[Federal Register Volume 73, Number 49 (Wednesday, March 12, 2008)]
[Rules and Regulations]
[Pages 13124-13125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4862]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9386]
RIN 1545-BE80


Abandonment of Stock or Other Securities

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations concerning the 
availability and character of a loss deduction under section 165 of the 
Internal Revenue Code (Code) for losses sustained from abandoned stock 
or other securities. The final regulations clarify the tax treatment of 
losses from abandoned securities, and affect any taxpayer claiming a 
deduction for a loss from abandoned securities after the date these 
regulations are published in the Federal Register.

DATES: Effective Date: These final regulations are effective on March 
12, 2008.
    Applicability Date: For dates of applicability, see Sec.  1.165-
5(i)(2).

FOR FURTHER INFORMATION CONTACT: Sean M. Dwyer at (202) 622-5020 or 
Peter C. Meisel at (202) 622-7750 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background

    This document contains amendments to 26 CFR part 1. On July 30, 
2007, the IRS published a notice of proposed rulemaking (REG-101001-05) 
in the Federal Register (72 FR 41468). The notice of proposed 
rulemaking clarified the treatment of abandoned stock or other 
securities under section 165 of the Code, specifically providing that a 
loss from an abandoned security is governed by section 165(g), and that 
the loss is only allowed if all rights in the security are permanently 
surrendered and relinquished for no consideration. The IRS received no 
comments in response to the notice of proposed rulemaking. No public 
hearing was requested or held.
    The proposed regulations are adopted as final regulations by this 
Treasury decision.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations. Because the 
regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Internal Revenue Code, the 
notice of proposed rulemaking that preceded this final regulation was 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Drafting Information

    The principal authors of these final regulations are Sean M. Dwyer, 
Office of the Associate Chief Counsel (Income Tax & Accounting), and 
Peter C. Meisel, Office of the Associate Chief Counsel (Corporate). 
However, other personnel from the IRS and Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

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

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


0
Par. 2. Section 1.165-5 is amended by:
0
1. Redesignating paragraph (i) as paragraph (j).
0
2. Adding a new paragraph (i).
    The addition reads as follows:


Sec.  1.165-5  Worthless securities.

* * * * *
    (i) Abandonment of securities--(1) In general. For purposes of 
section 165 and this section, a security that becomes wholly worthless 
includes a security described in paragraph (a) of this section that is 
abandoned and otherwise satisfies the requirements for a deductible 
loss under section 165. If the abandoned security is a capital asset 
and is not described in section 165(g)(3) and paragraph (d) of this 
section (concerning worthless securities of

[[Page 13125]]

certain affiliated corporations), the resulting loss is treated as a 
loss from the sale or exchange, on the last day of the taxable year, of 
a capital asset. See section 165(g)(1) and paragraph (c) of this 
section. To abandon a security, a taxpayer must permanently surrender 
and relinquish all rights in the security and receive no consideration 
in exchange for the security. For purposes of this section, all the 
facts and circumstances determine whether the transaction is properly 
characterized as an abandonment or other type of transaction, such as 
an actual sale or exchange, contribution to capital, dividend, or gift.
    (2) Effective/applicability date. This paragraph (i) applies to any 
abandonment of stock or other securities after March 12, 2008.
* * * * *

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
    Approved: March 3, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
 [FR Doc. E8-4862 Filed 3-11-08; 8:45 am]
BILLING CODE 4830-01-P