11, 1.1563-3, 
and 1.6012-2. With respect to the collections of information in such 
sections, and with respect to Sec. Sec.  1.338-10, 1.382-8, 1.382-11, 
1.1221-2, 1.1502-13, 1.1502-31, 1.1502-32, 1.1502-33 and 1.1502-95, it 
is hereby certified that these regulations will not have a significant 
economic impact on a substantial number of small entities. This 
certification is based on the fact that these regulations primarily 
affect large corporations (which are members of either controlled or 
consolidated groups) and in the case of all corporations will 
substantially reduce or eliminate the existing reporting burden. 
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 Internal Revenue Code, 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 Grid Glyer, Office of 
Associate Chief Counsel (Corporate). 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 301

    Administrative practice and procedure, Bankruptcy, Income taxes.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by removing 
the entries for Sec. Sec.  1.302-2T, 1.302-4T, 1.331-1T, 1.332-6T, 
1.338-10T, 1.351-3T, 1.355-5T, 1.368-3T, 1.381(b)-1T, 1.382-8T, 1.382-
11T, 1.1081-11T, 1.1221-2T, 1.1502-13T, 1.1502-31T, 1.1502-33T, 1.1502-
95T, 1.1563-3T and 1.6012-2T to read, in part, as follows:

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

0
Par. 2. Section 1.302-2 is amended by:
0
1. Adding headings to paragraphs (a), (b), (b)(1) and (c).
0
2. Revising paragraphs (b)(2) and (d).
0
3. Adding paragraphs (b)(3) and (b)(4).
    The additions and revisions read as follows:


Sec.  1.302-2  Redemptions not taxable as dividends.

    (a) In general. * * *
    (b) Redemption not essentially equivalent to a dividend--(1) In 
general. * * *
    (2) Statement. Unless Sec.  1.331-1(d) applies, every significant 
holder that transfers stock to the issuing corporation in exchange for 
property from such corporation must include on or with such holder's 
return for the taxable year of such exchange a statement entitled, 
``STATEMENT PURSUANT TO Sec.  1.302-2(b)(2) BY [INSERT NAME AND 
TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT 
HOLDER OF THE STOCK OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER 
(IF ANY) OF ISSUING CORPORATION].'' If a significant holder is a 
controlled foreign corporation (within the meaning of section 957), 
each United States shareholder (within the meaning of section 951(b)) 
with respect thereto must include this statement on or with its return. 
The statement must include--
    (i) The fair market value and basis of the stock transferred by the 
significant holder to the issuing corporation; and
    (ii) A description of the property received by the significant 
holder from the issuing corporation.
    (3) Definitions. For purposes of this section:
    (i) Significant holder means any person that, immediately before 
the exchange--
    (A) Owned at least five percent (by vote or value) of the total 
outstanding stock of the issuing corporation if the stock owned by such 
person is publicly traded; or
    (B) Owned at least one percent (by vote or value) of the total 
outstanding stock of the issuing corporation if the stock owned by such 
person is not publicly traded.
    (ii) Publicly traded stock means stock that is listed on--
    (A) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (B) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).
    (iii) Issuing corporation means the corporation that issued the 
shares of stock, some or all of which were transferred by a significant 
holder to such corporation in the exchange described in paragraph 
(b)(2) of this section.
    (4) Cross reference. See section 6043 of the Internal Revenue Code 
for requirements relating to a return by a liquidating corporation.
    (c) Basis adjustments. * * *
    (d) Effective/applicability date. Paragraphs (b)(2), (b)(3) and 
(b)(4) of this section apply to any taxable year beginning on or after 
May 30, 2006. However, taxpayers may apply paragraphs (b)(2), (b)(3) 
and (b)(4) of this section to any original Federal income tax return 
(including any amended return filed on or before the due date 
(including extensions) of such original return) timely filed on or 
after May 30, 2006. For taxable years beginning before May 30, 2006, 
see Sec.  1.302-2 as contained in 26 CFR part 1 in effect on April 1, 
2006.


Sec.  1.302-2T  [Removed]

0
Par. 3. Section 1.302-2T is removed.

0
Par. 4. Section 1.302-4 is amended by:
0
1. Revising paragraphs (a) and (h).
0
2. Adding headings to paragraphs (b), (c), (d), (e), (f), and (g) 
introductory text.
    The additions and revisions read as follows:

[[Page 32797]]

Sec.  1.302-4  Termination of shareholder's interest.

    (a) Statement. The agreement specified in section 302(c)(2)(A)(iii) 
shall be in the form of a statement entitled, ``STATEMENT PURSUANT TO 
SECTION 302(c)(2)(A)(iii) BY [INSERT NAME AND TAXPAYER IDENTIFICATION 
NUMBER (IF ANY) OF TAXPAYER OR RELATED PERSON, AS THE CASE MAY BE], A 
DISTRIBUTEE (OR RELATED PERSON) OF [INSERT NAME AND EMPLOYER 
IDENTIFICATION NUMBER (IF ANY) OF DISTRIBUTING CORPORATION].'' The 
distributee must include such statement on or with the distributee's 
first return for the taxable year in which the distribution described 
in section 302(b)(3) occurs. If the distributee is a controlled foreign 
corporation (within the meaning of section 957), each United States 
shareholder (within the meaning of section 951(b)) with respect thereto 
must include this statement on or with its return. The distributee must 
represent in the statement--
    (1) THE DISTRIBUTEE (OR RELATED PERSON) HAS NOT ACQUIRED, OTHER 
THAN BY BEQUEST OR INHERITANCE, ANY INTEREST IN THE CORPORATION (AS 
DESCRIBED IN SECTION 302(c)(2)(A)(i)) SINCE THE DISTRIBUTION; and
    (2) THE DISTRIBUTEE (OR RELATED PERSON) WILL NOTIFY THE INTERNAL 
REVENUE SERVICE OF ANY ACQUISITION, OTHER THAN BY BEQUEST OR 
INHERITANCE, OF SUCH AN INTEREST IN THE CORPORATION WITHIN 30 DAYS 
AFTER THE ACQUISITION, IF THE ACQUISITION OCCURS WITHIN 10 YEARS FROM 
THE DATE OF THE DISTRIBUTION.
    (b) Substantiation information. * * *
    (c) Stock of parent, subsidiary or successor corporation redeemed. 
* * *
    (d) Redeemed shareholder as creditor. * * *
    (e) Acquisition of assets pursuant to creditor's rights. * * *
    (f) Constructive ownership rules applicable. * * *
    (g) Avoidance of Federal income tax. * * *
    (h) Effective/applicability date. Paragraph (a) of this section 
applies to any taxable year beginning on or after May 30, 2006. 
However, taxpayers may apply paragraph (a) of this section to any 
original Federal income tax return (including any amended return filed 
on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006. For taxable years 
beginning before May 30, 2006, see Sec.  1.302-4 as contained in 26 CFR 
part 1 in effect on April 1, 2006.


Sec.  1.302-4T  [Removed]

0
Par. 5. Section 1.302-4T is removed.

0
Par. 6. Section 1.331-1 is amended by:
0
1. Adding headings to paragraphs (a), (b), (c) and (e).
0
2. Revising paragraphs (d) and (f).
    The additions and revisions read as follows:


Sec.  1.331-1  Corporate liquidations.

    (a) In general. * * *
    (b) Gain or loss. * * *
    (c) Recharacterization.* * *
    (d) Reporting requirement--(1) General rule. Every significant 
holder that transfers stock to the issuing corporation in exchange for 
property from such corporation must include on or with such holder's 
return for the year of such exchange the statement described in 
paragraph (d)(2) of this section unless--
    (i) The property is part of a distribution made pursuant to a 
corporate resolution reciting that the distribution is made in complete 
liquidation of the corporation; and
    (ii) The issuing corporation is completely liquidated and dissolved 
within one year after the distribution.
    (2) Statement. If required by paragraph (d)(1) of this section, a 
significant holder must include on or with such holder's return a 
statement entitled, ``STATEMENT PURSUANT TO Sec.  1.331-1(d) BY [INSERT 
NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A 
SIGNIFICANT HOLDER OF THE STOCK OF [INSERT NAME AND EMPLOYER 
IDENTIFICATION NUMBER (IF ANY) OF ISSUING CORPORATION].'' If a 
significant holder is a controlled foreign corporation (within the 
meaning of section 957), each United States shareholder (within the 
meaning of section 951(b)) with respect thereto must include this 
statement on or with its return. The statement must include--
    (i) The fair market value and basis of the stock transferred by the 
significant holder to the issuing corporation; and
    (ii) A description of the property received by the significant 
holder from the issuing corporation.
    (3) Definitions. For purposes of this section:
    (i) Significant holder means any person that, immediately before 
the exchange--
    (A) Owned at least five percent (by vote or value) of the total 
outstanding stock of the issuing corporation if the stock owned by such 
person is publicly traded; or
    (B) Owned at least one percent (by vote or value) of the total 
outstanding stock of the issuing corporation if the stock owned by such 
person is not publicly traded.
    (ii) Publicly traded stock means stock that is listed on--
    (A) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (B) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).
    (iii) Issuing corporation means the corporation that issued the 
shares of stock, some or all of which were transferred by a significant 
holder to such corporation in the exchange described in paragraph 
(d)(1) of this section.
    (4) Cross reference. See section 6043 of the Code for requirements 
relating to a return by a liquidating corporation.
    (e) Example. * * *
    (f) Effective/applicability date. Paragraph (d) of this section 
applies to any taxable year beginning on or after May 30, 2006. 
However, taxpayers may apply paragraph (d) of this section to any 
original Federal income tax return (including any amended return filed 
on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006. For taxable years 
beginning before May 30, 2006, see Sec.  1.331-1 as contained in 26 CFR 
part 1 in effect on April 1, 2006.


Sec.  1.331-1T  [Removed]

0
Par. 7. Section 1.331-1T is removed.

0
Par. 8. Section 1.332-6 is added to read as follows:


Sec.  1.332-6  Records to be kept and information to be filed with 
return.

    (a) Statement filed by recipient corporation. If any recipient 
corporation received a liquidating distribution from the liquidating 
corporation pursuant to a plan (whether or not that recipient 
corporation has received or will receive other such distributions from 
the liquidating corporation in other tax years as part of the same 
plan) during the current tax year, such recipient corporation must 
include a statement entitled, ``STATEMENT PURSUANT TO SECTION 332 BY 
[INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], 
A CORPORATION RECEIVING A LIQUIDATING DISTRIBUTION,'' on or with its 
return for such year. If any recipient corporation is a controlled 
foreign corporation (within the meaning of section 957), each United 
States shareholder (within the meaning of section 951(b)) with respect 
thereto

[[Page 32798]]

must include this statement on or with its return. The statement must 
include--
    (1) The name and employer identification number (if any) of the 
liquidating corporation;
    (2) The date(s) of all distribution(s) (whether or not pursuant to 
the plan) by the liquidating corporation during the current tax year;
    (3) The aggregate fair market value and basis, determined 
immediately before the liquidation, of all of the assets of the 
liquidating corporation that have been or will be transferred to any 
recipient corporation;
    (4) The date and control number of any private letter ruling(s) 
issued by the Internal Revenue Service in connection with the 
liquidation;
    (5) The following representation: THE PLAN OF COMPLETE LIQUIDATION 
WAS ADOPTED ON [INSERT DATE (mm/dd/yyyy)]; and
    (6) A representation by such recipient corporation either that--
    (i) THE LIQUIDATION WAS COMPLETED ON [INSERT DATE (mm/dd/yyyy)]; or
    (ii) THE LIQUIDATION IS NOT COMPLETE AND THE TAXPAYER HAS TIMELY 
FILED [INSERT EITHER FORM 952, ``Consent To Extend the Time to Assess 
Tax Under Section 332(b),'' OR NUMBER AND NAME OF THE SUCCESSOR FORM].
    (b) Filings by the liquidating corporation. The liquidating 
corporation must timely file Form 966, ``Corporate Dissolution or 
Liquidation,'' (or its successor form) and its final Federal corporate 
income tax return. See also section 6043 of the Code.
    (c) Definitions. For purposes of this section:
    (1) Plan means the plan of complete liquidation within the meaning 
of section 332.
    (2) Recipient corporation means the corporation described in 
section 332(b)(1).
    (3) Liquidating corporation means the corporation that makes a 
distribution of property to a recipient corporation pursuant to the 
plan.
    (4) Liquidating distribution means a distribution of property made 
by the liquidating corporation to a recipient corporation pursuant to 
the plan.
    (d) Substantiation information. Under Sec.  1.6001-1(e), taxpayers 
are required to retain their permanent records and make such records 
available to any authorized Internal Revenue Service officers and 
employees. In connection with a liquidation described in this section, 
these records should specifically include information regarding the 
amount, basis, and fair market value of all distributed property, and 
relevant facts regarding any liabilities assumed or extinguished as 
part of such liquidation.
    (e) Effective/applicability date. This section applies to any 
taxable year beginning on or after May 30, 2006. However, taxpayers may 
apply this section to any original Federal income tax return (including 
any amended return filed on or before the due date (including 
extensions) of such original return) timely filed on or after May 30, 
2006. For taxable years beginning before May 30, 2006, see Sec.  1.332-
6 as contained in 26 CFR part 1 in effect on April 1, 2006.


Sec.  1.332-6T  [Removed]

0
Par. 9. Section 1.332-6T is removed.

0
Par. 10. Section 1.338-0 is amended by revising the entries for 
Sec. Sec.  1.338-10(a)(4)(iii) and 1.338-10(c) and removing the entry 
for Sec.  1.338-10T to read as follows:


Sec.  1.338-0  Outline of topics.

* * * * *


Sec.  1.338-10  Filing of returns.

    (a) * * *
    (4) * * *
    (iii) Procedure for filing a combined return.
* * * * *
    (c) Effective/applicability date.
* * * * *

0
Par. 11. Section 1.338-10 is amended by revising paragraphs (a)(4)(iii) 
and (c) to read as follows:


Sec.  1.338-10  Filing of returns.

    (a) * * *
    (4) * * *
    (iii) Procedure for filing a combined return. A combined return is 
made by filing a single corporation income tax return in lieu of 
separate deemed sale returns for all targets required to be included in 
the combined return. The combined return reflects the deemed asset 
sales of all targets required to be included in the combined return. If 
the targets included in the combined return constitute a single 
affiliated group within the meaning of section 1504(a), the income tax 
return is signed by an officer of the common parent of that group. 
Otherwise, the return must be signed by an officer of each target 
included in the combined return. Rules similar to the rules in Sec.  
1.1502-75(j) apply for purposes of preparing the combined return. The 
combined return must include a statement entitled, ``ELECTION TO FILE A 
COMBINED RETURN UNDER SECTION 338(h)(15).'' The statement must 
include--
    (A) The name, address, and employer identification number of each 
target required to be included in the combined return; and
    (B) The following declaration: EACH TARGET IDENTIFIED IN THIS 
ELECTION TO FILE A COMBINED RETURN CONSENTS TO THE FILING OF A COMBINED 
RETURN.
* * * * *
    (c) Effective/applicability date. Paragraph (a)(4)(iii) of this 
section applies to any taxable year beginning on or after May 30, 2006. 
However, taxpayers may apply paragraph (a)(4)(iii) of this section to 
any original Federal income tax return (including any amended return 
filed on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006. For taxable years 
beginning before May 30, 2006, see Sec.  1.338-10 as contained in 26 
CFR part 1 in effect on April 1, 2006.


Sec.  1.338-10T  [Removed]

0
Par. 12. Section 1.338-10T is removed.

0
Par. 13. Section 1.351-3 is added to read as follows:


Sec.  1.351-3  Records to be kept and information to be filed.

    (a) Significant transferor. Every significant transferor must 
include a statement entitled, ``STATEMENT PURSUANT TO Sec.  1.351-3(a) 
BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF 
TAXPAYER], A SIGNIFICANT TRANSFEROR,'' on or with such transferor's 
income tax return for the taxable year of the section 351 exchange. If 
a significant transferor is a controlled foreign corporation (within 
the meaning of section 957), each United States shareholder (within the 
meaning of section 951(b)) with respect thereto must include this 
statement on or with its return. The statement must include--
    (1) The name and employer identification number (if any) of the 
transferee corporation;
    (2) The date(s) of the transfer(s) of assets;
    (3) The aggregate fair market value and basis, determined 
immediately before the exchange, of the property transferred by such 
transferor in the exchange; and
    (4) The date and control number of any private letter ruling(s) 
issued by the Internal Revenue Service in connection with the section 
351 exchange.
    (b) Transferee corporation. Except as provided in paragraph (c) of 
this section, every transferee corporation must include a statement 
entitled, ``STATEMENT PURSUANT TO Sec.  1.351-3(b) BY [INSERT NAME AND

[[Page 32799]]

EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A TRANSFEREE 
CORPORATION,'' on or with its income tax return for the taxable year of 
the exchange. If the transferee corporation is a controlled foreign 
corporation (within the meaning of section 957), each United States 
shareholder (within the meaning of section 951(b)) with respect thereto 
must include this statement on or with its return. The statement must 
include--
    (1) The name and taxpayer identification number (if any) of every 
significant transferor;
    (2) The date(s) of the transfer(s) of assets;
    (3) The aggregate fair market value and basis, determined 
immediately before the exchange, of all of the property received in the 
exchange; and
    (4) The date and control number of any private letter ruling(s) 
issued by the Internal Revenue Service in connection with the section 
351 exchange.
    (c) Exception for certain transferee corporations. The transferee 
corporation is not required to file a statement under paragraph (b) of 
this section if all of the information that would be included in the 
statement described in paragraph (b) of this section is included in any 
statement(s) described in paragraph (a) of this section that is 
attached to the same return for the same section 351 exchange.
    (d) Definitions. For purposes of this section:
    (1) Significant transferor means a person that transferred property 
to a corporation and received stock of the transferee corporation in an 
exchange described in section 351 if, immediately after the exchange, 
such person--
    (i) Owned at least five percent (by vote or value) of the total 
outstanding stock of the transferee corporation if the stock owned by 
such person is publicly traded, or
    (ii) Owned at least one percent (by vote or value) of the total 
outstanding stock of the transferee corporation if the stock owned by 
such person is not publicly traded.
    (2) Publicly traded stock means stock that is listed on--
    (i) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (ii) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).
    (e) Substantiation information. Under Sec.  1.6001-1(e), taxpayers 
are required to retain their permanent records and make such records 
available to any authorized Internal Revenue Service officers and 
employees. In connection with the exchange described in this section, 
these records should specifically include information regarding the 
amount, basis, and fair market value of all transferred property, and 
relevant facts regarding any liabilities assumed or extinguished as 
part of such exchange.
    (f) Effective/applicability date. This section applies to any 
taxable year beginning on or after May 30, 2006. However, taxpayers may 
apply this section to any original Federal income tax return (including 
any amended return filed on or before the due date (including 
extensions) of such original return) timely filed on or after May 30, 
2006. For taxable years beginning before May 30, 2006, see Sec.  1.351-
3 as contained in 26 CFR part 1 in effect on April 1, 2006.


Sec.  1.351-3T  [Removed]

0
Par. 14. Section 1.351-3T is removed.

0
Par. 15. Section 1.355-0 is amended by removing the entry for Sec.  
1.355-5T and adding an entry for Sec.  1.355-5.
    The revision and addition read as follows:


Sec.  1.355-0  Outline of sections.

* * * * *


Sec.  1.355-5  Records to be kept and information to be filed.

    (a) Distributing corporation.
    (1) In general.
    (2) Special rule when an asset transfer precedes a stock 
distribution.
    (b) Significant distributee.
    (c) Definitions.
    (1) Significant distributee.
    (2) Publicly traded stock.
    (d) Substantiation information.
    (e) Effective/applicability date.
* * * * *

0
Par. 16. Section 1.355-5 is added to read as follows:


Sec.  1.355-5  Records to be kept and information to be filed.

    (a) Distributing corporation--(1) In general. Every corporation 
that makes a distribution (the distributing corporation) of stock or 
securities of a controlled corporation, as described in section 355 (or 
so much of section 356 as relates to section 355), must include a 
statement entitled, ``STATEMENT PURSUANT TO Sec.  1.355-5(a) BY [INSERT 
NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A 
DISTRIBUTING CORPORATION,'' on or with its return for the year of the 
distribution. If the distributing corporation is a controlled foreign 
corporation (within the meaning of section 957), each United States 
shareholder (within the meaning of section 951(b)) with respect thereto 
must include this statement on or with its return. The statement must 
include--
    (i) The name and employer identification number (if any) of the 
controlled corporation;
    (ii) The name and taxpayer identification number (if any) of every 
significant distributee;
    (iii) The date of the distribution of the stock or securities of 
the controlled corporation;
    (iv) The aggregate fair market value and basis, determined 
immediately before the distribution or exchange, of the stock, 
securities, or other property (including money) distributed by the 
distributing corporation in the transaction; and
    (v) The date and control number of any private letter ruling(s) 
issued by the Internal Revenue Service in connection with the 
transaction.
    (2) Special rule when an asset transfer precedes a stock 
distribution. If the distributing corporation transferred property to 
the controlled corporation in a transaction described in section 351 or 
368, as part of a plan to then distribute the stock or securities of 
the controlled corporation in a transaction described in section 355 
(or so much of section 356 as relates to section 355), then, unless 
paragraph (a)(1)(v) of this section applies, the distributing 
corporation must also include on or with its return for the year of the 
distribution the statement required by Sec.  1.351-3(a) or 1.368-3(a). 
If the distributing corporation is a controlled foreign corporation 
(within the meaning of section 957), each United States shareholder 
(within the meaning of section 951(b)) with respect thereto must 
include the statement required by Sec.  1.351-3(a) or 1.368-3(a) on or 
with its return.
    (b) Significant distributee. Every significant distributee must 
include a statement entitled, ``STATEMENT PURSUANT TO Sec.  1.355-5(b) 
BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF 
TAXPAYER], A SIGNIFICANT DISTRIBUTEE,'' on or with such distributee's 
return for the year in which such distribution is received. If a 
significant distributee is a controlled foreign corporation (within the 
meaning of section 957), each United States shareholder (within the 
meaning of section 951(b)) with respect thereto must include this 
statement on or with its return. The statement must include--
    (1) The names and employer identification numbers (if any) of the 
distributing and controlled corporations;

[[Page 32800]]

    (2) The date of the distribution of the stock or securities of the 
controlled corporation; and
    (3) The aggregate basis, determined immediately before the 
exchange, of any stock or securities transferred by the significant 
distributee in the exchange, and the aggregate fair market value, 
determined immediately before the distribution or exchange, of the 
stock, securities or other property (including money) received by the 
significant distributee in the distribution or exchange.
    (c) Definitions. For purposes of this section:
    (1) Significant distributee means--
    (i) A holder of stock of a distributing corporation that receives, 
in a transaction described in section 355 (or so much of section 356 as 
relates to section 355), stock of a corporation controlled by the 
distributing corporation if, immediately before the distribution or 
exchange, such holder--
    (A) Owned at least five percent (by vote or value) of the total 
outstanding stock of the distributing corporation if the stock owned by 
such holder is publicly traded; or
    (B) Owned at least one percent (by vote or value) of the stock of 
the distributing corporation if the stock owned by such holder is not 
publicly traded; or
    (ii) A holder of securities of a distributing corporation that 
receives, in a transaction described in section 355 (or so much of 
section 356 as relates to section 355), stock or securities of a 
corporation controlled by the distributing corporation if, immediately 
before the distribution or exchange, such holder owned securities in 
such distributing corporation with a basis of $1,000,000 or more.
    (2) Publicly traded stock means stock that is listed on--
    (i) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (ii) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).
    (d) Substantiation information. Under Sec.  1.6001-1(e), taxpayers 
are required to retain their permanent records and make such records 
available to any authorized Internal Revenue Service officers and 
employees. In connection with the distribution or exchange described in 
this section, these records should specifically include information 
regarding the amount, basis, and fair market value of all property 
distributed or exchanged, and relevant facts regarding any liabilities 
assumed or extinguished as part of such distribution or exchange.
    (e) Effective/applicability date. This section applies to any 
taxable year beginning on or after May 30, 2006. However, taxpayers may 
apply this section to any original Federal income tax return (including 
any amended return filed on or before the due date (including 
extensions) of such original return) timely filed on or after May 30, 
2006. For taxable years beginning before May 30, 2006, see Sec.  1.355-
5 as contained in 26 CFR part 1 in effect on April 1, 2006.


Sec.  1.355-5T  [Removed]

0
Par. 17. Section 1.355-5T is removed.

0
Par. 18. Section 1.368-3 is added to read as follows:


Sec.  1.368-3  Records to be kept and information to be filed with 
returns.

    (a) Parties to the reorganization. The plan of reorganization must 
be adopted by each of the corporations that are parties thereto. Each 
such corporation must include a statement entitled, ``STATEMENT 
PURSUANT TO Sec.  1.368-3(a) BY [INSERT NAME AND EMPLOYER 
IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A CORPORATION A PARTY TO A 
REORGANIZATION,'' on or with its return for the taxable year of the 
exchange. If any such corporation is a controlled foreign corporation 
(within the meaning of section 957), each United States shareholder 
(within the meaning of section 951(b)) with respect thereto must 
include this statement on or with its return. However, it is not 
necessary for any taxpayer to include more than one such statement on 
or with the same return for the same reorganization. The statement must 
include--
    (1) The names and employer identification numbers (if any) of all 
such parties;
    (2) The date of the reorganization;
    (3) The aggregate fair market value and basis, determined 
immediately before the exchange, of the assets, stock or securities of 
the target corporation transferred in the transaction; and
    (4) The date and control number of any private letter ruling(s) 
issued by the Internal Revenue Service in connection with this 
reorganization.
    (b) Significant holders. Every significant holder, other than a 
corporation a party to the reorganization, must include a statement 
entitled, ``STATEMENT PURSUANT TO Sec.  1.368-3(b) BY [INSERT NAME AND 
TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT 
HOLDER,'' on or with such holder's return for the taxable year of the 
exchange. If a significant holder is a controlled foreign corporation 
(within the meaning of section 957), each United States shareholder 
(within the meaning of section 951(b)) with respect thereto must 
include this statement on or with its return. The statement must 
include--
    (1) The names and employer identification numbers (if any) of all 
of the parties to the reorganization;
    (2) The date of the reorganization; and
    (3) The fair market value, determined immediately before the 
exchange, of all the stock or securities of the target corporation held 
by the significant holder that is transferred in the transaction and 
such holder's basis, determined immediately before the exchange, in the 
stock or securities of such target corporation.
    (c) Definitions. For purposes of this section:
    (1) Significant holder means--
    (i) A holder of stock of the target corporation that receives stock 
or securities in an exchange described in section 354 (or so much of 
section 356 as relates to section 354) if, immediately before the 
exchange, such holder--
    (A) Owned at least five percent (by vote or value) of the total 
outstanding stock of the target corporation if the stock owned by such 
holder is publicly traded; or
    (B) Owned at least one percent (by vote or value) of the total 
outstanding stock of the target corporation if the stock owned by such 
holder is not publicly traded; or
    (ii) A holder of securities of the target corporation that receives 
stock or securities in an exchange described in section 354 (or so much 
of section 356 as relates to section 354) if, immediately before the 
exchange, such holder owned securities in such target corporation with 
a basis of $1,000,000 or more.
    (2) Publicly traded stock means stock that is listed on--
    (i) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (ii) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).
    (d) Substantiation information. Under Sec.  1.6001-1(e), taxpayers 
are required to retain their permanent records and make such records 
available to any authorized Internal Revenue Service officers and 
employees. In connection with the reorganization described in this

[[Page 32801]]

section, these records should specifically include information 
regarding the amount, basis, and fair market value of all transferred 
property, and relevant facts regarding any liabilities assumed or 
extinguished as part of such reorganization.
    (e) Effective/applicability date. This section applies to any 
taxable year beginning on or after May 30, 2006. However, taxpayers may 
apply this section to any original Federal income tax return (including 
any amended return filed on or before the due date (including 
extensions) of such original return) timely filed on or after May 30, 
2006. For taxable years beginning before May 30, 2006, see Sec.  1.368-
3 as contained in 26 CFR part 1 in effect on April 1, 2006.


Sec.  1.368-3T  [Removed]

0
Par. 19. Section 1.368-3T is removed.

0
Par. 20. Section 1.381(b)-1 is amended by revising paragraphs (b)(3) 
and (e) to read as follows:


Sec.  1.381(b)-1  Operating rules applicable to carryovers in certain 
corporate acquisitions.

* * * * *
    (b) * * *
    (3) Election--(i) Content of statements. The statements referred to 
in paragraph (b)(2) of this section must be entitled, ``ELECTION OF 
DATE OF DISTRIBUTION OR TRANSFER PURSUANT TO Sec.  1.381(b)-1(b)(2),'' 
and must include: [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF 
ANY) OF DISTRIBUTOR OR TRANSFEROR CORPORATION] AND [INSERT NAME AND 
EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF ACQUIRING CORPORATION] ELECT 
TO DETERMINE THE DATE OF DISTRIBUTION OR TRANSFER UNDER Sec.  1.381(b)-
1(b)(2). SUCH DATE IS [INSERT DATE (mm/dd/yyyy)].
    (ii) Filing of statements. One statement must be included on or 
with the timely filed Federal income tax return of the distributor or 
transferor corporation for its taxable year ending with the date of 
distribution or transfer. An identical statement must be included on or 
with the timely filed Federal income tax return of the acquiring 
corporation for its first taxable year ending after that date. If the 
distributor or transferor corporation, or the acquiring corporation, is 
a controlled foreign corporation (within the meaning of section 957), 
each United States shareholder (within the meaning of section 951(b)) 
with respect thereto must include this statement on or with its return.
* * * * *
    (e) Effective/applicability date. Paragraph (b)(3) of this section 
applies to any taxable year beginning on or after May 30, 2006. 
However, taxpayers may apply paragraph (b)(3) of this section to any 
original Federal income tax return (including any amended return filed 
on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006. For taxable years 
beginning before May 30, 2006, see Sec.  1.381(b)-1 as contained in 26 
CFR part 1 in effect on April 1, 2006.


Sec.  1.381(b)-1T  [Removed]

0
Par. 21. Section 1.381(b)-1T is removed.

0
Par. 22. Section 1.382-1 is amended by:
0
1. Revising the entry for Sec.  1.382-8(c)(2).
0
2. Revising the entry for Sec.  1.382-8(e)(4).
0
3. Revising the entry for Sec.  1.382-8(h).
0
4. Revising the entry for Sec.  1.382-8(j)(4).
0
5. Removing the entry for Sec.  1.382-8T.
0
6. Adding the entry for Sec.  1.382-11.
0
7. Removing the entry for Sec.  1.382-11T.
    The additions and revisions read as follows:


Sec.  1.382-1  Table of contents.

* * * * *


Sec.  1.382-8  Controlled groups.

* * * * *
    (c) * * *
    (2) Restoration of value.
* * * * *
    (e) * * *
    (4) Foreign component member.
    (i) In general.
    (ii) Exception.
* * * * *
    (h) Time and manner of filing election to restore.
    (1) Statements required.
    (i) Filing by loss corporation.
    (ii) Filing by electing member.
    (iii) Agreement.
    (2) Special rule for foreign component members.
    (i) Deemed election to restore full value.
    (ii) Election not to restore full value.
    (iii) Agreement.
    (3) Revocation of election.
* * * * *
    (j) * * *
    (4) Effective/applicability date.
* * * * *


Sec.  1.382-11  Reporting requirements.

    (a) Information statement required.
    (b) Effective/applicability date.

0
Par. 23. Section 1.382-8 is amended by revising paragraphs (c)(2), 
(e)(4), (h) and (j)(4) to read as follows:


Sec.  1.382-8  Controlled groups.

* * * * *
    (c) * * *
    (2) Restoration of value. After the value of the stock of each 
component member is reduced pursuant to paragraph (c)(1) of this 
section, the value of the stock of each component member is increased 
by the amount of value, if any, restored to the component member by 
another component member (the electing member) pursuant to this 
paragraph (c)(2). The electing member may elect (or may be deemed to 
elect under paragraph (h)(2)(i) of this section in the case of a 
foreign component member) to restore value to another component member 
in an amount that does not exceed the lesser of--
    (i) The sum of--
    (A) The value, determined immediately before the ownership change, 
of the electing member's stock (after adjustment under paragraph (c)(1) 
of this section and before any restoration of value under this 
paragraph (c)(2)); plus
    (B) Any amount of value restored to the electing member by another 
component member under this paragraph (c)(2); or
    (ii) The value, determined immediately before any ownership change, 
of the electing member's stock (without regard to any adjustment under 
this section) that is directly owned by the other component member 
immediately after the ownership change.
* * * * *
    (e) * * *
    (4) Foreign component member--(i) In general. Except as provided in 
paragraph (e)(4)(ii) of this section, foreign component member means a 
component member that is a foreign corporation.
    (ii) Exception. A foreign component member shall not include a 
foreign corporation that has items treated as connected with the 
conduct of a trade or business in the United States that it takes into 
account in determining its value pursuant to section 382(e)(3).
* * * * *
    (h) Time and manner of filing election to restore--(1) Statements 
required--(i) Filing by loss corporation. The election to restore value 
described in paragraph (c)(2) of this section must be in the form set 
forth in this paragraph (h)(1)(i). It must be filed by the loss 
corporation by including a statement on or with its income tax return 
for the taxable year in which the ownership change occurs (or with an 
amended return for that year filed on or before the due date (including 
extensions) of the income tax

[[Page 32802]]

return of any component member with respect to the taxable year in 
which the ownership change occurs). The common parent of a consolidated 
group must make the election on behalf of the group. The election is 
made in the form of a statement entitled, ``STATEMENT PURSUANT TO Sec.  
1.382-8(h)(1) TO ELECT TO RESTORE ALL OR PART OF THE VALUE OF [INSERT 
NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF THE ELECTING 
MEMBER] TO [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF 
THE CORPORATION TO WHICH VALUE IS RESTORED].'' The statement must 
include the amount of the value being restored and must also indicate 
that an agreement signed and dated by both parties, as described in 
paragraph (h)(1)(iii) of this section, has been entered into. Each such 
party must retain either the original or a copy of this agreement as 
part of its records. See Sec.  1.6001-1(e).
    (ii) Filing by electing member. An electing member must include a 
statement identical to the one described in paragraph (h)(1)(i) of this 
section on or with its income tax return (or with an amended return for 
that year filed on or before the due date (including extensions) of the 
income tax return of any component member with respect to the taxable 
year in which the ownership change occurs) (if any) for the taxable 
year which includes the change date in connection with which the 
election described in paragraph (c)(2) of this section is made. If the 
electing member is a controlled foreign corporation (within the meaning 
of section 957), each United States shareholder (within the meaning of 
section 951(b)) with respect thereto must include this statement on or 
with its return. It is not necessary for the electing member (or the 
United States shareholder, as the case may be) to include this 
statement on or with its return if the loss corporation includes an 
identical statement on or with the same return for the same election.
    (iii) Agreement. Both the electing member and the corporation to 
which value is restored must sign and date an agreement. The agreement 
must--
    (A) Identify the change date for the loss corporation in connection 
with which the election is made;
    (B) State the value of the electing member's stock (without regard 
to any adjustment under paragraph (c) of this section) immediately 
before the ownership change;
    (C) State the amount of any reduction required under paragraph 
(c)(1) of this section with respect to stock of the electing member 
that is owned directly or indirectly by the corporation to which value 
is restored;
    (D) State the amount of value that the electing member elects to 
restore to the corporation; and
    (E) State whether the value of either component member's stock was 
adjusted pursuant to paragraph (c)(4) of this section.
    (2) Special rule for foreign component members--(i) Deemed election 
to restore full value. Unless the election described in paragraph 
(h)(2)(ii) of this section is made for a foreign component member, each 
foreign component member of the controlled group is deemed to have 
elected to restore to each other component member the maximum value 
allowable under paragraph (c)(2) of this section, taking into account 
the limitations of this section.
    (ii) Election not to restore full value. (A) A loss corporation may 
elect to reduce the amount of value restored from a foreign component 
member (the electing foreign component member) to another component 
member under paragraph (h)(2)(i) of this section in the form set forth 
in this paragraph (h)(2)(ii). It must be filed by the loss corporation 
by including a statement on or with its income tax return for the 
taxable year in which the ownership change occurs (or with an amended 
return for that year filed on or before the due date (including 
extensions) of the income tax return of any component member with 
respect to the taxable year in which the ownership change occurs). The 
common parent of a consolidated group must make the election on behalf 
of the group. The election is made in the form of a statement entitled, 
``STATEMENT PURSUANT TO Sec.  1.382-8(h)(2)(ii) TO ELECT NOT TO RESTORE 
FULL VALUE OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) 
OF ELECTING FOREIGN COMPONENT MEMBER] TO [INSERT NAME AND EMPLOYER 
IDENTIFICATION NUMBER (IF ANY) OF THE CORPORATION TO WHICH SUCH VALUE 
IS NOT TO BE RESTORED].'' The statement must include the amount of the 
value not being restored and must also indicate that an agreement 
signed and dated by both parties, as described in paragraph (h)(2)(iii) 
of this section, has been entered into. Each such party must retain 
either the original or a copy of the agreement as part of its records. 
See Sec.  1.6001-1(e).
    (B) An electing foreign component member must include a statement 
identical to the one described in paragraph (h)(2)(ii)(A) of this 
section on or with its income tax return (or with an amended return for 
that year filed on or before the due date (including extensions) of the 
income tax return of any component member with respect to the taxable 
year in which the ownership change occurs) (if any) for the taxable 
year which includes the change date in connection with which the 
election described in paragraph (h)(2)(ii)(A) of this section is made. 
If the electing foreign component member is a controlled foreign 
corporation (within the meaning of section 957), each United States 
shareholder (within the meaning of section 951(b)) with respect thereto 
must include this statement on or with its return. It is not necessary 
for the electing foreign component member (or United States 
shareholder, as the case may be) to include this statement on or with 
its return if the loss corporation includes an identical statement on 
or with the same return for the same election.
    (iii) Agreement. Both the electing foreign component member and the 
corporation to which full value is not restored must sign and date an 
agreement. The agreement must--
    (A) Identify the change date for the loss corporation in connection 
with which the election is made;
    (B) State the value of the electing foreign component member's 
stock (without regard to any adjustment under paragraph (c) of this 
section) immediately before the ownership change;
    (C) State the amount of any reduction required under paragraph 
(c)(1) of this section with respect to stock of the electing foreign 
component member that is owned directly or indirectly by the 
corporation to which value is not restored;
    (D) State the amount of value that the electing foreign component 
member elects not to restore to the corporation; and
    (E) State whether the value of either component member's stock was 
adjusted pursuant to paragraph (c)(4) of this section.
    (3) Revocation of election. An election (other than the deemed 
election described in paragraph (h)(2)(i) of this section) made under 
this section is revocable only with the consent of the Commissioner.
* * * * *
    (j) * * *
    (4) Effective/applicability date. Paragraphs (c)(2), (e)(4) and (h) 
of this section apply to any taxable year beginning on or after May 30, 
2006. However, taxpayers may apply paragraphs (c)(2), (e)(4) and (h) of 
this section to any original Federal income

[[Page 32803]]

tax return (including any amended return filed on or before the due 
date (including extensions) of such original return) timely filed on or 
after May 30, 2006. For taxable years beginning before May 30, 2006, 
see Sec.  1.382-8 as contained in 26 CFR part 1 in effect on April 1, 
2006.


Sec.  1.382-8T  [Removed]

0
Par. 24. Section 1.382-8T is removed.

0
Par. 25. Section 1.382-11 is added to read as follows:


Sec.  1.382-11  Reporting requirements.

    (a) Information statement required. A loss corporation must include 
a statement entitled, ``STATEMENT PURSUANT TO Sec.  1.382-11(a) BY 
[INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER OF TAXPAYER], A LOSS 
CORPORATION,'' on or with its income tax return for each taxable year 
that it is a loss corporation in which an owner shift, equity structure 
shift or other transaction described in Sec.  1.382-2T(a)(2)(i) occurs. 
The statement must include the date(s) of any owner shifts, equity 
structure shifts, or other transactions described in Sec.  1.382-
2T(a)(2)(i), the date(s) on which any ownership change(s) occurred, and 
the amount of any attributes described in Sec.  1.382-2(a)(1)(i) that 
caused the corporation to be a loss corporation. A loss corporation may 
also be required to include certain elections on this statement, 
including--
    (1) An election made under Sec.  1.382-2T(h)(4)(vi)(B) to disregard 
the deemed exercise of an option if the actual exercise of that option 
occurred within 120 days of the ownership change; and
    (2) An election made under Sec.  1.382-6(b)(2) to close the books 
of the loss corporation for purposes of allocating income and loss to 
periods before and after the change date for purposes of section 382.
    (b) Effective/applicability date. This section applies to any 
taxable year beginning on or after May 30, 2006. However, taxpayers may 
apply this section to any original Federal income tax return (including 
any amended return filed on or before the due date (including 
extensions) of such original return) timely filed on or after May 30, 
2006. For taxable years beginning before May 30, 2006, see Sec.  1.382-
2T as contained in 26 CFR part 1 in effect on April 1, 2006.


Sec.  1.382-11T  [Removed]

0
Par. 26. Section 1.382-11T is removed.

0
Par. 27. Section 1.1081-11 is added to read as follows:


Sec.  1.1081-11  Records to be kept and information to be filed with 
returns.

    (a) Distributions and exchanges; significant holders of stock or 
securities. Every significant holder must include a statement entitled, 
``STATEMENT PURSUANT TO Sec.  1.1081-11(a) BY [INSERT NAME AND TAXPAYER 
IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT HOLDER,'' on 
or with such holder's income tax return for the taxable year in which 
the distribution or exchange occurs. If a significant holder is a 
controlled foreign corporation (within the meaning of section 957), 
each United States shareholder (within the meaning of section 951(b)) 
with respect thereto must include this statement on or with its return. 
The statement must include--
    (1) The name and employer identification number (if any) of the 
corporation from which the stock, securities, or other property 
(including money) was received by such significant holder;
    (2) The aggregate basis, determined immediately before the 
exchange, of any stock or securities transferred by the significant 
holder in the exchange, and the aggregate fair market value, determined 
immediately before the distribution or exchange, of the stock, 
securities or other property (including money) received by the 
significant holder in the distribution or exchange; and
    (3) The date of the distribution or exchange.
    (b) Distributions and exchanges; corporations subject to Commission 
orders. Each corporation which is a party to a distribution or exchange 
made pursuant to an order of the Commission must include on or with its 
income tax return for its taxable year in which the distribution or 
exchange takes place a statement entitled, ``STATEMENT PURSUANT TO 
Sec.  1.1081-11(b) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER 
(IF ANY) OF TAXPAYER], A DISTRIBUTING OR EXCHANGING CORPORATION.'' If 
the distributing or exchanging corporation is a controlled foreign 
corporation (within the meaning of section 957), each United States 
shareholder (within the meaning of section 951(b)) with respect thereto 
must include this statement on or with its return. The statement must 
include--
    (1) The date and control number of the Commission order, pursuant 
to which the distribution or exchange was made;
    (2) The names and taxpayer identification numbers (if any) of the 
significant holders;
    (3) The aggregate fair market value and basis, determined 
immediately before the distribution or exchange, of the stock, 
securities, or other property (including money) transferred in the 
distribution or exchange; and
    (4) The date of the distribution or exchange.
    (c) Sales by members of system groups. Each system group member 
must include a statement entitled, ``STATEMENT PURSUANT TO Sec.  
1.1081-11(c) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF 
ANY) OF TAXPAYER], A SYSTEM GROUP MEMBER,'' on or with its income tax 
return for the taxable year in which the sale is made. If any system 
group member is a controlled foreign corporation (within the meaning of 
section 957), each United States shareholder (within the meaning of 
section 951(b)) with respect thereto must include this statement on or 
with its return. The statement must include--
    (1) The dates and control numbers of all relevant Commission 
orders;
    (2) The aggregate fair market value and basis, determined 
immediately before the sale, of all stock or securities sold; and
    (3) The date of the sale.
    (d) Definitions. (1) For purposes of this section, Commission means 
the Securities and Exchange Commission.
    (2) For purposes of this section, significant holder means a person 
that receives stock or securities from a corporation (the distributing 
corporation) pursuant to an order of the Commission, if, immediately 
before the transaction, such person--
    (i) In the case of stock--
    (A) Owned at least five percent (by vote or value) of the total 
outstanding stock of the distributing corporation if the stock owned by 
such person is publicly traded, or
    (B) Owned at least one percent (by vote or value) of the total 
outstanding stock of the distributing corporation if the stock owned by 
such person is not publicly traded; or
    (ii) In the case of securities, owned securities of the 
distributing corporation with a basis of $1,000,000 or more.
    (3) Publicly traded stock means stock that is listed on--
    (i) A national securities exchange registered under section 6 of 
the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
    (ii) An interdealer quotation system sponsored by a national 
securities association registered under section 15A of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-3).

[[Page 32804]]

    (4) For purposes of paragraph (b) of this section, exchange means 
exchange, expenditure, or investment.
    (5) For purposes of paragraph (c) of this section, system group 
member means each corporation which is a member of a system group and 
which, pursuant to an order of the Commission, sells stock or 
securities received upon an exchange (pursuant to an order of the 
Commission) and applies the proceeds derived therefrom in retirement or 
cancellation of its own stock or securities.
    (e) Substantiation information. Under Sec.  1.6001-1(e), taxpayers 
are required to retain their permanent records and make such records 
available to any authorized Internal Revenue Service officers and 
employees. In connection with the distribution or exchange described in 
this section, these records should specifically include information 
regarding the amount, basis, and fair market value of all property 
distributed or exchanged, and relevant facts regarding any liabilities 
assumed or extinguished as part of such distribution or exchange.
    (f) Effective/applicability date. This section applies to any 
taxable year beginning on or after May 30, 2006. However, taxpayers may 
apply this section to any original Federal income tax return (including 
any amended return filed on or before the due date (including 
extensions) of such original return) timely filed on or after May 30, 
2006. For taxable years beginning before May 30, 2006, see Sec.  
1.1081-11 as contained in 26 CFR part 1 in effect on April 1, 2006.


Sec.  1.1081-11T  [Removed]

0
Par. 28. Section 1.1081-11T is removed.

0
Par. 29. Section 1.1221-2 is amended by revising paragraphs (e)(2)(iv) 
and (j) to read as follows:


Sec.  1.1221-2  Hedging transactions.

* * * * *
    (e) * * *
    (2) * * *
    (iv) Making and revoking the election. Unless the Commissioner 
otherwise prescribes, the election described in paragraph (e)(2) of 
this section must be made in a separate statement that provides, 
``[INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER OF COMMON PARENT] 
HEREBY ELECTS THE APPLICATION OF Sec.  1.1221-2(e)(2) (THE SEPARATE-
ENTITY APPROACH).'' The statement must also indicate the date as of 
which the election is to be effective. The election must be filed by 
including the statement on or with the consolidated group's income tax 
return for the taxable year that includes the first date for which the 
election is to apply. The election applies to all transactions entered 
into on or after the date so indicated. The election may only be 
revoked with the consent of the Commissioner.
* * * * *
    (j) Effective/applicability date. Paragraph (e)(2)(iv) of this 
section applies to any original consolidated Federal income tax return 
due (without extensions) after June 14, 2007. For original consolidated 
Federal income tax returns due (without extensions) after May 30, 2006, 
and on or before June 14, 2007, see Sec.  1.1221-2T as contained in 26 
CFR part 1 in effect on April 1, 2007. For original consolidated 
Federal income tax returns due (without extensions) on or before May 
30, 2006, see Sec.  1.1221-2 as contained in 26 CFR part 1 in effect on 
April 1, 2006.


Sec.  1.1221-2T  [Removed]

0
Par. 30. Section 1.1221-2T is removed.

0
Par. 31. Section 1.1502-13 is amended by revising paragraphs 
(f)(5)(ii)(E), (f)(6)(i)(C)(2) and (m) to read as follows:


Sec.  1.1502-13  Intercompany transactions.

* * * * *
    (f) * * *
    (5) * * *
    (ii) * * *
    (E) Election. An election to apply paragraph (f)(5)(ii) of this 
section is made in a separate statement entitled, ``[INSERT NAME AND 
EMPLOYER IDENTIFICATION NUMBER OF COMMON PARENT] HEREBY ELECTS THE 
APPLICATION OF Sec.  1.1502-13(f)(5)(ii) FOR AN INTERCOMPANY 
TRANSACTION INVOLVING [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER 
OF S] AND [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER OF T].'' A 
separate election must be made for each such application. The election 
must be filed by including the statement on or with the consolidated 
group's income tax return for the year of T's liquidation (or other 
transaction). The Commissioner may impose reasonable terms and 
conditions to the application of paragraph (f)(5)(ii) of this section 
that are consistent with the purposes of such section. The statement 
must--
    (1) Identify S's intercompany transaction and T's liquidation (or 
other transaction); and
    (2) Specify which provision of paragraph (f)(5)(ii) of this section 
applies and how it alters the otherwise applicable results under this 
section (including, for example, the amount of S's intercompany items 
and the amount deferred or offset as a result of paragraph (f)(5)(ii) 
of this section).
    (6) * * *
    (i) * * *
    (C) * * *
    (2) Election. The election described in paragraph (f)(6)(i)(C)(1) 
of this section must be made in a separate statement entitled, 
``ELECTION TO REDUCE BASIS OF P STOCK UNDER Sec.  1.1502-13(f)(6) HELD 
BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER OF MEMBER WHOSE 
BASIS IN P STOCK IS REDUCED].'' The election must be filed by including 
the statement on or with the consolidated group's income tax return for 
the year in which the nonmember becomes a member. The statement must 
identify the member's basis in the P stock (taking into account the 
effect of this election) and the number of shares of P stock held by 
the member.
* * * * *
    (m) Effective/applicability date. Paragraphs (f)(5)(ii)(E) and 
(f)(6)(i)(C)(2) of this section apply to any original consolidated 
Federal income tax return due (without extensions) after June 14, 2007. 
For original consolidated Federal income tax returns due (without 
extensions) after May 30, 2006, and on or before June 14, 2007, see 
Sec.  1.1502-13T as contained in 26 CFR part 1 in effect on April 1, 
2007. For original consolidated Federal income tax returns due (without 
extensions) on or before May 30, 2006, see Sec.  1.1502-13 as contained 
in 26 CFR part 1 in effect on April 1, 2006.


Sec.  1.1502-13T  [Removed]

0
Par. 32. Section 1.1502-13T is removed.

0
Par. 33. Section 1.1502-31 is amended by revising paragraphs (e)(2) and 
(j) to read as follows:


Sec.  1.1502-31  Stock basis after a group structure change.

* * * * *
    (e) * * *
    (2) Election. The election described in paragraph (e)(1) of this 
section must be made in a separate statement entitled, ``ELECTION TO 
TREAT LOSS CARRYOVER AS EXPIRING UNDER Sec.  1.1502-31(e).'' The 
election must be filed by including the statement on or with the 
consolidated group's income tax return for the year that includes the 
group structure change. The statement must identify the amount of each 
loss carryover deemed to expire (or the amount of each loss carryover 
deemed

[[Page 32805]]

not to expire, with any balance of any loss carryovers being deemed to 
expire).
* * * * *
    (j) Effective/applicability date. Paragraph (e)(2) of this section 
applies to any original consolidated Federal income tax return due 
(without extensions) after June 14, 2007. For original consolidated 
Federal income tax returns due (without extensions) after May 30, 2006, 
and on or before June 14, 2007, see Sec.  1.1502-31T as contained in 26 
CFR part 1 in effect on April 1, 2007. For original consolidated 
Federal income tax returns due (without extensions) on or before May 
30, 2006, see Sec.  1.1502-31 as contained in 26 CFR part 1 in effect 
on April 1, 2006.


Sec.  1.1502-31T  [Removed]

0
Par. 34. Section 1.1502-31T is removed.

0
Par. 35. Section 1.1502-32 is amended by revising paragraphs (b)(4)(iv) 
and (j) to read as follows:


Sec.  1.1502-32  Investment adjustments.

* * * * *
    (b) * * *
    (4) * * *
    (iv) Election. The election described in paragraph (b)(4) of this 
section must be made in a separate statement entitled, ``ELECTION TO 
TREAT LOSS CARRYOVER OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER 
OF S] AS EXPIRING UNDER Sec.  1.1502-32(b)(4).'' The election must be 
filed by including a statement on or with the consolidated group's 
income tax return for the year S becomes a member. A separate statement 
must be made for each member whose loss carryover is deemed to expire. 
The statement must identify the amount of each loss carryover deemed to 
expire (or the amount of each loss carryover deemed not to expire, with 
any balance of any loss carryovers being deemed to expire) and the 
basis of any stock reduced as a result of the deemed expiration.
* * * * *
    (j) Effective/applicability date. Paragraph (b)(4)(iv) of this 
section applies to any original consolidated Federal income tax return 
due (without extensions) after June 14, 2007. For original consolidated 
Federal income tax returns due (without extensions) after May 30, 2006, 
and on or before June 14, 2007, see Sec.  1.1502-32T as contained in 26 
CFR part 1 in effect on April 1, 2007. For original consolidated 
Federal income tax returns due (without extensions) on or before May 
30, 2006, see Sec.  1.1502-32 as contained in 26 CFR part 1 in effect 
on April 1, 2006.


Sec.  1.1502-32T  [Amended]

0
Par. 36. Section 1.1502-32T is amended by removing and reserving 
paragraphs (b)(4)(iv) and (j).

0
Par. 37. Section 1.1502-33 is amended by revising paragraphs 
(d)(5)(i)(D) and (k) to read as follows:


Sec.  1.1502-33  Earnings and profits.

* * * * *
    (d) * * *
    (5) * * *
    (i) * * *
    (D) If a method is permitted under paragraph (d)(4) of this 
section, provide the date and control number of the private letter 
ruling issued by the Internal Revenue Service approving such method.
* * * * *
    (k) Effective/applicability date. Paragraph (d)(5)(i)(D) of this 
section applies to any original consolidated Federal income tax return 
due (without extensions) after June 14, 2007. For original consolidated 
Federal income tax returns due (without extensions) after May 30, 2006, 
and on or before June 14, 2007, see Sec.  1.1502-33T as contained in 26 
CFR part 1 in effect on April 1, 2007. For original consolidated 
Federal income tax returns due (without extensions) on or before May 
30, 2006, see Sec.  1.1502-33 as contained in 26 CFR part 1 in effect 
on April 1, 2006.


Sec.  1.1502-33T  [Removed]

0
Par. 38. Section 1.1502-33T is removed.

0
Par. 39. Section 1.1502-90 is amended by:
0
1. Revising the entry for Sec.  1.1502-95(e)(8).
0
2. Revising the entry for Sec.  1.1502-95(f).
0
3. Revising the entry for Sec.  1.1502-95(g).
0
4. Removing the entry for Sec.  1.1502-95T.
    The revisions read as follows:


Sec.  1.1502-90  Table of contents.

* * * * *


Sec.  1.1502-95  Rules on ceasing to be a member of a consolidated 
group (or loss subgroup).

* * * * *
    (e) * * *
    (8) Reporting requirements.
    (i) Common parent.
    (ii) Former member.
    (iii) Exception.
    (f) Filing the election to apportion the section 382 limitation 
and net unrealized built-in gain.
    (1) Form of the election to apportion.
    (i) Statement.
    (ii) Agreement.
    (2) Signing the agreement.
    (3) Filing the election.
    (i) Filing by the common parent.
    (ii) Filing by the former member.
    (4) Revocation of election.
    (g) Effective/applicability date.
* * * * *

0
Par. 40. Section 1.1502-95 is amended by revising paragraphs (e)(8), 
(f) and (g) to read as follows:


Sec.  1.1502-95  Rules on ceasing to be a member of a consolidated 
group (or loss subgroup).

* * * * *
    (e) * * *
    (8) Reporting requirements--(i) Common Parent. Except as provided 
in paragraph (e)(8)(iii) of this section, if a net unrealized built-in 
loss is allocated under paragraph (e) of this section, the common 
parent must include a statement entitled, ``STATEMENT OF NET UNREALIZED 
BUILT-IN LOSS ALLOCATION PURSUANT TO Sec.  1.1502-95(e),'' on or with 
its income tax return for the taxable year in which the former 
member(s) (or a new loss subgroup that includes that member) ceases to 
be a member. The statement must include--
    (A) The name and employer identification number of the departing 
member;
    (B) The amount of the remaining NUBIL balance for the taxable year 
in which the member departs;
    (C) The amount of the net unrealized built-in loss allocated to the 
departing member; and
    (D) A representation that the common parent has delivered a copy of 
the statement to the former member (or the common parent of the group 
of which the former member is a member) on or before the day the group 
files its income tax return for the consolidated return year that the 
former member ceases to be a member.
    (ii) Former member. Except as provided in paragraph (e)(8)(iii) of 
this section, the former member must include a statement on or with its 
first income tax return (or the first return in which the former member 
joins) that is filed after the close of the consolidated return year of 
the group of which the former member (or a new loss subgroup that 
includes that member) ceases to be a member. The statement will be 
identical to the statement filed by the common parent under paragraph 
(e)(8)(i) of this section except that instead of including the 
information described in paragraph (e)(8)(i)(A) of this section the 
former member must provide the name, employer identification number and 
tax year of the former common parent, and instead of the representation 
described in

[[Page 32806]]

paragraph (e)(8)(i)(D) of this section the former member must represent 
that it has received and retained the copy of the statement delivered 
by the common parent as part of its records. See Sec.  1.6001-1(e).
    (iii) Exception. This paragraph (e)(8) does not apply if the 
required information (other than the amount of the remaining NUBIL 
balance) is included in a statement of election under paragraph (f) of 
this section (relating to apportioning a section 382 limitation).
    (f) Filing the election to apportion the section 382 limitation and 
net unrealized built-in gain--(1) Form of the election to apportion--
(i) Statement. An election under paragraph (c) of this section must be 
made in the form set forth in this paragraph (f)(1)(i). The election 
must be made by the common parent and the party described in paragraph 
(f)(2) of this section. It must be filed in accordance with paragraph 
(f)(3) of this section and be entitled, ``THIS IS AN ELECTION UNDER 
Sec.  1.1502-95 TO APPORTION ALL OR PART OF THE [INSERT THE 
CONSOLIDATED SECTION 382 LIMITATION, THE SUBGROUP SECTION 382 
LIMITATION, THE LOSS GROUP'S NET UNREALIZED BUILT-IN GAIN, OR THE LOSS 
SUBGROUP'S NET UNREALIZED BUILT-IN GAIN, AS APPROPRIATE] IN THE AMOUNT 
OF [INSERT THE AMOUNT OF THE LOSS LIMITATION OR NET UNREALIZED BUILT-IN 
GAIN] TO [INSERT NAME(S) AND EMPLOYER IDENTIFICATION NUMBER(S) OF THE 
CORPORATION (OR THE CORPORATIONS THAT COMPOSE A NEW LOSS SUBGROUP) TO 
WHICH ALLOCATION IS MADE].'' The statement must also indicate that an 
agreement, as described in paragraph (f)(1)(ii) of this section, has 
been entered into.
    (ii) Agreement. Both the common parent and the party described in 
paragraph (f)(2) of this section must sign and date the agreement. The 
agreement must include, as appropriate--
    (A) The date of the ownership change that resulted in the 
consolidated section 382 limitation (or subgroup section 382 
limitation) or the loss group's (or loss subgroup's) net unrealized 
built-in gain;
    (B) The amount of the departing member's (or loss subgroup's) pre-
change net operating loss carryovers and the taxable years in which 
they arose that will be subject to the limitation that is being 
apportioned to that member (or loss subgroup);
    (C) The amount of any net unrealized built-in loss allocated to the 
departing member (or loss subgroup) under paragraph (e) of this 
section, which, if recognized, can be a pre-change attribute subject to 
the limitation that is being apportioned;
    (D) If a consolidated section 382 limitation (or subgroup section 
382 limitation) is being apportioned, the amount of the consolidated 
section 382 limitation (or subgroup section 382 limitation) for the 
taxable year during which the former member (or new loss subgroup) 
ceases to be a member of the consolidated group (determined without 
regard to any apportionment under this section);
    (E) If any net unrealized built-in gain is being apportioned, the 
amount of the loss group's (or loss subgroup's) net unrealized built-in 
gain (as determined under paragraph (c)(2)(ii) of this section) that 
may be apportioned to members that ceased to be members during the 
consolidated return year;
    (F) The amount of the value element and adjustment element of the 
consolidated section 382 limitation (or subgroup section 382 
limitation) that is apportioned to the former member (or new loss 
subgroup) pursuant to paragraph (c) of this section;
    (G) The amount of the loss group's (or loss subgroup's) net 
unrealized built-in gain that is apportioned to the former member (or 
new loss subgroup) pursuant to paragraph (c) of this section;
    (H) If the former member is allocated any net unrealized built-in 
loss under paragraph (e) of this section, the amount of any adjustment 
element apportioned to the former member that is attributable to 
recognized built-in gains (determined in a manner that will enable both 
the group and the former member to apply the principles of Sec.  
1.1502-93(c)); and
    (1) The name and employer identification number of the common 
parent making the apportionment.
    (2) Signing the agreement. The agreement must be signed by both the 
common parent and the former member (or, in the case of a loss 
subgroup, the common parent and the loss subgroup parent) by persons 
authorized to sign their respective income tax returns. If the 
allocation is made to a loss subgroup for which an election under Sec.  
1.1502-91(d)(4) is made, and not separately to its members, the 
agreement under this paragraph (f) must be signed by the common parent 
and any member of the new loss subgroup by persons authorized to sign 
their respective income tax returns. Each party signing the agreement 
must retain either the original or a copy of the agreement as part of 
its records. See Sec.  1.6001-1(e).
    (3) Filing of the election--(i) Filing by the common parent. The 
election must be filed by the common parent of the group that is 
apportioning the consolidated section 382 limitation (or the subgroup 
section 382 limitation) or the loss group's net unrealized built-in 
gain (or loss subgroup's net unrealized built-in gain) by including the 
statement on or with its income tax return for the taxable year in 
which the former member (or new loss subgroup) ceases to be a member.
    (ii) Filing by the former member. An identical statement must be 
included on or with the first return of the former member (or the first 
return in which the former member, or the members of a new loss 
subgroup, join) that is filed after the close of the consolidated 
return year of the group of which the former member (or the members of 
a new loss subgroup) ceases to be a member.
    (4) Revocation of election. An election statement made under 
paragraph (c) of this section is revocable only with the consent of the 
Commissioner.
    (g) Effective/applicability date. Paragraphs (e)(8) and (f) of this 
section apply to any original consolidated Federal income tax return 
due (without extensions) after June 14, 2007. For original consolidated 
Federal income tax returns due (without extensions) after May 30, 2006, 
and on or before June 14, 2007, see Sec.  1.1502-95T as contained in 26 
CFR part 1 in effect on April 1, 2007. For original consolidated 
Federal income tax returns due (without extensions) on or before May 
30, 2006, see Sec.  1.1502-95 as contained in 26 CFR part 1 in effect 
on April 1, 2006.


Sec.  1.1502-95T  [Removed]

0
Par. 41. Section 1.1502-95T is removed.

0
Par. 42. Section 1.1563-3 is amended by revising paragraph (d)(2)(iv), 
adding paragraph (d)(2)(v) and revising (e) to read as follows:


Sec.  1.1563-3  Rules for determining stock ownership.

* * * * *
    (d) * * *
    (2) * * *
    (iv) Statement. If the application of paragraph (d)(2)(ii) or (iii) 
of this section does not result in a corporation being treated as a 
component member of only one controlled group of corporations on a 
December 31, then such corporation will be treated as a component 
member of only one such group on such date. Such corporation may elect 
the group in which it is to be included by including on or with its 
income tax return a statement entitled, ``STATEMENT TO ELECT CONTROLLED 
GROUP PURSUANT TO Sec.  1.1563-3(d)(2)(iv).'' The statement must 
include--
    (A) A description of each of the controlled groups in which the

[[Page 32807]]

corporation could be included. The description must include the name 
and employer identification number of each component member of each 
such group and the stock ownership of the component members of each 
such group; and
    (B) The following representation: [INSERT NAME AND EMPLOYER 
IDENTIFICATION NUMBER OF CORPORATION] ELECTS TO BE TREATED AS A 
COMPONENT MEMBER OF THE [INSERT DESIGNATION OF GROUP].
    (v) Election--(A) Election filed. An election filed under paragraph 
(d)(2)(iv) of this section is irrevocable and effective until paragraph 
(d)(2)(ii) or (iii) of this section applies or until a change in the 
stock ownership of the corporation results in termination of membership 
in the controlled group in which such corporation has been included.
    (B) Election not filed. In the event no election is filed in 
accordance with the provisions of paragraph (d)(2)(iv) of this section, 
then the Internal Revenue Service will determine the group in which 
such corporation is to be included. Such determination will be binding 
for all subsequent years unless the corporation files a valid election 
with respect to any such subsequent year or until a change in the stock 
ownership of the corporation results in termination of membership in 
the controlled group in which such corporation has been included.
* * * * *
    (e) Effective/applicability date. Paragraph (d)(2)(iv) and (v) of 
this section apply to any taxable year beginning on or after May 30, 
2006. However, taxpayers may apply paragraph (d)(2)(iv) and (v) of this 
section to any original Federal income tax return (including any 
amended return filed on or before the due date (including extensions) 
of such original return) timely filed on or after May 30, 2006. For 
taxable years beginning before May 30, 2006, see Sec.  1.1563-3 as 
contained in 26 CFR part 1 in effect on April 1, 2006.


Sec.  1.1563-3T  [Removed]

0
Par. 43. Section 1.1563-3T is removed.

0
Par. 44. Section 1.6012-2 is amended by revising paragraphs (c) and (k) 
to read as follows:


Sec.  1.6012-2  Corporations required to make returns of income.

* * * * *
    (c) Insurance companies--(1) Domestic life insurance companies--(i) 
In general. A life insurance company subject to tax under section 801 
shall make a return on Form 1120-L, ``U.S. Life Insurance Company 
Income Tax Return.'' Except as provided in paragraph (c)(4) of this 
section, such company shall file with its return--
    (A) A copy of its annual statement which shows the reserves used by 
the company in computing the taxable income reported on its return; and
    (B) A copy of Schedule A (real estate) and of Schedule D (bonds and 
stocks), or any successor thereto, of such annual statement.
    (ii) Mutual savings banks. Mutual savings banks conducting life 
insurance business and meeting the requirements of section 594 are 
subject to partial tax computed on Form 1120, ``U.S. Corporation Income 
Tax Return,'' and partial tax computed on Form 1120-L. The Form 1120-L 
is attached as a schedule to Form 1120, together with the annual 
statement and schedules required to be filed with Form 1120-L.
    (2) Domestic nonlife insurance companies. Every domestic insurance 
company other than a life insurance company shall make a return on Form 
1120-PC, ``U.S. Property and Casualty Insurance Company Income Tax 
Return.'' This includes organizations described in section 501(m)(1) 
that provide commercial-type insurance and organizations described in 
section 833. Except as provided in paragraph (c)(4) of this section, 
such company shall file with its return a copy of its annual statement 
(or a pro forma annual statement), including the underwriting and 
investment exhibit (or any successor thereto) for the year covered by 
such return.
    (3) Foreign insurance companies. The provisions of paragraphs 
(c)(1) and (c)(2) of this section concerning the returns and statements 
of insurance companies subject to tax under section 801 or section 831 
also apply to foreign insurance companies subject to tax under those 
sections, except that the copy of the annual statement required to be 
submitted with the return shall, in the case of a foreign insurance 
company that is not required to file an annual statement, be a copy of 
the pro forma annual statement relating to the United States business 
of such company.
    (4) Exception for insurance companies filing their Federal income 
tax returns electronically. If an insurance company described in 
paragraph (c)(1), (c)(2), or (c)(3) of this section files its Federal 
income tax return electronically, it should not include on or with such 
return its annual statement (or pro forma annual statement), or any 
portion thereof. Such statement must be available at all times for 
inspection by authorized Internal Revenue Service officers or employees 
and retained for so long as such statements may be material in the 
administration of any internal revenue law. See Sec.  1.6001-1(e).
    (5) Definition. For purposes of this section, the term annual 
statement means the annual statement, the form of which is approved by 
the National Association of Insurance Commissioners (NAIC), which is 
filed by an insurance company for the year with the insurance 
departments of States, Territories, and the District of Columbia. The 
term annual statement also includes a pro forma annual statement if the 
insurance company is not required to file the NAIC annual statement.
* * * * *
    (k) Effective/applicability date. Paragraph (c) of this section 
applies to any taxable year beginning on or after May 30, 2006. 
However, taxpayers may apply paragraph (c) of this section to any 
original Federal income tax return (including any amended return filed 
on or before the due date (including extensions) of such original 
return) timely filed on or after May 30, 2006. For taxable years 
beginning before May 30, 2006, see Sec.  1.6012-2 as contained in 26 
CFR part 1 in effect on April 1, 2006.


Sec.  1.6012-2T  [Removed]

0
Par. 45. Section 1.6012-2T is removed.


Sec. Sec.  1.338(h)(10)-1, 1.382-2T, 1.382-8, 1.1502-13, 1.1502-32, 
1.502-92, 1.502-94, 1.502-95, 1.563-3, and 1.6043-2  [Amended]

0
Par. 46. For each entry in the ``Location'' column of the following 
table, remove the language in the ``Remove'' column and add the 
language in the ``Add'' column in its place:

[[Page 32808]]



------------------------------------------------------------------------
          Location                   Remove                  Add
------------------------------------------------------------------------
The last sentence of the      The rules described   The following rules
 introductory text to Sec.     in paragraph (a) of   shall be applicable
 1.302-4.                      Sec.   1.302-4T and   in determining
                               in paragraphs (b)     whether the
                               through (g) of this   specific
                               section apply in      requirements of
                               determining whether   section 302(c)(2)
                               the specific          are met:
                               requirements of
                               section 302(c)(2)
                               are met.
Sec.   1.338(h)(10)-1(f)....  Sec.   1.331-1T(d)    Sec.   1.331-1(d)
                               and Sec.   1.332-6T.  and Sec.   1.332-6.
Sec.   1.382-2T(a)(2)(ii)...  Sec.   1.382-11T....  Sec.   1.382-11.
The last sentence of Sec.     paragraph (a) of      Sec.   1.382-11(a).
 1.382-2T(h)(4)(vi)(B).        Sec.   1.382-11T.
The first sentence of Sec.    Sec.   1.382-11T(a).  Sec.   1.382-11(a).
 1.382-6(b)(2)(i).
The second sentence of Sec.   paragraphs (c)(1),    paragraph (c) of
  1.382-8(a).                  (c)(3), (c)(4) and    this section.
                               (c)(5) of this
                               section and
                               paragraph (c)(2) of
                               Sec.   1.382-8T.
The third sentence of Sec.    paragraphs (c)(1),    paragraph (c) of
 1.382-8(a).                   (c)(3), (c)(4) and    this section.
                               (c)(5) of this
                               section and
                               paragraph (c)(2) of
                               Sec.   1.382-8T.
Sec.   1.382-8(c)(3)........  paragraph (c)(2) of   paragraph (c)(2) of
                               Sec.   1.382-8T.      this section.
The first sentence of Sec.    paragraphs (c)(1)     paragraphs (c)(1),
 1.382-8(c)(4).                and (c)(3) of this    (2), and (3) of
                               section and           this section.
                               paragraph (c)(2) of
                               Sec.   1.382-8T.
Sec.   1.382-8(c)(5)........  paragraphs (c)(1),    this paragraph (c).
                               (c)(3), (c)(4), and
                               (c)(5) of this
                               section, and
                               paragraph (c)(2) of
                               Sec.   1.382-8T.
The fifth sentence of Sec.    paragraphs (c)(1),    paragraph (c) of
 1.382-8(f).                   (c)(3), (c)(4), and   this section.
                               (c)(5) of this
                               section, and
                               paragraph (c)(2) of
                               Sec.   1.382-8T.
Sec.   1.382-8(g), Example    paragraphs (c)(1),    paragraph (c) of
 (1)(b)(2).                    (c)(3), (c)(4), and   this section.
                               (c)(5) of this
                               section, and
                               paragraph (c)(2) of
                               Sec.   1.382-8T.
The second sentence of Sec.   paragraphs (c)(1),    paragraph (c) of
  1.382-8(g), Example (1)(c).  (c)(3), (c)(4), and   this section.
                               (c)(5) of this
                               section, and
                               paragraph (c)(2) of
                               Sec.   1.382-8T.
Sec.   1.382-8(g), Example    paragraph (c)(2) of   paragraph (c)(2) of
 (2)(c).                       Sec.   1.382-8T.      this section.
The first sentence of Sec.    paragraph (c)(2) of   paragraph (c)(2) of
 1.382-8(g), Example (2)(e).   Sec.   1.382-8T.      this section.
Sec.   1.382-8(g), Example    paragraph (c)(2) of   paragraph (c)(2) of
 (3)(b).                       Sec.   1.382-8T.      this section.
Sec.   1.382-8(g), Example    paragraph (c)(1) of   paragraphs (c)(1)
 (3)(c)(1)(B).                 this section and      and (2) of this
                               paragraph (c)(2) of   section.
                               Sec.   1.382-8T.
The second sentence of Sec.   paragraph (c)(2) of   paragraph (c)(2) of
  1.382-8(g), Example (4)(c).  Sec.   1.382-8T.      this section.
The second sentence of Sec.   paragraph (c)(2) of   paragraph (c)(2) of
  1.382-8(g), Example (5)(c).  Sec.   1.382-8T.      this section.
Sec.   1.1502-13(a)(6)(ii),   Manufacturer          [Reserved].
 Matching rule, Example 13.    incentive payments.
The first sentence of Sec.    paragraph (b)(4)(iv)  paragraph (b)(4)(iv)
 1.1502-32(b)(4)(v)(A).        of Sec.   1.1502-     of this section.
                               32T.
The first sentence of Sec.    paragraph (b)(4)(iv)  paragraph (b)(4)(iv)
 1.1502-32(b)(4)(v)(B).        of Sec.   1.1502-     of this section.
                               32T.
Sec.   1.1502-92(e)(1)......  Sec.   1.382-11T(a).  Sec.   1.382-11(a).
The first sentence of Sec.    Sec.   1.382-11T(a).  Sec.   1.382-11(a).
 1.1502-92(e)(2).
The first sentence of Sec.    Sec.   1.382-11T(a).  Sec.   1.382-11(a).
 1.1502-94(d).
The second sentence of Sec.   Sec.   1.382-11T(a).  Sec.   1.382-11(a).
  1.1502-94(d).
The last sentence of Sec.     paragraph (f) of      paragraph (f) of
 1.1502-95(b)(3).              Sec.   1.1502-95T.    this section.
The second sentence of Sec.   paragraphs            paragraphs
  1.1563-3(d)(2)(i).           (d)(2)(ii) and        (d)(2)(ii), (iii)
                               (iii) of this         and (iv) of this
                               section, and          section.
                               paragraph
                               (d)(2)(iv) of Sec.
                                1.1563-3T.
The first sentence of Sec.    Sec.   1.332-6T(a),   Sec.   1.332-6(b),
 1.6043-2(a).                  Sec.   1.368-3T(a),   1.368-3(a), or
                               or Sec.   1.1081-     1.1081-11.
                               11T.
------------------------------------------------------------------------

PART 301--PROCEDURE AND ADMINISTRATION

0
Par. 46a. The authority citation for part 300 continues to read in part 
as follows:

    Authority: 26 U.S.C. 7805. * * *
    Section 301.6011-5T also issued under 26 U.S.C. 6011.


Sec.  301.6011-5T  [Amended]

0
Par. 46b. In the following table remove the language in the ``remove'' 
column and add the text from the ``add'' column in its place.

------------------------------------------------------------------------
          Location                   Remove                  Add
------------------------------------------------------------------------
The first sentence of Sec.    paragraphs (a), (b)   Sec.   1.6012-2.
 301.6011-5T(a)(twice).        and (d) through (j)
                               of Sec.   1.6012-2,
                               and paragraph (c)
                               of Sec.   1.6012-2T.
------------------------------------------------------------------------


[[Page 32809]]

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

0
Par. 47. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.


Sec.  602.101  [Amended]

0
Par. 48.
0
1. In Sec.  602.101(b), the following entries to the table are removed:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
1.302-2T................................................       1545-2019
1.302-4T................................................       1545-2019
1.331-1T................................................       1545-2019
1.332-6T................................................       1545-2019
1.338-10T...............................................       1545-2019
1.351-3T................................................       1545-2019
1.355-5T................................................       1545-2019
1.368-3T................................................       1545-2019
1.381(b)-1T.............................................       1545-2019
1.382-8T................................................       1545-2019
1.382-11T...............................................       1545-2019
1.1081-11T..............................................       1545-2019
1.1221-2T...............................................       1545-2019
1.1502-13T..............................................       1545-2019
1.1502-31T..............................................       1545-2019
1.1502-32T..............................................       1545-2019
1.1502-33T..............................................       1545-2019
1.1502-95T..............................................       1545-2019
1.1563-3T...............................................       1545-2019
1.6012-2T...............................................       1545-2019
------------------------------------------------------------------------

0
2. The following entries are added in numerical order to the table:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
1.332-6.................................................       1545-2019
1.351-3.................................................       1545-2019
1.355-5.................................................       1545-2019
1.368-3.................................................       1545-2019
1.382-11................................................       1545-2019
1.1081-11...............................................       1545-2019
------------------------------------------------------------------------


Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
    Approved: June 4, 2007.
Eric Solomon,
Assistant Secretary of the Treasury.
 [FR Doc. E7-11148 Filed 6-13-07; 8:45 am]
BILLING CODE 4830-01-P