Stock Transfer Rules: Supplemental Rules

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Parts 1 [REG-116048-99] RIN 1545-
AX63

TITLE: Stock Transfer Rules: Supplemental Rules

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

SUMMARY: This document proposes, by cross-reference to temporary
regulations, amendments to the final regulations concerning the
Federal tax treatment of certain exchanges subject to section 367(b)
of the Internal Revenue Code (Code). The temporary regulations,
published in the Rules and Regulations section of this issue of the
Federal Register, provide an election for certain taxpayers engaged
in certain exchanges described in section 367(b). The temporary
regulations provide guidance for taxpayers that make the specified
election in order to determine the extent to which income must be
included and certain corresponding adjustments must be made. The
text of the temporary regulations also serves as the text of the
proposed regulations. This document also provides notice of a public
hearing on the proposed regulations.

DATES: Written comments must be received by April 24, 2000. Requests
to speak (with outlines of oral comments) at the public hearing
scheduled for April 20, 2000, must be submitted by March 31, 2000.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-116048-99), room
5228, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. In the alternative, submissions may be hand
delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R
(REG-116048-99), Courier's Desk, Internal Revenue Service, 1111
Constitution Avenue NW., Washington, DC.

Alternatively, taxpayers may submit comments electronically via the
Internet by selecting the "Tax Regs" option of the IRS Home Page, or
by submitting comments directly to the IRS Internet site at:
http://www.irs.ustreas.gov/prod/tax_regs/regslist.html. The public
hearing will be held in room 2615, Internal Revenue Building, 1111
Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Mark D.
Harris, (202) 622-3860 (not a toll-free number); concerning
submissions and the hearing, Guy Traynor, (202) 622-7180 (not a
toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in this notice of proposed
rulemaking has been submitted to the Office of Management and Budget
for review in accordance with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)). Comments on the collection of information
should be sent to the Office of Management and Budget, Attn: Desk
Officer for the Department of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC 20503, with copies to the
Internal Revenue Service, Attn: IRS Reports Clearance Officer,
OP:FS:FP, Washington, DC 20224. Comments on the collection of
information should be received by March 24, 2000. Comments are
specifically requested concerning:

Whether the proposed collection of information is necessary for the
proper performance of the functions of the Internal Revenue Service,
including whether the information will have practical utility;

The accuracy of the estimated burden associated with the proposed
collection of information (see below);

How the quality, utility, and clarity of the information to be
collected may be enhanced;

How the burden of complying with the proposed collection of
information may be minimized, including through the application of
automated collection techniques or other forms of information
technology; and Estimates of capital or start-up costs and costs of
operation, maintenance, and purchase of service to provide
information.

The collection of information in this proposed regulation is in
§1.367(b)-3(b)(4). This information is required to properly make an
election to include an amount in income that is different than the
inclusion currently required under §1.367(b)-3 of the final
regulations. This information will be used to verify  proper
compliance with the section 367(b) regulations, including that the
election provided herein was made and that the required adjustments
will be made by all parties to the section 367(b) transaction. The
collection of information is mandatory. The likely respondents are
businesses or other for-profit institutions.

Estimated total annual reporting burden: 85 hours. Estimated average
annual burden hours per respondent: 4 hours, 15 minutes.

Estimated number of respondents: 20 Estimated annual frequency of
responses: once An agency may not conduct or sponsor, and a person
is not required to respond to, a collection of information unless it
displays a valid control number assigned by the Office of Management
and Budget.

Books or 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.

Background

Temporary regulations in the Rules and Regulations section of this
issue of the Federal Register amend the Income Tax Regulations (26
CFR part 1) relating to section 367(b). The temporary regulations
contain rules that provide an election for certain taxpayers engaged
in certain exchanges described in section 367(b).

The text of those temporary regulations also serves as the text of
these proposed regulations. The preamble to the temporary
regulations explains the proposed regulations. Proposed Effective
Date Except as otherwise specified, these regulations are proposed
to apply to section 367(b) exchanges that occur on or after the date
final regulations are published in the Federal Register.

Special Analyses

It has been determined that these regulations are not a significant
regulatory action as defined in Executive Order 12866. Therefore, a
regulatory assessment is not required. It is hereby certified that
the collection of information contained in these regulations will
not have a significant economic impact on a substantial number of
small entities. This certification is based upon the fact that the
number of section 367(b) exchanges that require reporting under
these regulations is estimated to be only 20 per year. Therefore, a
Regulatory Flexibility Analysis under the Regulatory Flexibility Act
(5 U.S.C. chapter 6) is not required.

Pursuant to section 7805(f) of the Code, these proposed regulations
will be submitted to the Chief Counsel for Advocacy of the Small
Business Administration for comment on their impact.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments (preferably a
signed original and eight (8) copies) that are submitted timely to
the IRS. The IRS and Treasury request comments on the clarity of the
proposed regulation and how it may be made easier to understand. All
comments will be available for public inspection and copying.

A public hearing has been scheduled for April 20, 2000, beginning at
10 a.m., in room 2615, Internal Revenue Building, 1111 Constitution
Avenue NW., Washington, DC. Because of access restrictions, visitors
will not be admitted beyond the Internal Revenue Building lobby more
than 15 minutes before the hearing starts.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons that
wish to present oral comments at the hearing must submit timely
written comments and an outline of the topics to be discussed and
the time to be devoted to each topic by (preferably a signed
original and eight (8) copies) March 31, 2000. However, comments not
to be presented at the hearing must be submitted by April 24, 2000.

A period of 10 minutes will be allotted to each person for making
comments.

An agenda showing the scheduling of the speakers will be prepared
after the deadline for receiving outlines has passed. Copies of the
agenda will be available free of charge at the hearing..Drafting
Information The principal author of these regulations is Mark Harris
of the Office of Associate Chief Counsel (International). However,
other personnel from the IRS and Treasury Department participated in
their development.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

Income taxes, Reporting and recordkeeping requirements.

PART 1--INCOME TAXES

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

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

Par. 2. Section 1.367(b)-3 is amended by adding paragraph (b)(4) to
read as follows:

§1.367(b)-3 Repatriation of foreign corporate assets in certain
nonrecognition transactions.

* * * * *

(b) * * *

(4) [The text of this proposed addition is the same as the text of
§1.367(b)-3T(b)(4) published elsewhere in this issue of the Federal
Register].

* * * * *

John M. Dalrymple
Acting Deputy Commissioner of Internal Revenue

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