Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Proposed Rules 1101 

your comments. For instructions on 

submitting comments and accessing 

documents related to this action, see 

‘‘Submitting Comments and Accessing 

Information’’ in the SUPPLEMENTARY

INFORMATION section of this document. 

You may submit comments by any one 

of the following methods. 

Federal Rulemaking Web site: Go to 

http://www.regulations.gov and search 

for documents filed under Docket ID 

NRC–2011–0003. Address questions 

about NRC dockets to Carol Gallagher, 

telephone: 301–492–3668; e-mail: 

Carol.Gallagher@nrc.gov. 

Mail comments to: Cindy Bladey, 

Chief, Rules, Announcements, and 

Directives Branch (RADB), Office of 

Administration, Mail Stop: TWB–05– 

B01M, U.S. Nuclear Regulatory 

Commission, Washington, DC 20555– 

0001. 

Fax comments to: RADB at 301–492– 

3446. 

FOR FURTHER INFORMATION CONTACT: Gary 

Comfort, Office of Federal and State 

Materials and Environmental 

Management Programs, U.S. Nuclear 

Regulatory Commission, Washington, 

DC 20555–0001, telephone: 301–415– 

8106, e-mail: Gary.Comfort@nrc.gov. 

SUPPLEMENTARY INFORMATION: 

Submitting Comments and Accessing 

Information 

Comments submitted in writing or in 

electronic form will be posted on the 

NRC Web site and on the Federal 

Rulemaking Web site, http:// 

www.regulations.gov. Because your 

comments will not be edited to remove 

any identifying or contact information, 

the NRC cautions you against including 

any information in your submission that 

you do not want to be publicly 

disclosed. The NRC requests that any 

party soliciting or aggregating comments 

received from other persons for 

submission to the NRC inform those 

persons that the NRC will not edit their 

comments to remove any identifying or 

contact information, and therefore, they 

should not include any information in 

their comments that they do not want 

publicly disclosed. 

You can access publicly available 

documents related to this document 

using the following methods: 

NRC’s Public Document Room (PDR): 

The public may examine and have 

copied for a fee publicly available 

documents at the NRC’s PDR, Room O– 

1F21, One White Flint North, 11555 

Rockville Pike, Rockville, Maryland 

20852. 

NRC’s Agencywide Documents Access 

and Management System (ADAMS): 

Publicly available documents created or 

received at the NRC are available 

electronically at the NRC’s Electronic 

Reading Room at http://www.nrc.gov/ 

reading-rm/adams.html. From this page, 

the public can gain entry into ADAMS, 

which provides text and image files of 

NRC’s public documents. If you do not 

have access to ADAMS or if there are 

problems in accessing the documents 

located in ADAMS, contact the NRC’s 

PDR reference staff at 1–800–397–4209, 

or 301–415–4737, or by e-mail to 

PDR.Resource@nrc.gov. The draft Part 

40 implementation guidance is available 

electronically under ADAMS Accession 

Number ML103160241. 

Federal Rulemaking Web site: Public 

comments and supporting materials 

related to the implementation guidance, 

including the draft implementation 

guidance, can be found at http:// 

www.regulations.gov by searching on 

Docket ID NRC–2011–0003. Documents 

related to the proposed rule can be 

found by searching on Docket ID NRC– 

2009–0084. 

Discussion 

The NRC published a proposed rule 

(75 FR 43425; July 26, 2010) that would 

amend its regulations in part 40 of Title 

10 of the Code of Federal Regulations 

(10 CFR) to require that the initial 

distribution of source material to 

exempt persons or general licensees be 

explicitly authorized by a specific 

license, which would include new 

reporting requirements. This proposed 

rule would affect manufacturers and 

distributors of certain products and 

materials containing source material 

and certain persons using source 

material under general license and 

under exemptions from licensing. The 

public comment period runs through 

February 15, 2011. 

In conjunction with the proposed 

rule, the NRC has developed draft 

implementation guidance. The draft 

implementation document provides 

guidance to a licensee or applicant for 

implementation of proposed 10 CFR 

Part 40, ‘‘Distribution of Source Material 

to Exempt Persons and to General 

Licensees and Revision of General 

License and Exemptions.’’ It is intended 

for use by applicants, licensees, 

Agreement States, and NRC staff. The 

document describes methods acceptable 

to the NRC staff for implementing 

proposed 10 CFR part 40. The 

approaches and methods described in 

the document are provided for 

information only. Methods and 

solutions different from those described 

in the document are acceptable if they 

meet the requirements in proposed 10 

CFR part 40. The guidance is provided 

in the form of questions and answers on 

the provisions of the proposed rule. The 

draft implementation guidance 

document for proposed 10 CFR part 40 

is available electronically under 

ADAMS Accession Number 

ML103160241, and can also be found at 

http://www.regulations.gov by searching 

on Docket ID NRC–2011–0003. 

At this time, the NRC is announcing 

the availability for public comment of 

‘‘Implementation Guidance for 10 CFR 

Part 40 Distribution of Source Material 

to Exempt Persons and to General 

Licensees and Revision of General 

License and Exemptions.’’ The 

document provides guidance on 

implementing the provisions of 

proposed 10 CFR part 40, ‘‘Distribution 

of Source Material to Exempt Persons 

and to General Licensees and Revision 

of General License and Exemptions.’’ 

Dated at Rockville, Maryland, this 28th day 

of December 2010. 

For the Nuclear Regulatory Commission. 

James Luehman, 

Deputy Director, Licensing and Inspection 

Directorate, Division of Materials Safety and 

State Agreements, Office of Federal and State 

Materials and Environmental Management 

Programs. 

[FR Doc. 2011–107 Filed 1–6–11; 8:45 am] 

BILLING CODE 7590–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–131947–10] 

RIN 1545–BJ71 

Property Traded on an Established 

Market 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed regulations relating to 

determining when property is traded on 

an established market (that is, publicly 

traded) for purposes of determining the 

issue price of a debt instrument. The 

regulations amend the current 

regulations to clarify the circumstances 

that cause property to be publicly 

traded. The regulations provide needed 

guidance to issuers and holders of debt 

instruments. This document also 

provides a notice of a public hearing on 

these proposed regulations. 

DATES: Written or electronic comments 

must be received by March 8, 2011. 

Outlines of topics to be discussed at the 

public hearing scheduled for April 13, 


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1102 Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Proposed Rules 

2011, at 10 a.m. must be received by 

March 4, 2011. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–131947–10), room 

5203, Internal Revenue Service, PO Box 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be handdelivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to CC:PA:LPD:PR (REG–131947–10), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC, or sent 

electronically, via the Federal 

eRulemaking Portal at http:// 

www.regulations.gov (IRS REG–131947– 

10). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

William E. Blanchard at (202) 622–3950; 

concerning submission of comments, 

the hearing, and/or to be placed on the 

building access list to attend the 

hearing, Oluwafunmilayo.P.Taylor@

irscounsel.treas.gov, at (202) 622–7180 

(not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

The issue price of a debt instrument 

is determined under section 1273(b) of 

the Internal Revenue Code or, in the 

case of certain debt instruments issued 

for property, under section 1274. 

Section 1273(b)(3) generally provides 

that in the case of a debt instrument that 

is issued for property and that is part of 

an issue some or all of which is traded 

on an established securities market 

(often referred to as ‘‘publicly traded’’), 

the issue price of the debt instrument is 

the fair market value of the debt 

instrument. Similarly, if the debt 

instrument is issued for stock or 

securities (or other property) that are 

publicly traded, the issue price of the 

debt instrument is the fair market value 

of the property. Section 

1.1273–2 of the Income Tax Regulations 

(the ‘‘current regulations’’) also applies 

to determine the issue price of a debt 

instrument that is publicly traded or is 

issued for publicly traded property. 

Under § 1.1273–2(c)(1), the term 

property means a debt instrument, 

stock, security, contract, commodity, or 

nonfunctional currency. Section 

1.1273–2(f) defines when property is 

traded on an established market (that is, 

publicly traded) for purposes of section 

1273(b)(3) and § 1.1273–2. 

In general, under § 1.1273–2(f) of the 

current regulations, a debt instrument is 

traded on an established market if either 

the debt instrument or the property for 

which the debt instrument is exchanged 

is described in § 1.1273–2(f)(2) through 

(f)(5) in the time period 30 days before 

or after the exchange. Property is 

described in § 1.1273–2(f)(2) if it is 

listed on a specified exchange. Property 

is described in § 1.1273–2(f)(3) if it is of 

a kind that is traded on a contract 

market designated by the Commodities 

Futures Trading Commission or an 

interbank market. Property is described 

in § 1.1273–2(f)(4) if it appears on a 

system of general circulation that 

disseminates price quotations or recent 

trading prices. Property is described in 

§ 1.1273–2(f)(5) if price quotations are 

readily available from dealers, brokers 

or traders, subject to certain exceptions. 

The issue price of a debt instrument 

has important income tax consequences. 

As an initial matter, the difference 

between the issue price of a debt 

instrument and its stated redemption 

price at maturity measures whether 

there is any original issue discount 

associated with the instrument. A debtfor-debt exchange (including a 

significant modification of existing debt) 

in the context of a work-out may result 

in a reduced issue price for the new 

debt, which generally would produce 

cancellation of indebtedness income for 

the issuer, a loss to the holder whose 

basis is greater than the issue price of 

the new debt, and original issue 

discount that generally must be 

accounted for by both the issuer and the 

holder of the new debt. These 

consequences, exacerbated by recent 

turmoil in the debt markets, have 

focused attention on the definition of 

when property is traded on an 

established market for purposes of 

§ 1.1273–2(f). 

Commenters have criticized the 

definition of an established market in 

§ 1.1273–2(f) of the current regulations. 

They argue that comparatively little 

debt is listed on an exchange described 

in § 1.1273–2(f)(2), and that even debt 

that is listed rarely trades on the 

exchange. They point out that the list of 

foreign exchanges in § 1.1273–2(f)(2)(iii) 

is outdated. Commenters also struggle to 

interpret the meaning of an interbank 

market in § 1.1273–2(f)(3). 

Even more troublesome for 

commenters is the question of what 

constitutes a quotation medium for 

purposes of § 1.1273–2(f)(4) of the 

current regulations. Debt instruments 

typically trade in various ways in the 

current markets, but the vast majority of 

debt instruments are purchased or sold 

over-the-counter for a price negotiated 

between a financial entity (such as a 

securities dealer or broker) and a 

customer. A dealer or broker may quote 

a firm price, sometimes referred to as a 

‘‘firm’’ or ‘‘executable’’ quote, entitling a 

customer to purchase or sell at that 

price, subject to volume limits or other 

specified restrictions. Alternatively, a 

dealer, broker or listing service may 

quote a price that indicates a 

willingness to purchase and/or sell a 

specified debt instrument, again subject 

to volume limits or other limitations, 

but not necessarily at the quoted price. 

This is sometimes referred to as a ‘‘soft’’ 

or an ‘‘indicative’’ quote. The decision to 

send a price quote to a customer (or 

customers) may be initiated by a dealer 

or broker, or a customer may request a 

price quote from one or more dealers or 

brokers. Additionally, a service provider 

may provide subscribers with valuations 

based on data collected from 

contributors that may reflect actual 

sales, price quotes, or any other 

information it deems relevant to the 

value of the debt instrument in 

question. Commenters struggled to 

apply the description of a quotation 

medium in § 1.1273–2(f)(4) to this 

informal marketplace, which has 

evolved considerably since the 

regulations were originally promulgated 

in 1994. 

Finally, commenters pointed out that 

the general rule in § 1.1273–2(f)(5) of the 

current regulations, which treats a debt 

instrument as publicly traded if price 

quotations are readily available from 

dealers, brokers or traders could cause 

almost every debt instrument to be 

within this definition but for the safe 

harbors in § 1.1273–2(f)(5)(ii). 

Explanation of Provisions 

As a general matter, the Treasury 

Department and the IRS believe that the 

‘‘traded on an established market’’ 

standard established by section 

1273(b)(3) is intended to be interpreted 

broadly. When section 1275(a)(4) was 

repealed by section 11325(a)(2) of the 

Revenue Reconciliation Act of 1990, 

Public Law 101–508, 104 Stat. 1388, 

1388–466 (1990), issue price was 

required to be determined under section 

1273 and section 1274 even in a debtfor-debt exchange that qualified as a 

corporate reorganization. As the depth 

of trading and the transparency of the 

markets that trade debt instruments has 

improved, the earlier concerns that 

trading prices may not reflect the fair 

market value of a debt instrument have 

diminished. Thus, to the extent accurate 

pricing information exists, whether it 

derives from executed sales, reliable 

price quotations, or valuation estimates 

that are based on some combination of 

sales and quotes, the Treasury 

Department and the IRS believe that that 

information should be the basis for the 

issue price determined under section 

1273(b)(3). 

To address concerns with the current 

regulations, the proposed regulations 


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Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Proposed Rules 1103 

simplify and clarify the determination 

of when property is traded on an 

established market. The proposed 

regulations identify four ways for 

property to be traded on an established 

market. In each case, the time period for 

determining whether the property is 

publicly traded is the 31-day period 

ending 15 days after the issue date of 

the debt instrument. 

First, property that is listed on an 

exchange continues to be publicly 

traded property under § 1.1273–2(f)(2) 

of the proposed regulations. Although 

relatively few debt instruments are 

listed or traded on an exchange, the 

regulations may still apply to other 

property that is listed, such as stock for 

which a debt instrument is issued in a 

debt-for-stock exchange. The proposed 

regulations, however, delete the 

reference to an interdealer quotation 

system that is sponsored by a national 

securities association registered under 

section 15A of the Securities Exchange 

Act of 1934 because none exist or are 

contemplated. Rather than list foreign 

exchanges, the proposed regulations 

specify that a foreign securities 

exchange that is officially recognized, 

sanctioned, regulated or supervised by a 

governmental authority of the foreign 

country in which the market is located 

is an exchange that causes property to 

be publicly traded. 

Second, § 1.1273–2(f)(3) of the 

proposed regulations treats property as 

publicly traded when a sales price for 

the property is reasonably available. 

Market participants have access to 

information about the securities markets 

from a variety of sources, which are 

constantly changing and evolving. If 

information about the sales price of a 

debt instrument (or information 

sufficient to calculate the sales price) 

appears in a medium that is made 

available to persons that regularly 

purchase or sell debt instruments, or 

persons that broker purchases or sales of 

debt instruments, the sales price will be 

considered reasonably available. For 

example, in the case of a debt 

instrument, a sale that is reported 

electronically at any time in the 31-day 

time period, such as in the Trade 

Reporting and Compliance Engine 

(‘‘TRACE’’) database maintained by the 

Financial Industry Regulatory 

Authority, would cause the instrument 

to be publicly traded, as would other 

pricing services and trading platforms 

that report prices of executed sales on 

a general basis or to subscribers. 

Third, property is considered to be 

traded on an established market if a firm 

price quote to buy or sell the property 

is available. A firm, or executable, price 

quote may be labeled as such, or a price 

quote may function as a firm quote as 

a matter of law or industry practice. In 

either case, § 1.1273–2(f)(4) of the 

proposed regulations treats property 

with a firm quote as publicly traded. 

Finally, a price quote (other than a 

firm quote) that is provided by a dealer, 

a broker, or a pricing service (an 

indicative quote) will cause property to 

be publicly traded under § 1.1273– 

2(f)(5) of the proposed regulations. 

The proposed regulations provide that 

the fair market value of property 

described in § 1.1273–2(f) will be 

presumed to be equal to its trading 

price, sales price, or quoted price, 

whichever is applicable. However, if 

there is more than one price or quote, 

a taxpayer is permitted to reconcile 

competing prices or quotes in a 

reasonable manner. In the case of an 

indicative quote, if a taxpayer 

determines that the quoted price or 

prices misrepresents the fair market 

value of the property by a material 

amount, § 1.1273–2(f)(6)(ii) of the 

proposed regulations permits the 

taxpayer to use any method that 

provides a reasonable basis to determine 

the fair market value of the property, 

provided the taxpayer can establish that 

the method chosen more accurately 

reflects the value of the property than 

the extant quote or quotes for the 

property. 

In response to commenters, the 

proposed regulations also contain 

guidance in areas ancillary to publicly 

traded debt, such as proposed 

regulations clarifying and revising the 

rules to determine when an issue of debt 

instruments is eligible to be part of a 

qualified reopening under § 1.1275–2(k) 

and proposed regulations clarifying the 

treatment of a debt instrument issued in 

a debt-for-debt exchange under the 

potentially abusive rules in section 

1274(b)(3). In addition, in response to 

commenters, the proposed regulations 

include a business day convention to 

determine if certain stated interest 

payments affect whether the payments 

are qualified stated interest. 

Proposed Effective Date 

The regulations, as proposed, apply to 

debt instruments that have an issue date 

on or after the publication date of the 

Treasury decision adopting these rules 

as final regulations in the Federal 

Register. 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

also has been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations, and because the 

regulation does not impose a collection 

of information on small entities, the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) does not apply. Pursuant to 

section 7805(f) of the Internal Revenue 

Code, these regulations have been 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 

Comments and Public Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written comments (a signed original and 

eight (8) copies) or electronic comments 

that are submitted timely to the IRS. The 

IRS and the Treasury Department 

request comments on the clarity of the 

proposed rules and how they can be 

made easier to understand. All 

comments will be available for public 

inspection and copying. 

A public hearing has been scheduled 

for April 13, 2011, beginning at 10 a.m. 

in the Auditorium, Internal Revenue 

Building, 1111 Constitution Avenue, 

NW., Washington, DC. Due to building 

security procedures, visitors must enter 

at the Constitution Avenue entrance. All 

visitors must present photo 

identification to enter the building. 

Because of access restrictions, visitors 

will not be admitted beyond the 

immediate entrance area more than 30 

minutes before the hearing starts. For 

information about having your name 

placed on the building access list to 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

preamble. 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. Persons who wish 

to present oral comments at the hearing 

must submit electronic or written 

comments and an outline of the topics 

to be discussed and the time to be 

devoted to each topic by March 4, 2011. 

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 

These regulations were drafted by 

personnel in the Office of Associate 

Chief Counsel (Financial Institutions 

and Products) and the Treasury 

Department. 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
1104 Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Proposed Rules 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR part 1 is 

proposed to be amended as follows: 

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 1.1273–1 is amended 

by adding a new paragraph (c)(6) to read 

as follows: 

§ 1.1273–1 Definition of OID. 

* * * * * 

(c) * * * 

(6) Business day convention—(i) Rule. 

For purposes of this paragraph (c), if a 

scheduled payment date for stated 

interest falls on a Saturday, Sunday, or 

Federal holiday (within the meaning of 

5 U.S.C. 6103) but, under the terms of 

the debt instrument, the stated interest 

is payable on the first business day that 

immediately follows the scheduled 

payment date, the stated interest is 

treated as payable on the scheduled 

payment date, provided no additional 

interest is payable as a result of the 

deferral. 

(ii) Effective/applicability date. 

Paragraph (c)(6)(i) of this section applies 

to debt instruments that are issued on or 

after the date of publication of the 

Treasury decision adopting these rules 

as final regulations in the Federal 

Register. A taxpayer, however, may rely 

on paragraph (c)(6)(i) of this section for 

debt instruments issued before that date. 

* * * * * 

Par. 3. Section 1.1273–2 is amended 

by revising paragraph (f) to read as 

follows: 

§ 1.1273–2 Determination of issue price 

and issue date. 

* * * * * 

(f) Traded on an established market 

(publicly traded)—(1) In general. Except 

as provided in paragraph (f)(7) or (f)(8) 

of this section, property (including a 

debt instrument described in paragraph 

(b)(1) of this section) is traded on an 

established market for purposes of this 

section if, at any time during the 31-day 

period ending 15 days after the issue 

date— 

(i) The property is listed on an 

exchange described in paragraph (f)(2) 

of this section; 

(ii) There is a sales price for the 

property as described in paragraph (f)(3) 

of this section; 

(iii) There are one or more firm quotes 

for the property as described in 

paragraph (f)(4) of this section; or 

(iv) There are one or more indicative 

quotes for the property as described in 

paragraph (f)(5) of this section. 

(2) Exchange listed property. Property 

is listed on an exchange for purposes of 

this paragraph (f)(2) if it is listed on— 

(i) A national securities exchange 

registered under section 6 of the 

Securities Exchange Act of 1934 (15 

U.S.C. 78f); 

(ii) A board of trade designated as a 

contract market by the Commodities 

Futures Trading Commission; 

(iii) A foreign securities exchange that 

is officially recognized, sanctioned, 

regulated or supervised by a 

governmental authority of the foreign 

country in which the market is located; 

or 

(iv) Any other exchange, board of 

trade, or other market which the 

Commissioner identifies in guidance 

published in the Internal Revenue 

Bulletin (see § 601.601(d)(2)(ii)) as an 

exchange for purposes of this paragraph 

(f)(2). 

(3) Sales price—(i) In general. A sales 

price exists if the price for an executed 

purchase or sale of the property is 

reasonably available. 

(ii) Pricing information for a debt 

instrument. For purposes of paragraph 

(f)(3)(i) of this section, the price of a 

debt instrument is considered 

reasonably available if the sales price (or 

information sufficient to calculate the 

sales price) appears in a medium that is 

made available to persons that regularly 

purchase or sell debt instruments 

(including a price provided only to 

certain customers or to subscribers), or 

persons that broker purchases or sales of 

debt instruments. 

(4) Firm quote. A firm quote is 

considered to exist when a price quote 

is available from at least one broker, 

dealer, or pricing service (including a 

price provided only to certain customers 

or to subscribers) for property and the 

quoted price is substantially the same as 

the price for which the property could 

be purchased or sold. The identity of the 

person providing the quote must be 

reasonably ascertainable for a quote to 

be considered a firm quote for purposes 

of this paragraph (f)(4). A quote will be 

considered a firm quote if market 

participants typically purchase or sell, 

as the case may be, at the quoted price, 

even if the party providing the quote is 

not legally obligated to do so. 

(5) Indicative quote. An indicative 

quote is considered to exist when a 

price quote is available from at least one 

broker, dealer, or pricing service 

(including a price provided only to 

certain customers or to subscribers) for 

property and the price quote is not a 

firm quote described in paragraph (f)(4) 

of this section. 

(6) Presumption that price or quote is 

equal to fair market value—(i) In 

general. The fair market value of 

property described in this section will 

be presumed to be equal to its trading 

price on an exchange described in 

paragraph (f)(2) of this section, or its 

sales price or quoted price determined 

under paragraphs (f)(3) through (f)(5) of 

this section. If there is more than one 

trading price under paragraph (f)(2) of 

this section, sales price under paragraph 

(f)(3) of this section, or quoted price 

under paragraph (f)(4) or (f)(5) of this 

section, a taxpayer may use any 

reasonable method, consistently 

applied, to determine the price. 

(ii) Special rule for property for which 

there is only an indicative quote. If 

property is described only in paragraph 

(f)(5) of this section, and the taxpayer 

determines that the quote (or an average 

of the quotes) materially misrepresents 

the fair market value of the property, the 

taxpayer can use any method that 

provides a reasonable basis to determine 

the fair market value of the property. A 

taxpayer must establish that the method 

chosen more accurately reflects the 

value of the property than the quote or 

quotes for the property to use the 

method provided in this paragraph 

(f)(6)(ii). For an equity or debt 

instrument, a volume discount or 

control premium will not be considered 

to create a material misrepresentation of 

value for purposes of this paragraph 

(f)(6). 

(7) Exception for property for which 

there is de minimis trading—(i) In 

general. Notwithstanding any other 

provision in this section, property will 

not be treated as traded on an 

established market if there is no more 

than de minimis trading of the property. 

(ii) Definition of de minimis trading 

for debt instruments. For purposes of 

paragraph (f)(7)(i) of this section, a debt 

instrument will be treated as traded in 

de minimis quantities only if— 

(A) Each trade of such debt 

instrument during the 31-day period 

ending 15 days after the issue date is for 

quantities of US$1 million or less (or, 

for debt denominated in a currency 

other than the U.S. dollar, the 

equivalent amount in the currency in 

which the debt is denominated); and 

(B) The aggregate amount of all such 

trades does not exceed US$5 million (or, 

for debt denominated in a currency 

other than the U.S. dollar, the 

equivalent amount in the currency in 

which the debt is denominated). 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
Federal Register / Vol. 76, No. 5 / Friday, January 7, 2011 / Proposed Rules 1105 

(8) Exception for small debt issues. 

Notwithstanding any other provision in 

this section, a debt instrument will not 

be treated as traded on an established 

market if the original stated principal 

amount of the issue that includes the 

debt instrument does not exceed US$50 

million (or, for debt denominated in a 

currency other than the U.S. dollar, the 

equivalent amount in the currency in 

which the debt is denominated). 

(9) Anti-abuse rules—(i) Effect of 

certain temporary restrictions on 

trading. If there is any temporary 

restriction on trading, a purpose of 

which is to avoid the characterization of 

the property as one that is traded on an 

established market for Federal income 

tax purposes, then the property is 

treated as traded on an established 

market. For purposes of the preceding 

sentence, a temporary restriction on 

trading need not be imposed by the 

issuer. 

(ii) Artificial pricing information. If a 

principal purpose for the existence of 

any sale or price quotation is to 

materially misrepresent the value of 

property, that sale or price quotation 

may be disregarded. 

(10) Convertible debt instruments. A 

debt instrument is not treated as traded 

on an established market solely because 

the debt instrument is convertible into 

property that is so traded. 

(11) Effective/applicability date. 

Paragraph (f) of this section applies to 

a debt instrument issued on or after the 

date of publication of the Treasury 

decision adopting these rules as final 

regulations in the Federal Register. 

* * * * * 

Par. 4. Section 1.1274–3 is amended 

by adding a new paragraph (b)(4) to read 

as follows: 

§ 1.1274–3 Potentially abusive situations 

defined. 

* * * * * 

(b) * * * 

(4) Debt-for-debt exchange—(i) Rule. 

A debt instrument issued in a debt-fordebt exchange, including a deemed 

exchange under § 1.1001–3, will not be 

treated as the subject of a recent sales 

transaction for purposes of section 

1274(b)(3)(B)(ii)(I) even if the debt 

instrument exchanged for the newly 

issued debt instrument was recently 

acquired prior to the exchange. 

Therefore, the issue price of the debt 

instrument will not be determined 

under section 1274(b)(3). However, if 

the debt instrument or the property for 

which the debt instrument is issued is 

publicly traded within the meaning of 

§ 1.1273–2(f), the rules of § 1.1273–2 

will apply to determine the issue price 

of the debt instrument. 

(ii) Effective/applicability date. 

Paragraph (b)(4)(i) of this section applies 

to a debt instrument issued on or after 

the date of publication of the Treasury 

decision adopting these rules as final 

regulations in the Federal Register. 

* * * * * 

Par. 5. Section 1.1275–2 is amended 

by revising paragraphs (k)(3)(ii)(A), 

(k)(3)(iii)(A) and (k)(5) and adding a 

new paragraph (k)(3)(v) to read as 

follows: 

§ 1.1275–2 Special rules relating to debt 

instruments. 

* * * * * 

(k) * * * 

(3) * * * 

(ii) * * * 

(A) The original debt instruments are 

publicly traded (within the meaning of 

§ 1.1273–2(f)) as of the reopening date of 

the additional debt instruments; 

* * * * * 

(iii) * * * 

(A) The original debt instruments are 

publicly traded (within the meaning of 

§ 1.1273–2(f)) as of the reopening date of 

the additional debt instruments; 

* * * * * 

(v) Non-publicly traded debt issued 

for cash. Notwithstanding paragraphs 

(k)(3)(ii)(A) and (k)(3)(iii)(A) of this 

section, a qualified reopening includes 

a reopening of original debt instruments 

if the additional debt instruments are 

issued for cash to persons unrelated to 

the issuer (as determined under section 

267(b) or 707(b)) for an arm’s length 

price and the other requirements in 

paragraph (k)(3)(ii) or (k)(3)(iii) of this 

section are satisfied, whichever is 

applicable. For purposes of paragraph 

(k)(3)(ii)(C) of this section, the yield test 

is satisfied if, on the reopening date of 

the additional debt instruments, the 

yield of the additional debt instruments 

(based on their cash purchase price) is 

not more than 110 percent of the yield 

of the original debt instruments on their 

issue date (or, if the original debt 

instruments were issued with no more 

than a de minimis amount of OID, the 

coupon rate). 

* * * * * 

(5) Effective/applicability dates—(i) 

Except as provided in paragraph 

(k)(5)(ii) of this section, this paragraph 

(k) applies to debt instruments that are 

part of a reopening where the reopening 

date is on or after March 13, 2001. 

(ii) Paragraph (k)(3)(v) of this section 

applies to debt instruments that are part 

of a reopening if the reopening date is 

on or after the date of publication of the 

Treasury decision adopting these rules 

as final regulations in the Federal 

Register. 

Steven T. Miller, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2011–83 Filed 1–6–11; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 31 

[REG–146097–09] 

RIN 1545–BJ01 

Guidance on Reporting Interest Paid to 

Nonresident Aliens 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking; 

notice of public hearing; and 

withdrawal of previously proposed 

rulemaking. 

SUMMARY: This document contains 

proposed regulations that provide 

guidance on the reporting requirements 

for interest on deposits maintained at 

U.S. offices of certain financial 

institutions and paid to nonresident 

alien individuals. These proposed 

regulations affect persons making 

payments of interest with respect to 

such deposits. This document also 

provides a notice of public hearing on 

these proposed regulations and 

withdraws the notice of proposed 

rulemaking published on August 2, 

2002 (67 FR 50386). 

DATES: Written or electronic comments 

must be received by April 7, 2011. 

Outlines of topics to be discussed at the 

public hearing scheduled for April 28, 

2011, at 10 a.m. must be received by 

April 8, 2011. The proposed rule 

published on August 2, 2002 is 

withdrawn as of January 7, 2011. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–146097–09), room 

5203, Internal Revenue Service, PO Box 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be handdelivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to: CC:PA:LPD:PR (REG–146097–09), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC 20224 or sent 

electronically via the Federal 

eRulemaking Portal at http:// 

www.regulations.gov (IRS REG–146097– 

09). The public hearing will be held in 

auditorium of the Internal Revenue 

Building, 1111 Constitution Avenue, 

NW., Washington, DC. 


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