[Federal Register Volume 84, Number 60 (Thursday, March 28, 2019)]
[Proposed Rules]
[Pages 11686-11687]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05959]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-143686-07]
RIN 1545-BH35


The Allocation of Consideration and Allocation and Recovery of 
Basis in Transactions Involving Corporate Stock or Securities; 
Withdrawal

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Proposed rule; withdrawal.

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SUMMARY: This document withdraws a notice of proposed rulemaking 
containing proposed regulations under numerous sections of the Internal 
Revenue Code (Code). The proposed regulations being withdrawn would 
have provided guidance on the recovery of stock basis in distributions 
of property made by a corporation to a shareholder and certain 
transactions treated as dividend-equivalents, as well as guidance 
regarding the determination of gain and the basis of stock or 
securities received in certain transactions. The proposed regulations 
being withdrawn would have affected shareholders and security holders 
of corporations.

DATES: As of March 28, 2019, the notice of proposed rulemaking that was 
published in the Federal Register (74 FR 3509) on January 21, 2009, 
with corrections published in the Federal Register (74 FR 9575) on 
March 5, 2009, is withdrawn.

FOR FURTHER INFORMATION CONTACT: Kevin M. Jacobs at (202) 317-5332 or 
Aglaia Ovtchinnikova at (202) 317-6975 (neither a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    On January 21, 2009, the Department of the Treasury (Treasury 
Department) and the IRS published a notice of proposed rulemaking (REG-
143686-07)

[[Page 11687]]

in the Federal Register (74 FR 3509) containing proposed regulations 
under sections 301, 302, 304, 351, 354, 355, 356, 358, 368, 861, 1001, 
and 1016 of the Code. On March 5, 2009, the Treasury Department and the 
IRS published corrections to the notice of proposed rulemaking in the 
Federal Register (74 FR 9575) (collectively, the 2009 Proposed 
Regulations).
    The 2009 Proposed Regulations generally would have provided a 
single model for stock basis recovery by a shareholder that receives a 
distribution to which section 301 applies and a single model for sale 
and exchange transactions to which section 302(a) applies, including 
certain elements of an exchange in pursuance of a plan of 
reorganization under section 368. The 2009 Proposed Regulations also 
would have defined the scope of the exchange that must be analyzed 
under particular Code provisions and provided a methodology for 
determining gain under section 356 and stock basis under section 358.
    The 2009 Proposed Regulations responded to comments received by the 
Treasury Department and the IRS regarding the then-recently published 
section 358 regulations. These comments included suggestions to expand 
the tracing rules of the section 358 regulations to stock transfers 
that are subject to section 351 but do not qualify as reorganizations, 
as well as questions regarding whether (and, if so, to what extent) 
shareholder elections constitute terms of an exchange and whether the 
terms of an exchange control for purposes of qualifying a transaction 
as a reorganization under section 368.
    Finally, the 2009 Proposed Regulations included amendments to the 
current regulations under section 304 that would have updated those 
regulations to reflect statutory amendments to that section. See 
section 226 of the Tax Equity and Fiscal Responsibility Act of 1982, 
Pub. L. 97-248 (96 Stat. 325, 490) (September 3, 1982), section 712(l) 
of the Deficit Reduction Act of 1984, Pub. L. 98-369 (98 Stat. 494, 
953-55) (July 18, 1984), section 1875(b) of the Tax Reform Act of 1986, 
Pub. L. 99-514 (100 Stat. 2085, 2894) (October 22, 1986), and section 
1013 of the Taxpayer Relief Act of 1997, Pub. L. 105-34 (111 Stat. 788, 
918) (August 5, 1997).
    The Treasury Department and the IRS received many comments 
regarding the 2009 Proposed Regulations. The chief concern raised by 
commenters was that the approach taken in the 2009 Proposed Regulations 
represented an unwarranted departure from current law as a result of 
which minor changes to an overall business transaction could cause 
meaningful changes to the tax consequences, thereby elevating the form 
of the transaction over its substance.
    After thoroughly considering the comments received, the Treasury 
Department and the IRS have determined that it is unlikely that the 
approach of the 2009 Proposed Regulations can be implemented in 
comprehensive final regulations without significant modifications. As a 
result, the Treasury Department and the IRS have decided to withdraw 
the 2009 Proposed Regulations. The Treasury Department and the IRS are 
continuing to study the issues addressed in the 2009 Proposed 
Regulations, with a particular focus on issues surrounding sections 
301(c)(2) and 304, and Sec.  1.302-2(c) of the Income Tax Regulations.
    The Treasury Department and the IRS continue to believe that under 
current law, the results of a section 301 distribution should derive 
from the consideration received by a shareholder in respect of each 
share of stock, notwithstanding designations otherwise. See Johnson v. 
United States, 435 F.2d 1257 (4th Cir. 1971). The Treasury Department 
and the IRS also continue to believe that, under current law, with 
respect to redemptions governed by section 302(d), any unrecovered 
basis in the redeemed stock of a shareholder may be shifted to other 
stock only if such an adjustment is a proper adjustment within the 
meaning of Sec.  1.302-2(c). Not all shifts of a redeemed shareholder's 
unrecovered basis result in proper adjustments, and certain basis 
adjustments can lead to inappropriate results. See, e.g., Notice 2001-
45, 2001-33 I.R.B. 129.

Drafting Information

    The principal author of this withdrawal notice is Aglaia 
Ovtchinnikova of the Office of Associate Chief Counsel (Corporate). 
However, other personnel from the Treasury Department and the IRS 
participated in its development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Withdrawal of Notice of Proposed Rulemaking

0
Accordingly, under the authority of 26 U.S.C. 7805, the Treasury 
Department and the IRS withdraw the notice of proposed rulemaking (REG-
143686-07) that was published in the Federal Register (74 FR 3509) on 
January 21, 2009, with corrections that were published in the Federal 
Register (74 FR 9575) on March 5, 2009.

Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2019-05959 Filed 3-27-19; 8:45 am]
 BILLING CODE 4830-01-P