[Federal Register Volume 86, Number 45 (Wednesday, March 10, 2021)]
[Rules and Regulations]
[Pages 13647-13648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04789]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9936]
RIN 1545-BO59


Guidance on Passive Foreign Investment Companies; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

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SUMMARY: This document contains corrections to the final regulations 
Treasury Decision 9936, that were published in the Federal Register on 
Friday, January 15, 2021. The final regulations regarding the 
determination of whether a foreign corporation is treated as a passive 
foreign investment company (``PFIC'') for purposes of the Internal 
Revenue Code (``Code''), and the application and scope of certain rules 
that determine whether a United States person that indirectly holds 
stock in a PFIC is treated as a shareholder of the PFIC.

DATES: These corrections are effective on March 10, 2021 and applicable 
on or after January 15, 2021.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations Sec. Sec.  
1.1291-0 and 1.1291-1, 1.1297-0 through 1.1297-2, 1.1298-0, 1.1298-2, 
and 1.1298-4, Christina G. Daniels at (202) 317-6934; concerning the 
regulations Sec. Sec.  1.1297-4 and 1.1297-6, Josephine Firehock at 
(202) 317-4932 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    The final regulations (TD 9936) that are the subject of this 
correction are issued under sections 1297 and 1298 of the Internal 
Revenue Code.

Need for Correction

    As published on January 15, 2021 (86 FR 4516), the final 
regulations (TD 9936) contain errors that need to be corrected.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

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


[[Page 13648]]


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


0
Par. 2. Section 1.1297-0 is amended by revising the entry for Sec.  
1.1297-2(g)(12) to read as follows:


Sec.  1.1297-0   Table of contents.

* * * * *


Sec.  1.1297-2  Special rules regarding look-through subsidiaries and 
look-through partnerships.

* * * * *
    (g) * * *
    (12) TFC obligation.
* * * * *

0
Par. 3. Section 1.1297-1 is amended by:
0
a. Removing ``Sec.  1.1297-2(b)(2)(i))'' in the first sentence of 
paragraph (d)(1)(v)(C)(1) and adding in its place ``Sec.  1.1297-
2(b)(2)(i)''.
0
b. Revising paragraph (f)(8).
    The revision reads as follows:


Sec.  1.1297-1   Definition of passive foreign investment company.

* * * * *
    (f) * * *
    (8) Related person. For purposes of applying the rules of this 
section and Sec.  1.1297-2 with respect to section 1297(b)(2)(C), the 
term means a related person within the meaning of section 954(d)(3).
* * * * *

0
Par. 4. Section 1.1297-2 is amended by:
0
a. Removing ``of this section))'' in the first sentence of paragraph 
(b)(3)(i) and adding in its place ``of this section)''.
0
b. Revising the first sentence of paragraph (c)(4)(iii)(B).
0
c. Removing ``PFIC .'' at the end of paragraph (e)(3)(i)(B)(1) and 
adding in its place ``PFIC.''
0
d. Revising the first sentence of paragraph (g)(4)(iv)(A)(2)(iii).
    The revisions read as follows:


Sec.  1.1297-2   Special rules regarding look-through subsidiaries and 
look-through partnerships.

* * * * *
    (c) * * *
    (4) * * *
    (iii) * * *
    (B) * * * The results are the same as in paragraph (c)(4)(ii)(B) of 
this section (the results in Example 2), except that TFC's assets also 
do not include the stock of LTS2.
    * * *
* * * * *
    (g) * * *
    (4) * * *
    (iv) * * *
    (A) * * *
    (2) * * *
    (iii) * * * For purposes of paragraph (b)(3) of this section, FPS 
qualifies as a look-through partnership because TFC satisfies the 
active partner tests of both paragraphs (g)(4)(ii)(A) and (B) of this 
section. * * *
* * * * *

0
Par. 5. Section 1.1297-4 is amended by:
0
a. Revising paragraph (d)(6).
0
b. Removing ``written by a'' in paragraph (f)(5) and adding in its 
place ``written by, a''.
    The revision reads as follows:


Sec.  1.1297-4   Qualifying insurance corporation.

* * * * *
    (d) * * *
    (6) Stock ownership. For purposes of this section, ownership of 
stock in a foreign corporation means either direct ownership of such 
stock or indirect ownership determined using the rules specified in 
Sec.  1.1291-1(b)(8) (but without regard to the 50 percent ownership 
requirement of Sec.  1.1291-1(b)(8)(ii)(A)).
* * * * *

0
Par. 6. Section 1.1298-2 is amended by revising the second sentence of 
paragraph (c)(3), the second sentence of paragraph (f)(1)(i)(B), and 
the first sentence of paragraph (f)(2)(ii) to read as follows:


Sec.  1.1298-2   Rules for certain corporations changing businesses.

* * * * *
    (c) * * *
    (3) * * * However, if activities performed by the officers and 
employees of a look-through subsidiary of a corporation or of a look-
through partnership (including a look-through subsidiary or a look-
through partnership with respect to which paragraph (d) of this section 
applies) would be taken into account by the corporation pursuant to 
Sec.  1.1297-2(e) if it applied, such activities are taken into account 
for purposes of the determination of the existence of an active trade 
or business and the determination of whether assets are used in an 
active trade or business.
* * * * *
    (f) * * *
    (1) * * *
    (i) * * *
    (B) * * * The residual gain computed under Sec.  1.1297-2(f)(2) on 
the sale of the FS stock is $10x. * * *
* * * * *
    (2) * * *
    (ii) * * * The results are the same as in paragraph (f)(1)(ii) of 
this section (the results in Example 1), except that under paragraph 
(c)(1) of this section, the passive income considered attributable to 
proceeds from a disposition of one or more active trades or businesses 
is $4x (from investment of disposition proceeds). * * *
* * * * *


Sec.  1.1298-4   [Amended]

0
Par. 7. Section 1.1298-4(f) is amended by removing ``Janyuary'' and 
adding in its place ``January''.

Crystal Pemberton,
Senior Federal Register Liaison, Legal Processing Division, Associate 
Chief Counsel (Procedure and Administration).
[FR Doc. 2021-04789 Filed 3-9-21; 8:45 am]
BILLING CODE 4830-01-P