[Federal Register Volume 79, Number 166 (Wednesday, August 27, 2014)]
[Rules and Regulations]
[Pages 51090-51091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20330]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9691]
RIN 1545-BL24


Debt That Is a Position in Personal Property That Is Part of a 
Straddle

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations relating to the 
application of the straddle rules to a debt instrument. The final 
regulations clarify that a taxpayer's obligation under a debt 
instrument can be a position in personal property that is part of a 
straddle. The final regulations primarily affect taxpayers that issue 
debt instruments that provide for one or more payments that reference 
the value of personal property or a position in personal property.

DATES: Effective Date: These regulations are effective on August 27, 
2014.
    Applicability Dates: For dates of applicability, see Sec.  
1.1092(d)-1(e).

FOR FURTHER INFORMATION CONTACT: Mary Brewer, (202) 317-6895 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background And Explanation Of Provisions

1. Summary of Prior Notices of Proposed Rule Making and Temporary 
Regulations

    This document contains amendments to 26 CFR Part 1. On January 18, 
2001, a notice of proposed rulemaking (REG-105801-00) (the 2001 NPRM) 
was published in the Federal Register (66 FR 4746). The 2001 NPRM 
broadly addressed the application of the straddle rules and section 
263(g), and it included proposed regulation Sec.  1.1092(d)-1(d) to 
clarify the circumstances under which an issuer's position under a debt 
instrument is treated as a position in personal property that is part 
of a straddle under section 1092 of the Internal Revenue Code. No 
public hearing was requested or held. Written and electronic comments 
responding to the 2001 NPRM were received, and the only commenter that 
substantively addressed proposed Sec.  1.1092(d)-1(d) urged its 
adoption.
    On September 5, 2013, temporary and final regulations (TD 9635) 
were published in the Federal Register (78 FR 54568). In Sec.  
1.1092(d)-1T(d), the temporary regulations adopted the text of proposed 
Sec.  1.1092(d)-1(d), as published in the 2001 NPRM. As had been 
proposed in the 2001 NPRM, to make room for a substantive paragraph 
(d), the 2013 final regulations redesignated as paragraph (e)(1) the 
section's effective/applicability date provisions, which had formerly 
been designated as Sec.  1.1092(d)-1(d). The temporary regulations 
added a new paragraph (e)(2) containing the applicability date that had 
been proposed in the 2001 NPRM. A notice of proposed rulemaking (REG-
111753-12) (the 2013 NPRM) cross-referencing the temporary regulations 
was published in the same issue of the Federal Register (78 FR 54598). 
No public hearing was requested or held. No written or electronic 
comments responding to the notice of proposed rulemaking were received.
    This Treasury decision adopts the provisions in the 2013 NPRM 
without substantive change. In addition, this Treasury decision amends 
the effective/applicability date provisions in Sec.  1.1092(d)-1(e) to 
provide explicitly the dates for those portions of Sec.  1.1092(d)-1 
that were added by a 1993 Treasury decision (TD 8491) as discussed 
further in section 3 of this preamble.
    The corresponding temporary regulations are removed. The remainder 
of the 2001 NPRM remains proposed.

2. Overview of the Final Regulations

    The final regulations provide guidance under section 1092 regarding 
the circumstances in which an issuer's obligation under a debt 
instrument may be a position in actively traded personal property and, 
therefore, part of a straddle.
    Section 1092(d)(1) defines ``personal property'' to mean ``personal 
property of a type that is actively traded.'' A debt or obligation 
generally is not property of the debtor or obligor. Nevertheless, if a 
debt instrument provides for payments that are (or are reasonably 
expected to be) linked to the value of personal property as so defined, 
then the obligor on the instrument has a position in the personal 
property referenced by the debt instrument. Therefore, as was proposed

[[Page 51091]]

in the 2013 NPRM, Sec.  1.1092(d)-1(d) of the final regulations 
expressly provides that an obligation under a debt instrument may be a 
position in personal property that is part of a straddle.

3. Dates of Applicability of the Regulations

    The final regulations adopt the effective/applicability date set 
forth in the 2013 NPRM by providing that Sec.  1.1092(d)-1(d) applies 
to straddles established on or after January 17, 2001 (the date on 
which the 2001 NPRM was filed with the Federal Register). No inference 
is intended with respect to straddles established prior to January 17, 
2001. In appropriate cases, the IRS may take the position under section 
1092(d)(2) that an obligation under a debt instrument was part of a 
straddle prior to the effective/applicability date of Sec.  1.1092(d)-
1(d) if the debt instrument functioned economically as an interest in 
actively traded personal property.
    In addition, the final regulations clarify the effective-date 
paragraph (Sec.  1.1092(d)-1(e)) to reflect the applicability of 
provisions in Sec.  1.1092(d)-1 that were originally proposed in 1991 
and adopted in 1993. On July 10, 1991, a notice of proposed rulemaking 
(FI-16-89) (the 1991 NPRM) was published in the Federal Register (56 FR 
31350). The 1991 NPRM primarily addressed accounting for notional 
principal contracts but also proposed a new Sec.  1.1092(d)-1, 
regarding the definition of actively traded personal property for 
purposes of the straddle rules. Proposed Sec.  1.1092(d)-1(a) clarified 
the definition of actively traded personal property, and proposed Sec.  
1.1092(d)-1(b) enumerated several categories of established financial 
markets. See 56 FR 31353. The preamble also stated, ``Proposed 
regulation section 1.1092(d)-1 is proposed to be effective for notional 
principal contracts entered into on or after July 8, 1991.'' See 56 FR 
31350. (July 8, 1991, was the date on which the 1991 NPRM was filed 
with the Federal Register.)
    However, the text of the 1991 proposed regulations contained an 
effective date only in paragraph (c), which was the portion of the 
proposed regulations that focused on which notional principal contracts 
would be treated as actively traded personal property. See proposed 
Sec.  1.1092(d)-1(c)(2) (``(2) Effective date. This paragraph (c) 
applies to notional principal contracts entered into on or after July 
8, 1991.'').
    Final regulations (TD 8491) (the 1993 Treasury decision), which 
issued Sec.  1.1092(d)-1, were published in the Federal Register on 
October 14, 1993 (58 FR 53125). The 1993 Treasury decision moved the 
effective date for paragraph (c) to a new paragraph (d), and added an 
October 14, 1993, effective date for new paragraph (b)(1)(vii). The 
1993 Treasury decision, however, like the 1991 NPRM, did not contain 
explicit effective dates for paragraph (a) or for the portion of 
paragraph (b) that had appeared in the 1991 NPRM.
    Accordingly, these final regulations revise Sec.  1.1092(d)-1(e) to 
include explicit effective/applicability-date provisions for all 
paragraphs of Sec.  1.1092(d)-1.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13563. 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 these regulations, and because the regulation does 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 proposed regulations 
preceding these final regulations were submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on their 
impact on small business. No comments were received.

Drafting Information

    The principal author of these regulations is Mary Brewer, Office of 
Associate Chief Counsel (Financial Institutions and Products). 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

    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 removing 
the entry for Sec.  1.1092(d)-1T and by adding an entry in numerical 
order to read as follows:

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

    Section 1.1092(d)-1 also issued under 26 U.S.C. 1092(b)(1). * * 
*


0
Par. 2. Section 1.1092(d)-1 is amended by revising paragraphs (d) and 
(e) to read as follows:


Sec.  1.1092(d)-1  Definitions and special rules.

* * * * *
    (d) Debt instrument linked to the value of personal property. If a 
taxpayer is the obligor under a debt instrument one or more payments on 
which are linked to the value of personal property or a position with 
respect to personal property, then the taxpayer's obligation under the 
debt instrument is a position with respect to personal property and may 
be part of a straddle.
    (e) Effective/applicability dates--(1) Paragraphs (a) and (b) of 
this section apply to positions entered into on or after October 14, 
1993.
    (2) Paragraph (c) of this section applies to positions entered into 
on or after July 8, 1991.
    (3) Paragraph (d) of this section applies to straddles established 
on or after January 17, 2001.

Sec.  1.1092(d)-1T  [Removed]

0
Par. 3. Section 1.1092(d)-1T is removed.

John Dalrymple.
Deputy Commissioner for Services and Enforcement.

    Approved: July 24, 2014.
Mark J. Mazur
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2014-20330 Filed 8-26-14; 8:45 am]
BILLING CODE 4830-01-P