Internal Revenue Bulletin: 2006-26 |
June 26, 2006 |
Table of Contents
DEPARTMENT OF THE TREASURY
Internal
Revenue Service
26 CFR Parts 1 and 602
These regulations affect taxpayers that file Federal income tax returns. They simplify, clarify, or eliminate reporting burdens and also eliminate regulatory impediments to the electronic filing of certain statements that taxpayers are required to include on or with their Federal income tax returns. The text of the temporary regulations also serves as the text of the proposed regulations (REG-134317-05) set forth in the notice of proposed rulemaking on this subject in this issue of the Bulletin.
Effective Date: These regulations are effective on May 30, 2006.
Applicability Date: For dates of applicability, see §§1.302-2T(d), 1.302-4T(h), 1.331-1T(f), 1.332-6T(e), 1.338-10T(c), 1.351-3T(f), 1.355-5T(e), 1.368-3T(e), 1.381(b)-1T(e), 1.382-8T(j)(4), 1.382-11T(b), 1.1081-11T(f), 1.1221-2T(j), 1.1502-13T(m), 1.1502-31T(j), 1.1502-32T(j), 1.1502-33T(k), 1.1502-35T(k), 1.1502-76T(d), 1.1502-95T(g), 1.1563-1T(e), 1.1563-3T(e) and 1.6012-2T(k). The applicability of these regulations will expire on May 26, 2009.
These temporary regulations are being issued without prior notice and public procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553). For this reason, the collection of information contained in these regulations has been reviewed and, pending receipt and evaluation of public comments, approved by the Office of Management and Budget under control number 1545-2019. Responses to this collection of information are mandatory.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number.
For further information concerning this collection of information, and where to submit comments on the collection of information and the accuracy of the estimated burden, and suggestions for reducing this burden, please refer to the preamble to the cross-referencing notice of proposed rulemaking published in this issue of the Bulletin.
Books and records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
This Treasury Decision amends Treasury regulations under sections 279, 302, 331, 332, 338, 351, 355, 368, 381, 382, 1081, 1221, 1502, 1563, and 6012 of the Internal Revenue Code (Code) that require taxpayers to include a statement on or with their Federal income tax returns. In some cases, these statements are the method by which taxpayers elect (or elect out of) a particular income tax treatment. In other cases, these statements are the method by which taxpayers report that they undertook a particular type of transaction. In both cases, these regulations often require taxpayers to include detailed amounts of information in these statements, or do not clearly specify the required information.
In addition, many of these regulations present impediments that prevent corporate taxpayers from submitting these statements as part of an electronically filed Federal income tax return (e-filing). Some of these regulations, for example, impede e-filing by requiring taxpayers to sign a statement and include it on or with the taxpayer’s income tax return. Others require a taxpayer to include third-party signatures on such statements or require taxpayers to attach documents, or information supplied by a third party.
Some regulations require a taxpayer to include a statement on or with its return if it undertakes certain types of transactions. In some cases, these regulations require the taxpayer to submit detailed information about the particular transaction with its return. In other cases, the scope of the reporting requirement was unclear. The IRS and Treasury Department believe that it is not useful to require taxpayers to attach all of this information to their returns. Accordingly, these regulations simplify and clarify the reporting requirements under several provisions.
Some regulations require that all shareholders and security holders that receive stock or securities in certain distributions or exchanges file statements providing information about that distribution or exchange. See, e.g., §§1.355-5(b) and 1.368-3(b). The IRS and Treasury Department have determined that for most shareholders and security holders these statements are no longer necessary. Accordingly, these temporary regulations only require that a “significant holder” file such statement. In the case of stock, a significant holder is a holder of stock of a corporation if at the time of the distribution or exchange such holder owns at least: (1) 5% (by vote or value) of the total outstanding stock of such corporation if the stock owned by such holder is publicly traded, or (2) 1% (by vote or value) of the total outstanding stock of such corporation if the stock owned by such holder is not publicly traded. See, e.g., §§1.355-5T(b) and 1.368-3T(b). These regulations use the definition of publicly traded stock found elsewhere in the regulations. See, e.g., §§1.1092(d)-1(b), 1.1273-2(f) and 54.4975-7(b)(1)(iv).
In the case of securities, a significant holder is a holder of securities of a corporation if at the time of the distribution or exchange such holder owns securities with a basis of $1,000,000 or more.
As described in this preamble in paragraphs 2.A. and 2.B., certain regulations impose reporting requirements that are impediments to e-filing. The IRS and Treasury Department are issuing these temporary regulations to eliminate such impediments without altering the substantive requirements of the current regulations.
Some regulations require a taxpayer to include a statement on or with its return in order to make an election, or notify the IRS that the taxpayer is undertaking a transaction authorized by that provision. In the case of elections, the current regulations often require the taxpayer to sign such statement. In these circumstances, the requirement that the taxpayer sign the statement is an impediment to e-filing and superfluous. By signing the return, a taxpayer is attesting to the validity of the Form 1120 as well as all of the attachments. Accordingly, for these types of statements, the underlying regulations are amended to eliminate the requirement that such statements be signed.
Some regulations require that the taxpayer and another person sign a statement, and that the taxpayer include such jointly signed statement on or with its return. In some cases, the taxpayer is required to provide a copy of this statement, or other information, to the other person and that person is required to include such copy or information on or with its return.
These requirements are impediments to e-filing. However, in such cases, the joint signature requirement cannot simply be eliminated because, in the absence of that requirement, the taxpayer and the other person might take inconsistent positions. Therefore, these regulations amend the provisions with a joint signature requirement to require the taxpayer and the other person to include a statement on or with its return indicating that it has entered into an agreement with the other party addressing the substantive matters covered by the statement required under the current regulations. These agreements will contain the same information as the jointly signed statements required by the current regulations. Each party will be required to retain either the original or a copy of this agreement as part of its records. See §1.6001-1(e).
Section 1561(a) provides that the component members of a controlled group of corporations are limited to using the amounts of the tax benefit items described therein in the same manner as if they were one corporation. Section 1561(a) generally provides that such amounts shall be divided equally among such members. However, section 1561(a) also provides that if such members adopt an apportionment plan, they are then permitted to allocate such amounts among themselves unequally. Section 1.1561-3(b) provides the mechanism by which such members may consent to an apportionment plan.
Section 1.1561-3(b) presents impediments to e-filing. However, the IRS and Treasury Department have determined that these impediments cannot be eliminated without also addressing certain substantive issues present in these regulations. Addressing these issues is beyond the scope of this project. Therefore, these issues will be addressed in separate guidance that the IRS and Treasury Department expect to publish later this year.
Certain of these regulations require taxpayers to provide in their reporting statement the fair market value and basis of assets or stock distributed or exchanged in a transaction. The IRS and Treasury Department recognize that, in some cases, a taxpayer may not conveniently be able to provide a precise valuation of property exchanged or distributed in a transaction that is not taxable in the current year. In those cases, for the purposes of these statements, the IRS and Treasury Department will accept a taxpayer’s good faith estimate of such fair market value.
Similarly, the IRS and Treasury Department recognize that there are occasionally situations where a taxpayer may not be able to precisely determine its basis in a taxable year in which that basis would not be relevant to determining the taxpayer’s taxable income. As in the case of fair market value, for purposes of these statements, the IRS and Treasury Department will in these situations accept a taxpayer’s good faith estimate of such basis.
In the case of a controlled group of corporations, §1.382-8 provides that, for purposes of determining the section 382 limitation, the value of the stock of each component member of the controlled group of which the loss corporation is a component member on the change date must be reduced by the value of the stock of any other component member that such component member directly owns immediately after an ownership change. However, the component member’s value may be increased by the amount of value that such other component member elects to restore.
The IRS and Treasury Department are aware that taxpayers generally elect to restore value from component members that are foreign corporations. The IRS and Treasury Department are also aware that taxpayers occasionally fail to make the election timely and must file a request for relief under §301.9100-1. Therefore, to reduce unnecessary elections and section 9100 requests, §1.382-8T(h)(2) will deem foreign component members to elect to restore full value to other component members under §1.382-8. Nevertheless, should such members not wish to restore the full amount of such value, they may elect not to restore all or part of such value. Further, a foreign component member that has items treated as connected with the conduct of a trade or business in the United States that it takes into account in determining its value under section 382(e)(3) is not subject to this deemed election.
The IRS and Treasury Department request comments regarding the scope and application of this deemed election to restore value.
The IRS and Treasury Department emphasize that although the amount of information that a taxpayer is required to include on or with its return has, in most cases, decreased, the taxpayer’s recordkeeping requirement remains unchanged. Certain of these regulations illustrate the type of information taxpayers are recommended to keep in order to substantiate their reporting position.
Contemporaneously with the issuance of these temporary regulations, the IRS and Treasury Department are releasing Rev. Proc. 2006-21, 2006-24 I.R.B. 1050, to remove e-filing impediments and reduce reporting requirements currently found in Rev. Proc. 89-56, 1989-2 C.B. 643, Rev. Proc. 90-39, 1990-2 C.B. 365, and Rev. Proc. 2002-32, 2002-1 C.B. 959. Each revenue procedure provides a method for consolidated taxpayers to request a specified consent or waiver from the Commissioner without submitting a request for a private letter ruling. In particular, Rev. Proc. 89-56 permits taxpayers to request a consent to use a 52-53 week tax year, Rev. Proc. 90-39 permits taxpayers to request a consent to change the method for allocating tax liability to members for earnings and profits purposes, and Rev. Proc. 2002-32 permits taxpayers to request a waiver of the 60-month limitation on reconsolidation.
These regulations also include a revision to §1.1502-35 that is not related to electronic filing or reporting requirements. The revision corrects an error in the determination of the time period during which suspended losses are reduced under that section. Specifically, these regulations provide that this time period ends on the day before the first date on which the subsidiary (and any successor) is not a member of the group.
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. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), refer to the Special Analyses section of the preamble to the cross-reference notice of proposed rulemaking published in this issue of the Bulletin. Pursuant to section 7805(f) of the Code, these temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
Paragraph 1. The authority citation for part 1 is amended by adding entries in numerical order to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.338-10T also issued under 26 U.S.C. 338. * * *
Section 1.1221-2T also issued under 26 U.S.C. 1502. * * *
Section 1.1502-13T also issued under 26 U.S.C. 1502. * * *
Section 1.1502-31T also issued under 26 U.S.C. 1502. * * *
Section 1.1502-32T also issued under 26 U.S.C. 1502. * * *
Section 1.1502-33T also issued under 26 U.S.C. 1502. * * *
Section 1.1502-35T also issued under 26 U.S.C. 1502. * * *
Section 1.1502-76T also issued under 26 U.S.C. 1502. * * *
Section 1.1502-95T also issued under 26 U.S.C. 1502. * * *
Par. 2. Section 1.279-5 is amended by removing paragraph (h).
Par. 3. Section 1.302-2 is amended by:
1. Redesignating paragraph (b) as paragraph (b)(1).
2. Revising newly designated paragraph (b)(1).
3. Adding paragraphs (b)(2) and (d).
The additions and revisions read as follows:
* * * * *
(b)(1) The question whether a distribution in redemption of stock of a shareholder is not essentially equivalent to a dividend under section 302(b)(1) depends upon the facts and circumstances of each case. One of the facts to be considered in making this determination is the constructive stock ownership of such shareholder under section 318(a). All distributions in pro rata redemptions of a part of the stock of a corporation generally will be treated as distributions under section 301 if the corporation has only one class of stock outstanding. However, for distributions in partial liquidation, see section 302(e). The redemption of all of one class of stock (except section 306 stock) either at one time or in a series of redemptions generally will be considered as a distribution under section 301 if all classes of stock outstanding at the time of the redemption are held in the same proportion. Distributions in redemption of stock may be treated as distributions under section 301 regardless of the provisions of the stock certificate and regardless of whether all stock being redeemed was acquired by the stockholders from whom the stock was redeemed by purchase or otherwise.
(2) [Reserved]. For further guidance, see §1.302-2T(b)(2).
* * * * *
(d) [Reserved]. For further guidance, see §1.302-2T(d)(1).
Par. 4. Section 1.302-2T is added to read as follows:
(a) through (b)(1) [Reserved]. For further guidance, see §1.302-2(a) through (b)(1).
(2) Unless paragraph (d) of §1.331-1T applies, every significant holder that transfers stock to the issuing corporation in exchange for property from such corporation must include on or with such holder’s return for the taxable year of such exchange a statement entitled, “STATEMENT PURSUANT TO §1.302-2T(b)(2) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT HOLDER OF THE STOCK OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF ISSUING CORPORATION].” If a significant holder is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include—
(i) The fair market value and basis of the stock transferred by the significant holder to the issuing corporation; and
(ii) A description of the property received by the significant holder from the issuing corporation.
(3) Definitions. For purposes of this section:
(i) Significant holder means any person that, immediately before the exchange—
(A) Owned at least five percent (by vote or value) of the total outstanding stock of the issuing corporation if the stock owned by such person is publicly traded; or
(B) Owned at least one percent (by vote or value) of the total outstanding stock of the issuing corporation if the stock owned by such person is not publicly traded.
(ii) Publicly traded stock means stock that is listed on—
(A) A national securities exchange registered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
(B) An interdealer quotation system sponsored by a national securities association registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3).
(iii) Issuing corporation means the corporation that issued the shares of stock, some or all of which were transferred by a significant holder to such corporation in the exchange described in paragraph (b)(2) of this section.
(4) Cross reference. See section 6043 of the Code for requirements relating to a return by a liquidating corporation.
(c) [Reserved]. For further guidance, see §1.302-2(c).
(d) Effective date—(1) Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
(2) Expiration date. The applicability of this section will expire on May 26, 2009.
Par. 5. Section 1.302-4 is amended by revising paragraph (a) and adding paragraph (h) to read as follows:
(a) [Reserved]. For further guidance, see §1.302-4T(a).
* * * * *
(h) [Reserved]. For further guidance, see §1.302-4T(h)(1).
Par. 6. Section 1.302-4T is added to read as follows:
(a) The agreement specified in section 302(c)(2)(A)(iii) shall be in the form of a statement entitled, “STATEMENT PURSUANT TO SECTION 302(c)(2)(A)(iii) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER OR RELATED PERSON, AS THE CASE MAY BE], A DISTRIBUTEE (OR RELATED PERSON) OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF DISTRIBUTING CORPORATION].” The distributee must include such statement on or with the distributee’s first return for the taxable year in which the distribution described in section 302(b)(3) occurs. If the distributee is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The distributee must represent in the statement—
(1) THE DISTRIBUTEE (OR RELATED PERSON) HAS NOT ACQUIRED, OTHER THAN BY BEQUEST OR INHERITANCE, ANY INTEREST IN THE CORPORATION (AS DESCRIBED IN SECTION 302(c)(2)(A)(i)) SINCE THE DISTRIBUTION; and
(2) THE DISTRIBUTEE (OR RELATED PERSON) WILL NOTIFY THE INTERNAL REVENUE SERVICE OF ANY ACQUISITION, OTHER THAN BY BEQUEST OR INHERITANCE, OF SUCH AN INTEREST IN THE CORPORATION WITHIN 30 DAYS AFTER THE ACQUISITION, IF THE ACQUISITION OCCURS WITHIN 10 YEARS FROM THE DATE OF THE DISTRIBUTION.
(b) through (g) [Reserved]. For further guidance, see §1.302-4(b) through (g).
(h) Effective date—(1) Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
(2) Expiration date. The applicability of this section will expire on May 26, 2009.
Par. 7. Section 1.331-1 is amended by revising paragraph (d) and adding paragraph (f) to read as follows:
* * * * *
(d) [Reserved]. For further guidance, see §1.331-1T(d).
* * * * *
(f) [Reserved]. For further guidance, see §1.331-1T(f)(1).
Par. 8. Section 1.331-1T is added to read as follows:
(a) through (c) [Reserved]. For further guidance, see §1.331-1(a) through (c).
(d) Reporting requirement—(1) General rule. Every significant holder that transfers stock to the issuing corporation in exchange for property from such corporation must include on or with such holder’s return for the year of such exchange the statement described in paragraph (d)(2) of this section unless—
(i) The property is part of a distribution made pursuant to a corporate resolution reciting that the distribution is made in complete liquidation of the corporation; and
(ii) The issuing corporation is completely liquidated and dissolved within one year after the distribution.
(2) Statement. If required by paragraph (d)(1) of this section, a significant holder must include on or with such holder’s return a statement entitled, “STATEMENT PURSUANT TO §1.331-1T(d) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT HOLDER OF THE STOCK OF [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF ISSUING CORPORATION].” If a significant holder is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include—
(i) The fair market value and basis of the stock transferred by the significant holder to the issuing corporation; and
(ii) A description of the property received by the significant holder from the issuing corporation.
(3) Definitions. For purposes of this section:
(i) Significant holder means any person that, immediately before the exchange—
(A) Owned at least five percent (by vote or value) of the total outstanding stock of the issuing corporation if the stock owned by such person is publicly traded; or
(B) Owned at least one percent (by vote or value) of the total outstanding stock of the issuing corporation if the stock owned by such person is not publicly traded.
(ii) Publicly traded stock means stock that is listed on—
(A) A national securities exchange registered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
(B) An interdealer quotation system sponsored by a national securities association registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3).
(iii) Issuing corporation means the corporation that issued the shares of stock, some or all of which were transferred by a significant holder to such corporation in the exchange described in paragraph (d)(1) of this section.
(4) Cross reference. See section 6043 of the Code for requirements relating to a return by a liquidating corporation.
(e) [Reserved]. For further guidance, see §1.331-1(e).
(f) Effective date—(1) Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
(2) Expiration date. The applicability of this section will expire on May 26, 2009.
Par. 9. Section 1.332-6 is removed.
Par. 10. Section 1.332-6T is added to read as follows:
(a) Statement filed by recipient corporation. If any recipient corporation received a liquidating distribution from the liquidating corporation pursuant to a plan (whether or not that recipient corporation has received or will receive other such distributions from the liquidating corporation in other tax years as part of the same plan) during the current tax year, such recipient corporation must include a statement entitled, “STATEMENT PURSUANT TO SECTION 332 BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A CORPORATION RECEIVING A LIQUIDATING DISTRIBUTION,” on or with its return for such year. If any recipient corporation is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include—
(1) The name and employer identification number (if any) of the liquidating corporation;
(2) The date(s) of all distribution(s) (whether or not pursuant to the plan) by the liquidating corporation during the current tax year;
(3) The aggregate fair market value and basis, determined immediately before the liquidation, of all of the assets of the liquidating corporation that have been or will be transferred to any recipient corporation;
(4) The date and control number of any private letter ruling(s) issued by the Internal Revenue Service in connection with the liquidation;
(5) The following representation: THE PLAN OF COMPLETE LIQUIDATION WAS ADOPTED ON [INSERT DATE (mm/dd/yyyy)]; and
(6) A representation by such recipient corporation either that—
(i) THE LIQUIDATION WAS COMPLETED ON [INSERT DATE (mm/dd/yyyy)]; or
(ii) THE LIQUIDATION IS NOT COMPLETE AND THE TAXPAYER HAS TIMELY FILED [INSERT EITHER FORM 952, “Consent To Extend the Time to Assess Tax Under Section 332(b),” OR NUMBER AND NAME OF THE SUCCESSOR FORM].
(b) Filings by the liquidating corporation. The liquidating corporation must timely file Form 966, “Corporate Dissolution or Liquidation,” (or its successor form) and its final Federal corporate income tax return. See also section 6043 of the Code.
(c) Definitions. For purposes of this section:
(1) Plan means the plan of complete liquidation within the meaning of section 332.
(2) Recipient corporation means the corporation described in section 332(b)(1).
(3) Liquidating corporation means the corporation that makes a distribution of property to a recipient corporation pursuant to the plan.
(4) Liquidating distribution means a distribution of property made by the liquidating corporation to a recipient corporation pursuant to the plan.
(d) Substantiation information. Under §1.6001-1(e), taxpayers are required to retain their permanent records and make such records available to any authorized Internal Revenue Service officers and employees. In connection with a liquidation described in this section, these records should specifically include information regarding the amount, basis, and fair market value of all distributed property, and relevant facts regarding any liabilities assumed or extinguished as part of such liquidation.
(e) Effective date—(1) Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
(2) Expiration date. The applicability of this section will expire on May 26, 2009.
Par. 11. Section 1.338-0 is amended by revising the entry for §1.338-10(a)(4)(iii) and adding entries for §1.338-10(c) and §1.338-10T to read as follows:
(a)(1) through (a)(4)(ii) [Reserved]
(iii) Procedure for filing a combined return.
(a)(4)(iv) through (b) [Reserved]
(c) Effective date.
(1) Applicability date.
(2) Expiration date.
* * * * *
Par. 12. Section 1.338-10 is amended by revising paragraph (a)(4)(iii) and adding paragraph (c) to read as follows:
(a) * * *
(4) * * *
(iii) [Reserved]. For further guidance, see §1.338-10T(a)(4)(iii).
* * * * *
(c) [Reserved]. For further guidance, see §1.338-10T(c)(1).
Par. 13. Section 1.338-10T is added to read as follows:
(a)(1) through (a)(4)(ii) [Reserved]. For further guidance, see §1.338-10(a)(1) through (a)(4)(ii).
(iii) Procedure for filing a combined return. A combined return is made by filing a single corporation income tax return in lieu of separate deemed sale returns for all targets required to be included in the combined return. The combined return reflects the deemed asset sales of all targets required to be included in the combined return. If the targets included in the combined return constitute a single affiliated group within the meaning of section 1504(a), the income tax return is signed by an officer of the common parent of that group. Otherwise, the return must be signed by an officer of each target included in the combined return. Rules similar to the rules in §1.1502-75(j) apply for purposes of preparing the combined return. The combined return must include a statement entitled, “ELECTION TO FILE A COMBINED RETURN UNDER SECTION 338(h)(15).” The statement must include—
(A) The name, address, and employer identification number of each target required to be included in the combined return; and
(B) The following declaration: EACH TARGET IDENTIFIED IN THIS ELECTION TO FILE A COMBINED RETURN CONSENTS TO THE FILING OF A COMBINED RETURN.
(a)(4)(iv) through (b) [Reserved]. For further guidance, see §1.338-10(a)(4)(iv) through (b).
(c) Effective date—(1) Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
(2) Expiration date. The applicability of this section will expire on May 26, 2009.
Par. 14. Section 1.351-3 is removed.
Par. 15. Section 1.351-3T is added to read as follows:
(a) Significant transferor. Every significant transferor must include a statement entitled, “STATEMENT PURSUANT TO §1.351-3T(a) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT TRANSFEROR,” on or with such transferor’s income tax return for the taxable year of the section 351 exchange. If a significant transferor is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include—
(1) The name and employer identification number (if any) of the transferee corporation;
(2) The date(s) of the transfer(s) of assets;
(3) The aggregate fair market value and basis, determined immediately before the exchange, of the property transferred by such transferor in the exchange; and
(4) The date and control number of any private letter ruling(s) issued by the Internal Revenue Service in connection with the section 351 exchange.
(b) Transferee corporation. Except as provided in paragraph (c) of this section, every transferee corporation must include a statement entitled, “STATEMENT PURSUANT TO §1.351-3T(b) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A TRANSFEREE CORPORATION,” on or with its income tax return for the taxable year of the exchange. If the transferee corporation is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include—
(1) The name and taxpayer identification number (if any) of every significant transferor;
(2) The date(s) of the transfer(s) of assets;
(3) The aggregate fair market value and basis, determined immediately before the exchange, of all of the property received in the exchange; and
(4) The date and control number of any private letter ruling(s) issued by the Internal Revenue Service in connection with the section 351 exchange.
(c) Exception for certain transferee corporations. The transferee corporation is not required to file a statement under paragraph (b) of this section if all of the information that would be included in the statement described in paragraph (b) of this section is included in any statement(s) described in paragraph (a) of this section that is attached to the same return for the same section 351 exchange.
(d) Definitions. For purposes of this section:
(1) Significant transferor means a person that transferred property to a corporation and received stock of the transferee corporation in an exchange described in section 351 if, immediately after the exchange, such person—
(i) Owned at least five percent (by vote or value) of the total outstanding stock of the transferee corporation if the stock owned by such person is publicly traded, or
(ii) Owned at least one percent (by vote or value) of the total outstanding stock of the transferee corporation if the stock owned by such person is not publicly traded.
(2) Publicly traded stock means stock that is listed on—
(i) A national securities exchange registered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
(ii) An interdealer quotation system sponsored by a national securities association registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3).
(e) Substantiation information. Under §1.6001-1(e), taxpayers are required to retain their permanent records and make such records available to any authorized Internal Revenue Service officers and employees. In connection with the exchange described in this section, these records should specifically include information regarding the amount, basis, and fair market value of all transferred property, and relevant facts regarding any liabilities assumed or extinguished as part of such exchange.
(f) Effective date—(1) Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
(2) Expiration date. The applicability of this section will expire on May 26, 2009.
Par. 16. Section 1.355-0 is amended by removing the entry for §1.355-5 and adding an entry for §1.355-5T.
The revision and addition read as follows:
Par. 17. Section 1.355-5 is removed.
Par. 18. Section 1.355-5T is added to read as follows:
(a) Distributing corporation—(1) In general. Every corporation that makes a distribution (the distributing corporation) of stock or securities of a controlled corporation, as described in section 355 (or so much of section 356 as relates to section 355), must include a statement entitled, “STATEMENT PURSUANT TO §1.355-5T(a) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A DISTRIBUTING CORPORATION,” on or with its return for the year of the distribution. If the distributing corporation is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include—
(i) The name and employer identification number (if any) of the controlled corporation;
(ii) The name and taxpayer identification number (if any) of every significant distributee;
(iii) The date of the distribution of the stock or securities of the controlled corporation;
(iv) The aggregate fair market value and basis, determined immediately before the distribution or exchange, of the stock, securities, or other property (including money) distributed by the distributing corporation in the transaction; and
(v) The date and control number of any private letter ruling(s) issued by the Internal Revenue Service in connection with the transaction.
(2) Special rule when an asset transfer precedes a stock distribution. If the distributing corporation transferred property to the controlled corporation in a transaction described in section 351 or 368, as part of a plan to then distribute the stock or securities of the controlled corporation in a transaction described in section 355 (or so much of section 356 as relates to section 355), then, unless paragraph (a)(1)(v) of this section applies, the distributing corporation must also include on or with its return for the year of the distribution the statement required by §1.351-3T(a) or 1.368-3T(a). If the distributing corporation is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include the statement required by §1.351-3T(a) or 1.368-3T(a) on or with its return.
(b) Significant distributee. Every significant distributee must include a statement entitled, “STATEMENT PURSUANT TO §1.355-5T(b) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT DISTRIBUTEE,” on or with such distributee’s return for the year in which such distribution is received. If a significant distributee is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include—
(1) The names and employer identification numbers (if any) of the distributing and controlled corporations;
(2) The date of the distribution of the stock or securities of the controlled corporation; and
(3) The aggregate basis, determined immediately before the exchange, of any stock or securities transferred by the significant distributee in the exchange, and the aggregate fair market value, determined immediately before the distribution or exchange, of the stock, securities or other property (including money) received by the significant distributee in the distribution or exchange.
(c) Definitions. For purposes of this section:
(1) Significant distributee means—
(i) A holder of stock of a distributing corporation that receives, in a transaction described in section 355 (or so much of section 356 as relates to section 355), stock of a corporation controlled by the distributing corporation if, immediately before the distribution or exchange, such holder—
(A) Owned at least five percent (by vote or value) of the total outstanding stock of the distributing corporation if the stock owned by such holder is publicly traded; or
(B) Owned at least one percent (by vote or value) of the stock of the distributing corporation if the stock owned by such holder is not publicly traded; or
(ii) A holder of securities of a distributing corporation that receives, in a transaction described in section 355 (or so much of section 356 as relates to section 355), stock or securities of a corporation controlled by the distributing corporation if, immediately before the distribution or exchange, such holder owned securities in such distributing corporation with a basis of $1,000,000 or more.
(2) Publicly traded stock means stock that is listed on—
(i) A national securities exchange registered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
(ii) An interdealer quotation system sponsored by a national securities association registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3).
(d) Substantiation information. Under §1.6001-1(e), taxpayers are required to retain their permanent records and make such records available to any authorized Internal Revenue Service officers and employees. In connection with the distribution or exchange described in this section, these records should specifically include information regarding the amount, basis, and fair market value of all property distributed or exchanged, and relevant facts regarding any liabilities assumed or extinguished as part of such distribution or exchange.
(e) Effective date—(1) Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
(2) Expiration date. The applicability of this section will expire on May 26, 2009.
Par. 19. Section 1.368-3 is removed.
Par. 20. Section 1.368-3T is added to read as follows:
(a) Parties to the reorganization. The plan of reorganization must be adopted by each of the corporations that are parties thereto. Each such corporation must include a statement entitled, “STATEMENT PURSUANT TO §1.368-3T(a) BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A CORPORATION A PARTY TO A REORGANIZATION,” on or with its return for the taxable year of the exchange. If any such corporation is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. However, it is not necessary for any taxpayer to include more than one such statement on or with the same return for the same reorganization. The statement must include—
(1) The names and employer identification numbers (if any) of all such parties;
(2) The date of the reorganization;
(3) The aggregate fair market value and basis, determined immediately before the exchange, of the assets, stock or securities of the target corporation transferred in the transaction; and
(4) The date and control number of any private letter ruling(s) issued by the Internal Revenue Service in connection with this reorganization.
(b) Significant holders. Every significant holder, other than a corporation a party to the reorganization, must include a statement entitled, “STATEMENT PURSUANT TO §1.368-3T(b) BY [INSERT NAME AND TAXPAYER IDENTIFICATION NUMBER (IF ANY) OF TAXPAYER], A SIGNIFICANT HOLDER,” on or with such holder’s return for the taxable year of the exchange. If a significant holder is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return. The statement must include—
(1) The names and employer identification numbers (if any) of all of the parties to the reorganization;
(2) The date of the reorganization; and
(3) The fair market value, determined immediately before the exchange, of all the stock or securities of the target corporation held by the significant holder that is transferred in the transaction and such holder’s basis, determined immediately before the exchange, in the stock or securities of such target corporation.
(c) Definitions. For purposes of this section:
(1) Significant holder means—
(i) A holder of stock of the target corporation that receives stock or securities in an exchange described in section 354 (or so much of section 356 as relates to section 354) if, immediately before the exchange, such holder—
(A) Owned at least five percent (by vote or value) of the total outstanding stock of the target corporation if the stock owned by such holder is publicly traded; or
(B) Owned at least one percent (by vote or value) of the total outstanding stock of the target corporation if the stock owned by such holder is not publicly traded; or
(ii) A holder of securities of the target corporation that receives stock or securities in an exchange described in section 354 (or so much of section 356 as relates to section 354) if, immediately before the exchange, such holder owned securities in such target corporation with a basis of $1,000,000 or more.
(2) Publicly traded stock means stock that is listed on—
(i) A national securities exchange registered under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f); or
(ii) An interdealer quotation system sponsored by a national securities association registered under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3).
(d) Substantiation information. Under §1.6001-1(e), taxpayers are required to retain their permanent records and make such records available to any authorized Internal Revenue Service officers and employees. In connection with the reorganization described in this section, these records should specifically include information regarding the amount, basis, and fair market value of all transferred property, and relevant facts regarding any liabilities assumed or extinguished as part of such reorganization.
(e) Effective date—(1) Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
(2) Expiration date. The applicability of this section will expire on May 26, 2009.
Par. 21. Section 1.381(b)-1 is amended by revising paragraph (b)(3) and adding paragraph (e) to read as follows:
* * * * *
(b) * * *
(3) [Reserved]. For further guidance, see §1.381(b)-1T(b)(3).
* * * * *
(e) [Reserved]. For further guidance, see §1.381(b)-1T(e)(1).
Par. 22. Section 1.381(b)-1T is added to read as follows:
(a) through (b)(2) [Reserved]. For further guidance, see §1.381(b)-1(a) through (b)(2).
(3) Election—(i) Content of statements. The statements referred to in paragraph (b)(2) of §1.381(b)-1 must be entitled, “ELECTION OF DATE OF DISTRIBUTION OR TRANSFER PURSUANT TO §1.381(b)-1(b)(2),” and must include: [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF DISTRIBUTOR OR TRANSFEROR CORPORATION] AND [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER (IF ANY) OF ACQUIRING CORPORATION] ELECT TO DETERMINE THE DATE OF DISTRIBUTION OR TRANSFER UNDER §1.381(b)-1(b)(2). SUCH DATE IS [INSERT DATE (mm/dd/yyyy)].
(ii) Filing of statements. One statement must be included on or with the timely filed Federal income tax return of the distributor or transferor corporation for its taxable year ending with the date of distribution or transfer. An identical statement must be included on or with the timely filed Federal income tax return of the acquiring corporation for its first taxable year ending after that date. If the distributor or transferor corporation, or the acquiring corporation, is a controlled foreign corporation (within the meaning of section 957), each United States shareholder (within the meaning of section 951(b)) with respect thereto must include this statement on or with its return.
(b)(4) through (d) [Reserved]. For further guidance, see §1.381(b)-1(b)(4) through (d).
(e) Effective date—(1) Applicability date. This section applies to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
(2) Expiration date. The applicability of this section will expire on May 26, 2009.
Par. 23. Section 1.382-1 is amended by:
1. Revising the entry for §1.382-2T(a)(2)(ii).
2. Revising the entry for §1.382-8(c)(2).
3. Redesignating the entry for §1.382-8(e)(4) as the entry for §1.382-8(e)(5).
4. Adding entries for paragraphs (e)(4) and (j)(4) of §1.382-8.
5. Revising the entry for paragraph (h), and removing the entries for paragraphs (h)(1), (h)(2) and (h)(3), of §1.382-8.
6. Adding entries for §1.382-8T.
7. Removing the entry for §1.382-11.
8. Adding entries for §1.382-11T.
The additions and revisions read as follows:
* * * * *
(a) * * *
(2) * * *
(ii) [Reserved]
* * * * *
* * * * *
(c) * * *
(2) [Reserved]
* * * * *
(e) * * *
(4) [Reserved]
(5) Predecessor and successor corporation.
* * * * *
(h) [Reserved]
* * * * *
(j) * * *
(4) [Reserved]
(a) through (c)(1) [Reserved]
(c)(2) Restoration of value.
(c)(3) through (e)(3) [Reserved]
(e)(4) Foreign component member.
(i) In general.
(ii) Exception.
(e)(5) through (g) [Reserved]
(h) Time and manner of filing election to restore.
(1) Statements required.
(i) Filing by loss corporation.
(ii) Filing by electing member.
(iii) Agreement.
(2) Special rule for foreign component members.
(i) Deemed election to restore full value.
(ii) Election not to restore full value.
(iii) Agreement.
(3) Revocation of election.
(i) through (j)(3) [Reserved]
(j)(4) Effective date.
(i) Applicability date.
(ii) Expiration date.
* * * * *
(a) Information statement required.
(b) Effective date.
(1) Applicability date.
(2) Expiration date.
Par. 24. Section 1.382-2T is amended by removing and reserving paragraph (a)(2)(ii) to read as follows:
* * * * *
(a) * * *
(2) * * *
(ii) [Reserved]. For further guidance, see §1.382-11T(a).
* * * * *
Par. 25. Section 1.382-8 is amended as follows:
1. Revising paragraphs (c)(2) and (h).
2. Redesignating paragraph (e)(4) as paragraph (e)(5).
3. Adding new paragraphs (e)(4) and (j)(4).
The additions and revisions read as follows:
* * * * *
(c) * * *
(2) [Reserved]. For further guidance, see §1.382-8T(c)(2).
* * * * *
(e) * * *
(4) [Reserved]. For further guidance, see §1.382-8T(e)(4).
(5) Predecessor and successor corporation. * * *
* * * * *
(h) [Reserved]. For further guidance, see §1.382-8T(h).
* * * * *
(j) * * *
(4) [Reserved]. For further guidance, see §1.382-8T(j)(4)(i).
Par. 26. Section 1.382-8T is added to read as follows:
(a) through (c)(1) [Reserved]. For further guidance, see §1.382-8(a) through (c)(1).
(2) Restoration of value. After the value of the stock of each component member is reduced pursuant to paragraph (c)(1) of §1.382-8, the value of the stock of each component member is increased by the amount of value, if any, restored to the component member by another component member (the electing member) pursuant to this paragraph (c)(2). The electing member may elect (or may be deemed to elect under paragraph (h)(2)(i) of this section in the case of a foreign component member) to restore value to another component member in an amount that does not exceed the lesser of—
(i) The sum of—
(A) The value, determined immediately before the ownership change, of the electing member’s stock (after adjustment under paragraph (c)(1) of §1.382-8 and before any restoration of value under this paragraph (c)(2)); plus
(B) Any amount of value restored to the electing member by another component member under this paragraph (c)(2); or
(ii) The value, determined immediately before any ownership change, of the electing member’s stock (without regard to any adjustment under this section) that is directly owned by the other component member immediately after the ownership change.
(c)(3) through (e)(3) [Reserved]. For further guidance, see §1.382-8(c)(3) through (e)(3).
(4) Foreign component member—(i) In general. Except as provided in paragraph (e)(4)(ii) of this section, foreign component member means a component member that is a foreign corporation.
(ii)