Internal Revenue Bulletin: 2004-32
August 9, 2004
Table of Contents
LIFO; price indexes; department stores. The May 2004 Bureau of Labor Statistics price indexes are accepted for use by department stores employing the retail inventory and last-in, first-out inventory methods for valuing inventories for tax years ended on, or with reference to, May 31, 2004.
Corporate reorganizations. This ruling provides that if, pursuant to an integrated plan, a parent corporation sells the stock of a subsidiary to another subsidiary and the acquired subsidiary liquidates into the acquiring subsidiary, the transaction is a reorganization under section 368(a)(1)(D) of the Code.
Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for August 2004.
Bankruptcy; golden parachute payments. This ruling provides rules for the application of section 280G of the Code, concerning golden parachute payments, in the context of a bankruptcy. Specifically, this ruling addresses whether the acquisition of stock by the former creditors results in a change in ownership or control, whether a corporation whose stock is de-listed is eligible for the exemption for certain corporations whose stock is not readily tradeable on an established securities market if the shareholder approval and disclosure requirements described in the final regulations are satisfied, and whether stock that is de-listed from a securities market is considered readily tradeable if it is traded on an over-the-counter market (such as the pink sheets).
This Treasury decision removes temporary regulation section 1.463-1T, which provides a rule for an election to deduct vested accrued vacation pay for a taxpayer’s first taxable year ending after July 18, 1984. The repeal of section 463 of the Code in 1987 has rendered the temporary regulation obsolete.
Final regulations under section 461 of the Code clarify that the transfer of a taxpayer’s note or promise to provide property or services in the future is not a transfer for the satisfaction of a contested liability under section 461(f). A transfer of a taxpayer’s stock or the stock or note of a related party also is not a transfer for the satisfaction of a contested liability under section 461(f). The regulations further provide that, in general, economic performance does not occur when a taxpayer transfers money or other property to a trust, escrow account, or court to provide for the satisfaction of a contested payment liability.
Proposed regulations relate to the application of section 1045 of the Code to partnerships and their partners. The regulations provide rules regarding the deferral of gain on a partner’s sale of qualified small business stock and deferral of gain on a partner’s sale of qualified small business stock distributed by a partnership. A public hearing is scheduled for November 2, 2004.
This notice requests comments regarding the treatment of certain financial transactions commonly known as credit default swaps (CDSs).
This document provides that certain eligible entities may request relief for a late S corporation election and a late election to be classified as an association taxable as a corporation within 18 months of the original due date of the S corporation election (but in no event later than 6 months after the due date of the tax return, excluding extensions, for the first year the entity intended to be an S corporation).
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