[Federal Register Volume 73, Number 102 (Tuesday, May 27, 2008)]
[Rules and Regulations]
[Pages 30301-30305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-11653]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9400]
RIN 1545-BG97


Treatment of Property Used To Acquire Parent Stock in Certain 
Triangular Reorganizations Involving Foreign Corporations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains final and temporary regulations under 
section 367(b) of the Internal Revenue Code (Code). The final 
regulations revise an existing final regulation and add a cross-
reference. The temporary regulations implement the rules described in 
Notice 2006-85 and Notice 2007-48. The regulations affect corporations 
engaged in certain triangular reorganizations involving one or more 
foreign corporations. The text of the temporary regulations serves as 
the text of the proposed regulations (REG-136020-07) set forth in the 
notice of proposed rulemaking on this subject published in the Proposed 
Rules section in this issue of the Federal Register.

DATES: Effective Date: These regulations are effective May 27, 2008.
    Applicability Dates: For dates of applicability, see Sec.  
1.367(a)-3T(b)(2)(i)(C) and 1.367(b)-14T(e).

FOR FURTHER INFORMATION CONTACT: Daniel McCall, (202) 622-3860 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    On September 22, 2006, the IRS and Treasury Department issued 
Notice 2006-85 (2006-41 IRB 677), which announced that regulations 
would be issued under section 367(b) to address certain triangular 
reorganizations under section 368(a) involving one or more foreign 
corporations. On May 31, 2007, the IRS and Treasury Department issued 
Notice 2007-48 (2007-25 IRB 1428), which amplified Notice 2006-85 and 
announced that additional regulations would be issued under section 
367(b). Each notice describes transactions the IRS and Treasury 
Department believe raise significant policy concerns.
    Notice 2006-85 describes triangular reorganizations in which a 
subsidiary (S) purchases stock of its parent corporation (P) from P in 
exchange for property, and then exchanges the P stock for the stock or 
assets of a target corporation (T), but only if P or S (or both) is 
foreign. Notice 2006-85 announced that regulations to be issued under 
section 367(b) would make adjustments that would have the effect of a 
distribution of property from S to P under section 301 (deemed 
distribution). Notice 2006-85 further announced that regulations would 
address similar transactions where S acquires the P stock from a 
related party that purchased the P stock in a related transaction.
    Notice 2007-48 describes transactions in which S purchases all or a 
portion of the P stock exchanged in the reorganization from a person 
other than P (such as from public shareholders on the open market). 
Notice 2007-48 announced that regulations to be issued under section 
367(b) would also make adjustments that would have the effect of a 
distribution of property from S to P (under section 301) followed by a 
deemed contribution of such property by P to S. Notice 2007-48 further 
announced that the regulations would take into account the earnings and 
profits of other corporations, as appropriate, if a principal purpose 
of creating, organizing, or funding S is to avoid the adjustments to be 
made by the regulations.
    These temporary regulations set forth the regulations described in 
Notices 2006-85 and 2007-48. The existing final regulations under Sec.  
1.367(b)-13 are revised to conform the definitions of the terms P, S, 
and T in those regulations to the definitions of such terms in these 
temporary regulations. The existing final regulations under Sec.  
1.367(b)-2 are revised to clarify that the definition of earnings and 
profits in Sec.  1.367(b)-2(l)(8) applies only for purposes of 
Sec. Sec.  1.367(b)-7 and 1.367(b)-9.

[[Page 30302]]

Explanation of Provisions

A. Section 367-- In General

    Section 367(a)(1) provides that if, in connection with any exchange 
described in section 332, 351, 354, 356, or 361, a United States person 
transfers property to a foreign corporation, such foreign corporation 
shall not, for purposes of determining the extent to which gain shall 
be recognized on such transfer, be considered to be a corporation. 
However, exceptions are provided under section 367(a)(2) and (3), and 
the Secretary has broad authority under section 367(a)(6) to provide 
that section 367(a)(1) will not apply to certain transfers otherwise 
described therein.
    Section 367(b)(1) provides that in the case of any exchange 
described in section 332, 351, 354, 355, 356, or 361 in connection with 
which there is no transfer of property described in section 367(a)(1), 
a foreign corporation shall be considered to be a corporation except to 
the extent provided in regulations prescribed by the Secretary which 
are necessary or appropriate to prevent the avoidance of Federal income 
taxes.
    Section 367(b)(2) provides that the regulations prescribed pursuant 
to section 367(b)(1) shall include (but shall not be limited to) 
regulations dealing with the sale or exchange of stock or securities in 
a foreign corporation by a United States person, including regulations 
providing the circumstances under which gain is recognized, amounts are 
included in gross income as a dividend, adjustments are made to 
earnings and profits, or adjustments are made to basis of stock or 
securities.

B. Policies of Section 367(b)

    Section 367(b) was enacted to ensure that international tax 
considerations are adequately addressed when the nonrecognition 
provisions of subchapter C of the Code apply to certain exchanges 
involving foreign corporations. Congress further noted that ``it is 
essential to protect against tax avoidance in transfers to foreign 
corporations and upon the repatriation of previously untaxed foreign 
earnings. * * *'' H.R. Rep. No. 658, 94th Cong., 1st Sess. 241 (1975). 
Accordingly, Congress granted the Secretary authority to provide 
regulations ``necessary or appropriate to prevent the avoidance of 
Federal income taxes'' and identified ``transfers constituting a 
repatriation of foreign earnings'' as a type of transfer to be covered 
in regulations to be promulgated by the Secretary. Id. The Secretary 
has exercised this grant of authority to address a wide range of 
international policy concerns. For further discussion, see Notices 
2006-85 and 2007-48.

C. Adjustments Made Under Section 367(b)

    These temporary regulations apply to triangular reorganizations 
where P or S (or both) is foreign and, in connection with the 
reorganization, S acquires, in exchange for property, all or a portion 
of the P stock that is used to acquire the stock or assets of T. The 
``in connection with'' standard is a broad standard that includes any 
transaction related to the reorganization even if the transaction is 
not part of the plan of reorganization. For example, the temporary 
regulations apply to a triangular reorganization regardless of whether 
P controls S (within the meaning of section 368(c)) when S acquires the 
P stock that is used in the reorganization.
    In a triangular reorganization subject to the temporary 
regulations, adjustments shall be made that have the effect of a 
distribution of property from S to P under section 301. The amount of 
the deemed distribution shall equal the amount of money plus the fair 
market value of other property that S used to acquire P stock. For this 
purpose, the term property has the meaning set forth in section 317(a), 
but includes any liability assumed by S in exchange for the P stock 
(notwithstanding the application of section 357(a)) and any S stock 
used by S to acquire the P stock from a person other than P. Consistent 
with the rule announced in Notice 2007-48, these temporary regulations 
provide that to the extent S buys P stock from a person other than P, 
immediately after taking into account the deemed distribution to P, P 
is deemed to contribute to S the property deemed distributed to P.
    These temporary regulations provide that the deemed distribution 
shall be treated as a distribution for all purposes of the Code. For 
example, provisions such as sections 312, 881, 897, 902, 959, 1442, and 
1445 apply, as appropriate, to the deemed distribution. Similarly, the 
deemed contribution of property shall be treated as a contribution of 
property for all purposes of the Code. For example, appropriate 
adjustments to P's basis in the S stock and other affected items shall 
be made according to applicable Code provisions.
    Ordering rules are provided that generally require the deemed 
distribution and, in cases where S buys P stock from a person other 
than P, the deemed contribution to be taken into account before the 
transfers undertaken pursuant to the triangular reorganization. If P 
does not control S (within the meaning of section 368(c)) at the time 
that S purchases the P stock, the deemed distribution and deemed 
contribution shall be treated as separate transactions occurring 
immediately after P acquires control of S. Thus, in a transaction where 
S purchases the P stock from a person other than P, after taking into 
account the adjustments made under these temporary regulations, S's 
purchase and transfer of P stock pursuant to the triangular 
reorganization are taken into account under generally applicable Code 
provisions, such as sections 304, 354, 356, 358, and 368.
    These temporary regulations also provide that appropriate 
adjustments will be made if in connection with a triangular 
reorganization described in the regulations, a transaction is engaged 
in with a view to avoid the purpose of the regulations. For example, if 
S is a newly formed corporation and, in connection with the 
reorganization, P contributes to S another corporation with positive 
earnings and profits (S2) to facilitate S's purchase of the P stock or 
to facilitate the repayment of an obligation incurred by S to purchase 
the P stock, then, under the temporary regulations, the earnings and 
profits of S may be deemed to include the earnings and profits of S2.
    Finally, these temporary regulations contain a coordination rule 
that applies to transactions described in section 367(a) and Sec.  
1.367(b)-14T. The IRS and Treasury Department continue to study 
transactions that implicate the policies of section 367(a) and (b), but 
that are not subject to both provisions as a result of the application 
of the coordination rule. Comments are requested on such transactions.

Availability of IRS Documents

    IRS notices cited in this preamble are made available by the 
Superintendent of Documents, U.S. Government Printing Office, 
Washington, DC 20402.

Effective/Applicability Dates

    With respect to those rules addressing transactions described in 
Notice 2006-85, these temporary regulations are generally applicable to 
transactions occurring on or after September 22, 2006, with limited 
transition relief. With respect to those rules addressing transactions 
described in Notice 2007-48, these temporary regulations are generally 
applicable to transactions occurring on or after May 31, 2007, with 
limited transition relief. Other rules included in these temporary 
regulations are generally applicable to transactions occurring on or 
after May 23, 2008, with limited transition relief. See Sec.  1.367(b)-
14T(e).

[[Page 30303]]

    No inference is intended as to the potential applicability of other 
Code or regulatory provisions or judicial doctrines (including 
substance over form) to transactions described in these temporary 
regulations.

Effect on Other Documents

    The following publications are obsolete as of May 27, 2008:
    Notice 2006-85 (2006-41 IRB 677).
    Notice 2007-48 (2007-25 IRB 1428).

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. A delayed effective 
date would be inappropriate because the purpose of this regulation is 
to address transactions that the IRS and Treasury Department believe 
raise serious policy concerns. Accordingly, good cause is found for 
dispensing with notice and public comment pursuant to 5 U.S.C. 553(b) 
and (c) and with a delayed effective date pursuant to 5 U.S.C. 553(d). 
Furthermore, under section 7805(b)(1)(C) of the Code, an effective date 
earlier than the date this regulation is filed with the Federal 
Register is appropriate because prior notices substantially described 
the rules contained in this regulation. For applicability of the 
Regulatory Flexibility Act, see the cross-referenced notice of proposed 
rulemaking published elsewhere in this Federal Register. Pursuant to 
section 7805(f) of the Code, these regulations have been submitted to 
the Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

Request for Comments

    For information on how to submit comments or request a public 
hearing, see the section ``Comments and Requests for a Public 
Hearing,'' set forth in the notice of proposed rulemaking published 
elsewhere in this issue of the Federal Register.

Drafting Information

    The principal author of these regulations is Daniel McCall of the 
Office of Associate Chief Counsel (International). However, other 
personnel from the IRS and the Treasury Department participated in 
their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

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 is amended by adding new 
entries in numerical order to read as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.367(a)-3T(b)(2)(i)(C) also issued under 26 U.S.C. 
367(a) and (b). * * *
    Section 1.367(b)-14T also issued under 26 U.S.C. 367(b). * * *


0
Par. 2. Section 1.367(a)-3 is amended by revising the first sentence in 
paragraph (b)(2)(i) and adding new paragraph (b)(2)(i)(C) to read as 
follows:


Sec.  1.367(a)-3  Treatment of transfers of stock or securities to 
foreign corporations.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * * A transfer of stock or securities described in section 
367(a) or the regulations thereunder as well as in section 367(b) or 
the regulations thereunder shall be subject concurrently to sections 
367(a) and (b) and the respective regulations thereunder, except as 
provided in paragraph (b)(2)(i)(A) through (C) of this section. * * *
    (C) [Reserved]. For further guidance, see Sec.  1.367(a)-
3T(b)(2)(i)(C).
* * * * *

0
Par. 3. Section 1.367(a)-3T is amended by revising paragraphs (a) 
through (d) and (f)(3), to read as follows:


Sec.  1.367(a)-3T  Treatment of transfers of stock or securities to 
foreign corporations (temporary).

    (a) through (b)(2)(i)(B) [Reserved]. For further guidance, see 
Sec.  1.367(a)-3(a) through (b)(2)(i)(B).
    (C) If in connection with a transaction described in Sec.  
1.367(b)-14T, one or more U.S. persons transfer stock of T, as defined 
in Sec.  1.358-6(b)(1)(iii), to a corporation in a transfer described 
in section 367(a), and the amount of gain in the T stock that would 
otherwise be recognized under section 367(a) is less than the deemed 
distribution that would result from the adjustments made under Sec.  
1.367(b)-14T and that would be treated as a dividend under section 
301(c)(1), then section 367(b), and not section 367(a), shall apply to 
such transaction. This paragraph (b)(2)(i)(C) applies to transfers 
occurring on or after May 23, 2008.
    (b)(2)(ii) through (d) [Reserved]. For further guidance, see Sec.  
1.367(a)-3(b)(2)(ii) through (d).
* * * * *
    (f) * * *
    (3) Expiration date. The applicability of Sec.  1.367(a)-
3T(b)(2)(i)(C) expires on May 23, 2011. The applicability of Sec.  
1.367(a)-3T(e) and (f)(1) and (f)(2) expires on February 1, 2010.


0
Par. 4. Section 1.367(b)-2 is amended by revising paragraph (l)(8) to 
read as follows:


Sec.  1.367(b)-2  Definitions and special rules.

* * * * *
    (l) * * *
    (8) Earnings and profits. For purposes of Sec. Sec.  1.367(b)-7 and 
1.367(b)-9, the term earnings and profits means post-1986 undistributed 
earnings, pre-1987 accumulated profits, and pre-1987 section 960 
earnings and profits.
* * * * *

0
Par. 5. Section 1.367(b)-13 is amended by redesignating paragraph 
(a)(2)(ii) as paragraph (a)(2)(iii), revising newly designated 
paragraph (a)(2)(iii), and adding a new paragraph (a)(2)(ii) to read as 
follows:


Sec.  1.367(b)-13  Special rules for determining basis and holding 
period.

    (a) * * *
    (2) * * *
    (ii) The terms P, S, and T have the meanings set forth in Sec.  
1.358-6(b)(1)(i), (ii), and (iii), respectively.
    (iii) A triangular reorganization is a reorganization described in 
Sec.  1.358-6(b)(2)(i), (ii), or (iii) or in sections 368(a)(1)(G) and 
(a)(2)(D) (a forward triangular merger, triangular C reorganization, 
reverse triangular merger, or triangular G reorganization, 
respectively).
* * * * *

0
Par. 6. Section 1.367(b)-14T is added to read as follows:


Sec.  1.367(b)-14T  Acquisition of parent stock for property in 
triangular reorganizations (temporary).

    (a) In general--(1) Scope and purpose. This section applies to 
triangular reorganizations where P or S (or both) is foreign and, in 
connection with the reorganization, S acquires, in exchange for 
property (as defined in this section), all or a portion of the P stock 
that is used to acquire the stock or assets of T. This section may 
apply to a reorganization regardless of whether P controls S (within 
the meaning of section 368(c)) at the time S acquires the P stock that 
is used to acquire the stock or assets of T. The purpose of this 
section is to prevent what is in effect a distribution of property to P 
without the application of provisions otherwise applicable to property 
distributions, when in connection with a triangular

[[Page 30304]]

reorganization S acquires, in exchange for property, all or a portion 
of the P stock used in the reorganization.
    (2) Definitions. For purposes of this section, the following 
definitions apply:
    (i) The terms P, S, and T have the meanings set forth in Sec.  
1.358-6(b)(1)(i), (ii), and (iii), respectively.
    (ii) In general, the term property has the meaning set forth in 
section 317(a). Notwithstanding section 357(a), such term includes any 
liability assumed by S in exchange for the P stock used to acquire the 
stock or assets of T. Such term also includes any S stock used by S to 
acquire P stock from a person other than P.
    (iii) The term triangular reorganization means a reorganization 
described in Sec.  1.358-6(b)(2) or in section 368(a)(1)(G) and 
(a)(2)(D).
    (b) General rules--(1) Deemed distribution. If this section 
applies, adjustments shall be made that have the effect of a 
distribution of property from S to P under section 301 (deemed 
distribution). The amount of the deemed distribution shall equal the 
amount of money plus the fair market value of other property 
transferred, in connection with the reorganization, by S in exchange 
for the P stock used to acquire the stock or assets of T in the 
triangular reorganization. Additional adjustments shall be made under 
paragraph (b)(3) of this section to the extent S acquires, in exchange 
for property, P stock from a person other than P.
    (2) Timing in the case of acquisitions from P. To the extent S 
acquires P stock from P in exchange for property, the deemed 
distribution described in paragraph (b)(1) of this section shall be 
treated as a transaction separate from, and occurring immediately 
before, the triangular reorganization. Therefore, P shall not be 
treated as receiving the property from S in exchange for P stock. The 
transfers of P stock in the triangular reorganization shall be subject 
to generally applicable provisions. See, for example, Sec.  1.1032-2.
    (3) Timing and deemed contribution in the case of acquisitions from 
persons other than P. To the extent S acquires P stock from a person 
other than P in exchange for property (the purchase), then immediately 
following the deemed distribution described in paragraph (b)(1) of this 
section, adjustments shall be made that have the effect of a 
contribution by P to S (deemed contribution) of the property deemed 
distributed by S to P under paragraph (b)(1) of this section. If P 
controls S (within the meaning of section 368(c)) at the time of the 
purchase, the deemed distribution and deemed contribution shall be 
treated as separate transactions occurring immediately before the 
purchase. If P does not control S (within the meaning of section 
368(c)) at the time of the purchase, the deemed distribution and deemed 
contribution shall be treated as separate transactions occurring 
immediately after P acquires control of S. Other provisions, such as 
sections 304, 354, 358 and 368, shall apply after the adjustments made 
pursuant to paragraph (b)(1) of this section and this paragraph.
    (4) Example. The rules of this paragraph (b) are illustrated by the 
following example:

    (i) Facts. P, a publicly traded domestic corporation, owns all 
of the outstanding stock of FS, a foreign corporation, and all of 
the outstanding stock of US1, a domestic corporation that is a 
member of the P consolidated group. US1 owns all of the outstanding 
stock of FT, a foreign corporation, the fair market value of which 
is $100x. FS purchases $100x of P stock on the open market for cash. 
Pursuant to foreign law, FT merges with and into FS in a triangular 
reorganization described in section 368(a)(1)(A) by reason of 
section 368(a)(2)(D). US1 exchanges all the outstanding stock of FT 
for the stock of P purchased by FS on the open market for $100x 
cash.
    (ii) Analysis. The triangular reorganization is described in 
paragraph (a)(1) of this section. Therefore, pursuant to paragraphs 
(b)(1) and (b)(3) of this section, FS is treated as distributing 
$100x to P under section 301. Immediately after such deemed 
distribution, P is deemed to contribute to FS the $100x that was 
deemed distributed to P. The deemed distribution and deemed 
contribution are treated as separate transactions occurring 
immediately before FS's purchase of the P stock used in the 
triangular reorganization.

    (c) Collateral adjustments. This paragraph (c) provides rules for 
the treatment of a deemed distribution or deemed contribution resulting 
under paragraph (b)(1) or (b)(3) of this section.
    (1) Deemed distribution. A deemed distribution of property 
described in paragraph (b)(1) of this section shall be treated as a 
distribution of property for all purposes of the Internal Revenue Code. 
For example, under section 301(c) the distribution may constitute a 
dividend to the extent of the earnings and profits of S, a return of 
basis, or gain from the sale or exchange of property, as appropriate. 
In addition, sections 902 and 959 may apply when S is foreign, and 
sections 897, 1442, and 1445 may apply when S is domestic.
    (2) Deemed contribution. A deemed contribution of property 
described in paragraph (b)(3) of this section shall be treated as a 
contribution of property for all purposes of the Internal Revenue Code. 
For example, appropriate adjustments to P's basis in the S stock and 
other affected items shall be made according to applicable provisions.
    (d) Special rule. Appropriate adjustments shall be made pursuant to 
this section if, in connection with a triangular reorganization, a 
transaction is engaged in with a view to avoid the purpose of this 
section as described in paragraph (a)(1) of this section. For example, 
if S is formed or availed of with a view to avoid the purpose of this 
section, the earnings and profits of S may be deemed to include the 
earnings and profits of a corporation related to S (within the meaning 
of section 267(b)).
    (e) Effective/applicability date--(1) Acquisitions of P stock from 
P or related persons. Except as otherwise provided in this paragraph 
(e), this section applies to triangular reorganizations described in 
paragraph (a)(1) of this section, to the extent S acquires the P stock 
from P or from a person related to P or S within the meaning of section 
267(b) or 707(b), occurring on or after September 22, 2006. This 
section, however, shall not apply to triangular reorganizations 
described in paragraph (a)(1) of this section, to the extent S acquires 
the P stock from P or from a person related to P or S within the 
meaning of section 267(b) or 707(b), completed on or after September 
22, 2006, pursuant to a written agreement that was (subject to 
customary conditions) binding before September 22, 2006, and all times 
afterward.
    (2) Acquisitions of P stock from persons other than P--(i) General 
rule. Except as otherwise provided in this paragraph (e), this section 
applies to triangular reorganizations described in paragraph (a)(1) of 
this section, to the extent S acquires the P stock from a person other 
than P that is not related to P or S within the meaning of section 
267(b) or 707(b) (unrelated person), occurring on or after May 31, 
2007.
    (ii) Binding commitment exception. This section shall not apply to 
triangular reorganizations described in paragraph (a)(1) of this 
section, to the extent S acquires the P stock from an unrelated person, 
pursuant to a written agreement that was (subject to customary 
conditions) binding before May 31, 2007, and all times afterward, but 
only to the extent that--
    (A) S acquired the P stock from an unrelated person before May 31, 
2007; or
    (B) S had a commitment to acquire the P stock from an unrelated 
person pursuant to a written agreement that was (subject to customary 
conditions) binding before May 31, 2007, and all times afterward, or 
pursuant to a tender offer announced before May 31, 2007, that is 
subject to section 14(d) of the

[[Page 30305]]

Securities and Exchange Act of 1934 (15 U.S.C. 78n(d)(1)) and 
Regulation 14(D) (17 CFR 240.14d-1 through 240.14d-101) or that is 
subject to comparable foreign laws.
    (3) Application of special rule--(i) General rule. Except as 
provided in paragraph (e)(3)(ii) of this section, paragraph (d) of this 
section applies to triangular reorganizations described in paragraph 
(a)(1) of this section occurring on or after May 31, 2007.
    (ii) Binding commitment exception. Paragraph (d) of this section 
shall not apply to triangular reorganizations described in paragraph 
(a)(1) of this section entered into pursuant to a written agreement 
that was (subject to customary conditions) binding before May 31, 2007, 
and all times afterward, but only to the extent that--
    (A) S acquired the P stock before May 31, 2007; or
    (B) S had a commitment to acquire the P stock from an unrelated 
person pursuant to a written agreement that was (subject to customary 
conditions) binding before May 31, 2007, and all times afterward, or 
pursuant to a tender offer announced before May 31, 2007, that is 
subject to section 14(d) of the Securities and Exchange Act of 1934 (15 
U.S.C. 78n(d)(1)) and Regulation 14(D) (17 CFR 240.14d-1 through 
240.14d-101) or that is subject to comparable foreign laws.
    (4) Treatment of S stock as property--(i) General rule. Except as 
provided in paragraph (e)(4)(ii) of this section, the treatment of S 
stock as property under paragraph (a)(2)(ii) of this section applies to 
triangular reorganizations described in paragraph (a)(1) of this 
section occurring on or after May 23, 2008.
    (ii) Binding commitment exception. The treatment of S stock as 
property under paragraph (a)(2)(ii) of this section shall not apply to 
triangular reorganizations described in paragraph (a)(1) of this 
section occurring on or after May 23, 2008 entered into pursuant to a 
written agreement that was (subject to customary conditions) binding 
before May 23, 2008 and all times afterward, but only to the extent 
that--
    (A) S acquired the P stock before May 23, 2008; or
    (B) S had a commitment to acquire the P stock from an unrelated 
person pursuant to a written agreement that was (subject to customary 
conditions) binding before May 23, 2008 and all times afterward, or 
pursuant to a tender offer announced before May 23, 2008, that is 
subject to section 14(d) of the Securities and Exchange Act of 1934 (15 
U.S.C. 78n(d)(1)) and Regulation 14(D) (17 CFR 240.14d-1 through 
240.14d-101) or that is subject to comparable foreign laws.
    (5) Expiration. The applicability of this section expires May 23, 
2011.

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
    Approved: May 16, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E8-11653 Filed 5-23-08; 8:45 am]
BILLING CODE 4830-01-P