Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Proposed Rules 67873

1Consistent with section 201(b) of Executive 

Order 12919, the Department of Commerce has 

delegated authority to DoD to use the DPAS 

regulations for priority rating of contracts and 

orders for all materials, services, and facilities 

needed in support of approved programs with 

respect to military production and construction, 

military assistance to foreign nations, stockpiling, 

outer space, and directly related activities. See

Department of Commerce DPAS Delegation #1 (July 

1, 1998). DoD is the single largest user of the DPAS 

regulations.

continue to be able to submit their 

rejection rationale in writing. 

It is estimated that 25 percent (or 

1,750) of the 7,000 DPAS respondents 

tasked with notifying their customer of 

their rationale for rejection are small 

entities affected by this rule. This 

estimate is based on data provided by 

the Department of Defense (DoD)1 on 

the number of entities participating in 

the DPAS program. DoD estimates that 

one percent (or 7,000) of 700,000 rated 

orders result in rejection notices and 

require the related transmittal of the 

rationale for rejection.

This rule would have a minor positive 

impact on the small entities affected by 

this rule. It would save these entities 

approximately five minutes per 

response (or 146 hours annually) in 

reduced public burden. Because the 

impact to small entities would be small, 

I certify that this rule would not have a 

significant economic impact on a 

substantial number of small entities. 

This amendment does not include any 

new reporting or recordkeeping 

requirements and will not duplicate, 

overlap or conflict with other laws or 

regulations.

List of Subjects in 15 CFR Part 700 

Administrative practice and 

procedure, Business and industry, 

Government contracts, National defense, 

Reporting and recordkeeping 

requirements, Strategic and critical 

materials.

Accordingly, the DPAS regulations 

(15 CFR part 700) are proposed to be 

amended as follows:

PART 700—[AMENDED] 

1. The authority citation is revised to 

read as follows:

Authority: Titles I and VII of the Defense 

Production Act of 1950, as amended (50 

U.S.C. App. 2061, et seq.), Title VI of the 

Robert T. Stafford Disaster Relief and 

Emergency Assistance Act (42 U.S.C. 5195 et 

seq.), and Executive Order 12919, as 

amended, 59 FR 29525, 3 CFR, 1994 Comp., 

p. 901, as amended by Executive Order 

13286, 68 FR 10619, 3 CFR, 2003 Comp., p. 

166; section 18 of the Selective Service Act 

of 1948 (50 U.S.C. App. 468), 10 U.S.C. 2538, 

50 U.S.C. 82, and Executive Order 12742, 56 

FR 1079, 3 CFR, 1991 Comp., p. 309; and 

Executive Order 12656, 53 FR 226, 3 CFR, 

1988 Comp., p. 585.

2. Revise § 700.13(d)(1) to read as 

follows:

§ 700.13 Acceptance and rejection of rated 

orders.

* * * * *

(d) Customer notification 

requirements. (1) A person must accept 

or reject a rated order and transmit the 

acceptance or rejection in writing (hard 

copy), or in electronic format, within 

fifteen (15) working days after receipt of 

a DO rated order and within ten (10) 

working days after receipt of a DX rated 

order. If the order is rejected, the person 

must also provide the reasons for the 

rejection, pursuant to paragraphs (b) and 

(c) of this section, in writing (hard copy) 

or electronic format.

* * * * *

Dated: November 12, 2004. 

Peter Lichtenbaum, 

Assistant Secretary for Export 

Administration.

[FR Doc. 04–25718 Filed 11–19–04; 8:45 am] 

BILLING CODE 3510–33–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service 

26 CFR Part 1 

[REG–145535–02] 

RIN 1545–BB85 

Guidance Regarding Predecessors and 

Successors Under Section 355(e); 

Limitation on Gain Recognition Under 

Section 355(e)

AGENCY: Internal Revenue Service (IRS), 

Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains 

proposed regulations that define the 

terms predecessor and successor for 

purposes of section 355(e). These 

proposed regulations provide guidance 

in determining whether a corporation is 

a predecessor or successor of a 

distributing or controlled corporation, 

as well as rules to assist taxpayers in 

determining whether an acquisition of 

an interest in a corporation would cause 

a distributing corporation to recognize 

gain under section 355(e). These 

proposed regulations affect corporations 

that distribute the stock of controlled 

corporations in distributions described 

in section 355.

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by February 22, 2005.

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–145535–02), 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–145535–02), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC, or sent 

electronically, via the IRS Internet site 

at http://www.irs.gov/regs or via the 

Federal eRulemaking Portal at http://

www.regulations.gov (IRS—REG–

145535–02).

FOR FURTHER INFORMATION CONTACT:

Concerning the proposed regulations, 

Krishna P. Vallabhaneni at (202) 622–

7550; concerning submissions of 

comments or requests for a hearing, 

Robin R. Jones, (202) 622–7180 (not tollfree numbers).

SUPPLEMENTARY INFORMATION: 

Background and Explanation of 

Provisions 

This document contains proposed 

regulations under section 355(e) of the 

Internal Revenue Code of 1986. Section 

355(e), enacted as part of the Taxpayer 

Relief Act of 1997 (Pub. L. 105–34, 111 

Stat 788 (1997)), provides that stock of 

a controlled corporation (Controlled) 

generally will not be treated as qualified 

property under section 355(c)(2) or 

361(c)(2) if the Controlled stock is 

distributed as part of a plan (or series of 

related transactions) pursuant to which 

one or more persons acquire directly or 

indirectly stock representing a 50-

percent or greater interest in the 

distributing corporation (Distributing) or 

Controlled. On April 26, 2002, the 

Internal Revenue Service (IRS) and the 

Treasury Department published 

temporary regulations (TD 8988) in the 

Federal Register (67 FR 20632) under 

section 355(e) providing guidance 

regarding whether a distribution and an 

acquisition of Distributing or Controlled 

are part of a ‘‘plan (or series of related 

transactions).’’ See Treas. Reg. § 1.355–

7T. Section 355(e)(4)(D) provides that, 

for purposes of section 355(e), ‘‘any 

reference to a controlled corporation or 

a distributing corporation shall include 

a reference to any predecessor or 

successor of such corporation.’’

Practitioners have commented that 

guidance regarding the definitions of 

predecessor and successor is desirable. 

Therefore, these regulations propose 

definitions of predecessor and 

successor, rules for determining 

whether there has been an acquisition of 

a predecessor of Distributing, 

Distributing, or Controlled in certain 

67874 Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Proposed Rules 

cases, and rules limiting the amount of 

gain required to be recognized as a 

result of acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in a predecessor of 

Distributing. 

Predecessors of Distributing 

The definition of a predecessor of 

Distributing in these proposed 

regulations is intended to reflect the fact 

that section 355(e) generally denies taxfree treatment under sections 355(c)(1) 

and 361(c)(1) if there is a division of a 

corporation’s assets to which section 

355(a) applies that is coupled with 

planned acquisitions of stock 

representing in the aggregate a 50-

percent or greater interest in 

Distributing or Controlled. The 

proposed regulations generally provide 

that a predecessor of Distributing 

includes a corporation that, before the 

distribution, transfers property to 

Distributing in a transaction to which 

section 381 applies if Distributing 

transfers some (but not all) of the 

acquired property to Controlled (or a 

predecessor of Controlled, as described 

below) and the basis of such property 

immediately after the transfer to 

Controlled (or a predecessor of 

Controlled) is determined in whole or in 

part by reference to the basis of the 

property in the hands of Distributing 

immediately before the transfer. For 

example, if before the distribution P 

merges into D in a statutory merger 

under section 368(a)(1)(A) and D 

transfers some but not all of the 

acquired P assets to C in exchange for 

C stock in a reorganization under 

section 368(a)(1)(D), then P is a 

predecessor of D. 

The proposed regulations also provide 

that a predecessor of Distributing 

includes a corporation that, before the 

distribution, transfers property to 

Distributing in a transaction to which 

section 381 applies if some but not all 

of the property transferred to 

Distributing includes Controlled stock 

and, after the combining transaction, 

Distributing transfers less than all of the 

property acquired (other than the 

Controlled stock) to Controlled. In such 

cases, the distribution of Controlled 

stock, even without a pre-distribution 

transfer of acquired assets to Controlled, 

effects a division of the predecessor’s 

assets. 

The definition of a predecessor of 

Distributing may result in a corporation 

being treated as a predecessor of 

Distributing even if the distribution and 

the combination of the predecessor and 

Distributing are not part of a plan. Once 

a predecessor of Distributing is 

identified, it must be determined 

whether the distribution and any 

acquisitions (deemed or actual) of stock 

of the predecessor are part of a plan. 

Predecessors of Controlled 

In the course of developing these 

regulations, the IRS and Treasury 

Department considered to what extent a 

corporation’s transfer of property to 

Controlled in a transaction to which 

section 381 applies implicates the 

policies underlying section 355(e). 

Generally, Controlled will not be able to 

transfer property that it receives in such 

a transaction to Distributing tax-free. 

One exception is where Controlled itself 

distributes the stock of another 

corporation in a distribution to which 

section 355 applies. In these cases, 

however, Controlled will functionally 

be a distributing corporation, and the 

transferor of property to Controlled may 

be a predecessor of the distributing 

corporation. Therefore, as a general 

matter, it appears that property 

transferred to Controlled cannot be 

divided tax-free between Distributing 

and Controlled in the same way that 

property transferred to Distributing can 

be divided tax-free. Accordingly, the 

policy underlying the definition of a 

predecessor of Distributing does not 

appear to necessitate a definition of a 

predecessor of Controlled. 

Nonetheless, solely for purposes of 

determining whether a corporation is a 

predecessor of Distributing, calculating 

certain limitations on gain recognition 

described below, and applying a special 

affiliated group rule described below, 

these proposed regulations define a 

predecessor of Controlled as a 

corporation that before the distribution 

transfers property to Controlled in a 

transaction to which section 381 

applies. Under these proposed 

regulations, for no other purpose can a 

corporation be a predecessor of 

Controlled. Thus, acquisitions of stock 

that are part of a plan that includes the 

distribution and that in the aggregate 

represent a 50-percent or greater interest 

in a predecessor of Controlled will not 

cause Distributing to recognize gain. 

However, the IRS and Treasury 

Department continue to study whether 

there may be other situations in which 

a corporation should be treated as a 

predecessor of Controlled. 

The definition of a predecessor of 

Controlled ensures that a corporation is 

treated as a predecessor of Distributing 

in the following situation and similar 

ones. Suppose Distributing acquires all 

the assets of X (including all the 

outstanding stock of Y) in a transaction 

to which section 381 applies. After the 

acquisition, Distributing causes Y to 

merge into Controlled, a wholly owned 

subsidiary of Distributing, in a 

reorganization under section 

368(a)(1)(D). Distributing then 

distributes the stock of Controlled to its 

shareholders pro rata in a distribution to 

which section 355(a) applies. In this 

case, there is a separation of the X assets 

in a distribution to which section 355(a) 

applies. Under the definition of a 

predecessor of Controlled described 

above, Y will be treated as a predecessor 

of Controlled, and because Distributing 

acquires in a transaction to which 

section 381 applies stock of a 

predecessor of Controlled from X, X will 

be treated as a predecessor of 

Distributing.

Multiple Predecessors 

Under the proposed regulations, more 

than one corporation may be a 

predecessor of Distributing or 

Controlled. For example, if more than 

one corporation transfers property to 

Distributing in transactions to which 

section 381 applies, each of the 

transferring corporations may be a 

predecessor of Distributing. However, a 

corporation that transfers its assets in a 

transaction to which section 381 applies 

to a predecessor of Distributing is not 

also treated as a predecessor of 

Distributing. The IRS and Treasury 

Department recognize that such 

transfers of assets to a predecessor of 

Distributing could be part of the plan 

that includes the distribution, but are 

concerned that treating such transferring 

corporations as predecessors of 

Distributing would add substantial 

complexity. Nonetheless, the IRS and 

Treasury Department continue to 

consider whether such corporations 

should be treated as a predecessor of 

Distributing. 

Successors 

The definition of a successor of 

Distributing or Controlled proposed in 

these regulations is intended to identify 

corporations that are properly viewed as 

a continuation of Distributing or 

Controlled for purposes of section 

355(e). Therefore, the proposed 

regulations define a successor of 

Distributing as any corporation to which 

Distributing transfers property after the 

distribution in a transaction to which 

section 381 applies and a successor of 

Controlled as any corporation to which 

Controlled transfers property after the 

distribution in a transaction to which 

section 381 applies. More than one 

corporation may be a successor of 

Distributing or Controlled. For example, 

if after a distribution Distributing 

transfers property to another 

corporation (X) in a transaction to 

which section 381 applies, and X 

Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Proposed Rules 67875

transfers property to another 

corporation (Y) in a transaction to 

which section 381 applies, then each of 

X and Y may be a successor of 

Distributing. In this case, the 

determination of whether Y is a 

successor of Distributing is made after 

the determination of whether X is a 

successor of Distributing. 

Special Rules for Measuring Certain 

Acquisitions 

Whether there have been acquisitions 

of stock that are part of a plan that 

includes a distribution that in the 

aggregate represent a 50-percent or 

greater interest in a predecessor of 

Distributing is counted separately from 

whether there have been acquisitions of 

stock that are part of a plan that 

includes a distribution that in the 

aggregate represent a 50-percent or 

greater interest in Distributing. 

Therefore, Distributing may be required 

to recognize gain by reason of section 

355(e) with respect to a predecessor of 

Distributing, but not Distributing, and 

vice versa. 

Because a predecessor of Distributing 

may no longer exist after it combines 

with Distributing, special rules are 

necessary to determine whether there 

has been an acquisition of the 

predecessor in connection with and 

after the combination transaction. These 

proposed regulations provide that each 

person that owned an interest in 

Distributing immediately before the 

transaction in which the predecessor of 

Distributing transfers its property to 

Distributing is treated as acquiring stock 

in the predecessor of Distributing in the 

combination transaction. For example, 

suppose D acquires the assets of a 

predecessor in a statutory merger under 

section 368(a)(1)(A) and A, an 

individual, owned stock of D 

immediately before the merger. A would 

be treated as acquiring stock of the 

predecessor. 

In addition, an acquisition of 

Distributing (or a successor of 

Distributing) that occurs after 

Distributing’s combination with a 

predecessor will count not only as an 

acquisition of Distributing, but also as 

an acquisition of the predecessor. The 

stock of Distributing (or a successor of 

Distributing) is treated as the stock of all 

predecessors of Distributing. Therefore, 

if D acquires the assets of a predecessor 

in a statutory merger under section 

368(a)(1)(A) and, after the merger, A, an 

individual, acquires 5 percent of the 

stock of D, A is treated as acquiring not 

only stock of D, but also stock of the 

predecessor of D. 

The proposed regulations provide 

similar rules for determining whether 

there has been an acquisition of stock of 

Distributing or Controlled if there is an 

acquisition of stock of a successor of 

Distributing or Controlled. Therefore, 

acquisitions of a successor of 

Distributing or Controlled and 

acquisitions of Distributing or 

Controlled (before or after the 

distribution) pursuant to a plan are 

combined to determine whether there 

have been acquisitions of stock that in 

the aggregate represent a 50-percent or 

greater interest in Distributing or 

Controlled that cause section 355(e) to 

apply. 

Special Rules for Gain Recognition 

Generally, if a distribution and 

acquisitions that in the aggregate 

represent a 50-percent or greater interest 

in a predecessor of Distributing or 

Distributing are part of a plan, section 

355(e) requires Distributing to recognize 

the full amount of the gain inherent in 

the Controlled stock on the date of the 

distribution under section 355(c)(2) or 

section 361(c)(2), as applicable. 

However, if a distribution and 

acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in a predecessor of 

Distributing are part of a plan but there 

are not acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in Distributing that are 

part of that plan, and if the gain 

inherent in the assets of the predecessor 

of Distributing that are contributed to 

Controlled is small relative to the gain 

inherent in the Controlled stock on the 

date of the distribution, it may seem 

inappropriate to require that 

Distributing recognize the full amount 

of gain inherent in the Controlled stock. 

Similarly, if a distribution and 

acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in Distributing are part 

of a plan but there are not acquisitions 

of stock that in the aggregate represent 

a 50-percent or greater interest in the 

predecessor of Distributing that are part 

of a plan, and if the excess of the gain 

inherent in the Controlled stock on the 

date of the distribution over the gain 

attributable to the assets of the 

predecessor is small relative to the full 

amount of gain inherent in the 

Controlled stock, it may seem 

inappropriate to require that 

Distributing recognize the full amount 

of gain inherent in the Controlled stock. 

Therefore, the proposed regulations 

provide two rules limiting the amount 

of gain that Distributing must recognize 

in these cases. 

The first rule provides that if a 

distribution and acquisitions of stock 

that in the aggregate represent a 50-

percent or greater interest in a 

predecessor of Distributing are part of a 

plan, then the amount of gain that 

Distributing recognizes by reason of 

such acquisitions will not exceed the 

amount of gain, if any, that the 

predecessor of Distributing would have 

recognized if, immediately before the 

distribution, the predecessor had 

transferred the property that was 

transferred to Controlled and the stock 

of Controlled that it transferred to 

Distributing to a newly formed, wholly 

owned corporation solely for stock of 

such corporation in an exchange to 

which section 351 applied (even if 

section 351 would not have actually 

applied) and then sold the stock of that 

corporation to an unrelated person in 

exchange for cash equal to its fair 

market value. 

The second rule applies if a 

distribution and acquisitions of stock 

that in the aggregate represent a 50-

percent or greater interest in 

Distributing are part of a plan and the 

acquisitions occur in the section 381 

transaction in which a predecessor of 

Distributing transfers its assets to 

Distributing. In these cases, the 

proposed regulations effectively provide 

that the amount of gain that Distributing 

recognizes will not exceed the amount 

of gain that Distributing would have 

recognized had it not transferred assets 

of the predecessor to Controlled and had 

it not acquired any Controlled stock 

from the predecessor. In particular, the 

amount of gain that Distributing 

recognizes will not exceed the excess, if 

any, of the amount described in section 

355(c)(2) or section 361(c)(2), as 

applicable, over the amount of gain, if 

any, that Distributing would have been 

required to recognize if there had been 

acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in the predecessor of 

Distributing (but not Distributing) 

involved in the combining transfer that 

were part of a plan that includes the 

distribution, taking into account the 

limitation in the first rule. For example, 

assume that X, a corporation, merges 

into Distributing in a statutory merger 

that qualifies as a reorganization under 

section 368(a)(1)(A). In the merger, 

Distributing issues 75 percent of its 

stock to the former shareholders of X. 

Distributing then forms Controlled 

solely with assets acquired from X in 

the merger and distributes the stock of 

Controlled pro rata to its shareholders. 

At the time of the distribution, the basis 

of the Controlled stock is $30 and the 

fair market value of that stock is $70. 

Assume that the distribution and the 

former X shareholders’ acquisition of 

67876 Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Proposed Rules 

stock of Distributing are part of a plan. 

Furthermore, assume that, other than 

the deemed acquisition of stock of X by 

the pre-merger shareholders of 

Distributing, there are no other 

acquisitions of the stock of X that are 

part of a plan that includes the 

distribution. By reason of the second 

limitation, Distributing’s gain 

recognized under section 361(c)(2) 

would be zero because all of the gain 

inherent in the Controlled stock at the 

time of the distribution is attributable to 

assets acquired from X in the merger.

In order to ensure that in appropriate 

cases these limitations do not ultimately 

prevent recognition of gain in the full 

amount described in section 355(c)(2) or 

361(c)(2), as applicable, these proposed 

regulations provide that if there are 

acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in more than one 

corporation (for example, two 

predecessors of Distributing) that are 

pursuant to a plan that includes the 

distribution, Distributing must 

recognize gain in the amount described 

in section 355(c)(2) or 361(c)(2), as 

applicable, subject to the limitations 

described above, with respect to each 

such corporation. However, because this 

rule could cause Distributing to 

recognize a total amount of gain in 

excess of that amount described in 

section 355(c)(2) or 361(c)(2), as 

applicable, these regulations include an 

overall limitation on gain recognition. 

That rule provides that the sum of the 

amounts required to be recognized by 

Distributing under section 355(e) and 

the regulations promulgated thereunder 

will not exceed the amount described in 

section 355(c)(2) or section 361(c)(2), as 

applicable. 

As described above, the rule for 

determining whether a corporation is a 

predecessor of Distributing references 

the assets of the predecessor at the time 

it combines with Distributing while the 

rule for calculating the limitation on 

gain recognition references the basis and 

value of the predecessor’s assets at the 

time of the distribution. The IRS and 

Treasury Department believe that 

determining whether a corporation is a 

predecessor of Distributing by reference 

to its assets at the time it combines with 

Distributing (and not later) is 

appropriate because, in that transaction, 

the predecessor will likely cease to 

exist. However, the division of the 

predecessor’s assets does not occur until 

the distribution. In addition, the gain 

required to be recognized by reason of 

section 355(e) is measured as of the date 

of the distribution. Therefore, the IRS 

and Treasury Department believe that it 

is appropriate to measure the basis and 

value of the predecessor’s assets on the 

date of the distribution for purposes of 

determining the amount of gain required 

to be recognized when there have been 

acquisitions of a 50-percent or greater 

interest in the predecessor that are part 

of a plan that includes the distribution. 

Special Rule for Affiliated Groups 

The proposed regulations include a 

special rule that relates to the 

application of section 355(e)(2)(C). 

Section 355(e)(2)(C) provides that a plan 

(or series of related transactions) will 

not result in stock or securities in the 

controlled corporation not being treated 

as qualified property for purposes of 

section 355(c)(2) or section 361(c)(2) if, 

immediately after the completion of 

such plan or transactions, the 

distributing corporation and all 

controlled corporations are members of 

a single affiliated group (as defined in 

section 1504 without regard to 

subsection (b) thereof). These proposed 

regulations provide that, for purposes of 

section 355(e)(2)(C), a predecessor of 

Distributing or Controlled is treated as 

continuing in existence following its 

transfer of property to Distributing or 

Controlled, and Distributing or 

Controlled is treated as continuing in 

existence following a transfer of 

property to a successor. 

Request for Comments 

The IRS and Treasury Department are 

concerned that certain transfers of assets 

to a partnership or a corporation by 

Distributing or Controlled may facilitate 

an acquisition of an interest in 

Distributing’s or Controlled’s assets that 

is functionally equivalent to an 

acquisition of Distributing or 

Controlled. The IRS and Treasury 

Department are also concerned that 

certain acquisitions by persons 

unrelated to Distributing or Controlled 

of an interest in a corporation or 

partnership in which Distributing or 

Controlled directly or indirectly owns 

an interest may also be an acquisition 

that is functionally equivalent to an 

acquisition of Distributing or 

Controlled. If such transfers and 

acquisitions are part of a plan that 

includes the distribution, they could be 

used to circumvent the purposes of 

section 355(e). Accordingly, the IRS and 

Treasury Department are studying how 

section 355(e) might apply to such 

transfers and acquisitions. Comments 

are requested in this regard. 

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 

has also 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 these 

regulations do 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, this notice of proposed 

rulemaking will be submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 

Comments and Requests for a 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 Treasury Department 

specifically request comments on the 

clarity of the proposed rules and how 

they may be made easier to understand. 

All comments will be available for 

public inspection and copying. 

A public hearing will be scheduled if 

requested in writing by any person that 

timely submits written comments. If a 

public hearing is scheduled, notice of 

the date, time, and place for the public 

hearing will be published in the Federal 

Register. 

Drafting Information 

The principal author of these 

proposed regulations is Krishna P. 

Vallabhaneni of the Office of Associate 

Chief Counsel (Corporate). However, 

other personnel from the IRS and 

Treasury Department participated in 

their development.

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 is amended by adding an entry 

in numerical order to read, in part, as 

follows:

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

Section 1.355–8 also issued under 26 

U.S.C. 355(e)(5). * * *

Par. 2. Section 1.355–8 is added to 

read as follows:

Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Proposed Rules 67877

§ 1.355–8 Definition of predecessors and 

successors and limitations on gain 

recognition. 

(a) References to a distributing or 

controlled corporation. For purposes of 

section 355(e) and the regulations 

promulgated thereunder, except as 

otherwise provided, any reference to a 

distributing corporation (Distributing) or 

a controlled corporation (Controlled) 

shall include a reference to any 

predecessor or successor of such 

corporation, as such terms are defined 

in this section. 

(b) Definition of predecessor—(1) 

Predecessor of a distributing 

corporation. A predecessor of 

Distributing is a corporation (the first 

corporation) that before the distribution 

transfers property to Distributing in a 

transaction to which section 381 applies 

(the combining transfer), but only if 

either—

(i) Distributing transfers some but not 

all of the property acquired from the 

first corporation to Controlled (the 

separating transfer) and the basis of 

such property immediately after the 

separating transfer is determined in 

whole or in part by reference to the 

basis of the property in the hands of 

Distributing immediately before the 

separating transfer; or 

(ii) In the combining transfer, some 

but not all of the property transferred to 

Distributing includes Controlled stock 

and, after the combining transfer, 

Distributing does not transfer all of the 

property acquired from the first 

corporation (other than the Controlled 

stock) to Controlled. 

(2) Predecessor of a controlled 

corporation. Solely for purposes of 

paragraphs (b)(1), (e)(2), and (f) of this 

section, a corporation is a predecessor of 

Controlled if, before the distribution, it 

transfers property to Controlled in a 

transaction to which section 381 

applies. Other than for the purposes 

described in the preceding sentence, no 

corporation can be a predecessor of 

Controlled. 

(3) References to a distributing or 

controlled corporation. For purposes of 

paragraph (b)(1) of this section, a 

reference to Distributing shall not 

include a reference to a predecessor of 

Distributing. Therefore, a corporation 

that transfers property to a predecessor 

of Distributing in a transaction to which 

section 381 applies is not also a 

predecessor of Distributing. For 

purposes of paragraph (b)(2) of this 

section, a reference to Controlled shall 

not include a reference to a predecessor 

of Controlled. Therefore, a corporation 

that transfers property to a predecessor 

of Controlled in a transaction to which 

section 381 applies is not also a 

predecessor of Controlled. 

(4) Determination of predecessor 

status—(i) Substitute assets. For 

purposes of determining whether a 

corporation is a predecessor of 

Distributing, if after the combining 

transfer Distributing transfers any 

property it received in the combining 

transfer in a transaction in which gain 

or loss is not recognized in whole, the 

property received by Distributing in 

exchange for such property shall be 

treated as transferred to Distributing in 

the combining transfer. 

(ii) Reorganizations under section 

368(a)(1)(F). For purposes of 

determining whether a corporation is a 

predecessor of Distributing or 

Controlled, if a corporation engages in a 

reorganization under section 

368(a)(1)(F), then the resulting 

corporation shall be treated as the same 

corporation that engaged in the 

reorganization. Therefore, if a 

corporation (X) transfers property to 

another corporation (Y) in a 

reorganization under section 

368(a)(1)(A), and then Y transfers 

property to Distributing in a 

reorganization under section 

368(a)(1)(F), Y and Distributing will be 

treated as the same corporation and X 

may be a predecessor of Distributing. 

(iii) Multiple predecessors. More than 

one corporation may be a predecessor of 

Distributing or Controlled. Therefore, if 

more than one corporation transfers 

property to Distributing or Controlled in 

transactions to which section 381 

applies, each of the transferring 

corporations may be a predecessor of 

Distributing or Controlled, respectively. 

(c) Definition of successor—(1) In 

general. A successor of Distributing or 

Controlled, respectively, is a 

corporation to which Distributing or 

Controlled transfers property after the 

distribution in a transaction to which 

section 381 applies (a successor 

transaction). 

(2) Determination of successor status.

More than one corporation may be a 

successor of Distributing or Controlled. 

Therefore, if Distributing transfers 

property to another corporation (X) in a 

transaction to which section 381 

applies, and X transfers property to 

another corporation (Y) in a transaction 

to which section 381 applies, then each 

of X and Y may be a successor of 

Distributing. In this case, the 

determination of whether Y is a 

successor of Distributing is made after 

the determination of whether X is a 

successor of Distributing.

(d) Special acquisition rules—(1) 

Deemed acquisitions of a predecessor of 

a distributing corporation. If there is a 

predecessor of Distributing, the 

following rules shall apply. 

(i) Each person that owned an interest 

in Distributing immediately before the 

combining transfer involving the 

predecessor of Distributing shall be 

treated as acquiring in the combining 

transfer stock representing an interest in 

the predecessor of Distributing. 

(ii) If stock of Distributing is acquired 

after the combining transfer involving 

the predecessor of Distributing, the 

stock of Distributing shall be treated as 

the stock of the predecessor of 

Distributing. Therefore, an acquisition 

of the stock of Distributing that occurs 

after the combining transfer shall be 

treated as not only an acquisition of the 

stock of Distributing, but also an 

acquisition of the stock of the 

predecessor of Distributing. 

(2) Deemed acquisitions of a 

distributing corporation. If there is a 

successor of Distributing, the following 

rules shall apply. 

(i) Each person that owned an interest 

in the successor of Distributing 

immediately before the successor 

transaction involving the successor of 

Distributing shall be treated as acquiring 

in the successor transaction stock 

representing an interest in Distributing. 

(ii) If stock of the successor of 

Distributing is acquired after the 

successor transaction, the stock of the 

successor of Distributing shall be treated 

as stock of Distributing. Therefore, 

acquisitions of the stock of a successor 

of Distributing that occur after the 

successor transaction shall be treated as 

acquisitions of the stock of Distributing. 

(3) Deemed acquisitions of a 

controlled corporation. If there is a 

successor of Controlled, the following 

rules shall apply. 

(i) Each person that owned an interest 

in the successor of Controlled 

immediately before the successor 

transaction involving the successor of 

Controlled shall be treated as acquiring 

in the successor transaction stock 

representing an interest in Controlled. 

(ii) If stock of the successor of 

Controlled is acquired after the 

successor transaction, the stock of the 

successor of Controlled shall be treated 

as stock of Controlled. Therefore, 

acquisitions of the stock of a successor 

of Controlled that occur after the 

successor transaction shall be treated as 

acquisitions of stock of Controlled. 

(4) Separate counting for distributing 

corporations and their predecessors.

The measurement of whether one or 

more persons have acquired stock that 

in the aggregate represents a 50-percent 

or greater interest in either a 

predecessor of Distributing or 

Distributing that is part of the plan that 

67878 Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Proposed Rules 

includes the distribution shall be made 

separately. Therefore, there may be 

acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in a predecessor of 

Distributing that are part of a plan that 

includes a distribution where there are 

not acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in Distributing that are 

part of a plan that includes a 

distribution. In addition, there may be 

acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in Distributing that are 

part of a plan that includes a 

distribution where there are not 

acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in a predecessor of 

Distributing that are part of a plan that 

includes a distribution. 

(e) Special rules for gain recognition—

(1) In general. If there are acquisitions 

of stock that in the aggregate represent 

a 50-percent or greater interest in more 

than one corporation (for example, two 

predecessors of Distributing) that are 

pursuant to a plan that includes the 

distribution, Distributing must 

recognize gain in the amount described 

in section 355(c)(2) or 361(c)(2), as 

applicable, with respect to each such 

corporation, subject to the limitations in 

paragraphs (e)(2) and (3) of this section 

if applicable. The limitations in 

paragraphs (e)(2) and (3) of this section 

are applied separately to each such 

corporation to determine the amount of 

gain required to be recognized. 

Paragraph (e)(4) of this section sets forth 

an overall limitation that is computed 

taking into account all of the gain 

recognized by Distributing by reason of 

section 355(e). 

(2) Acquisition of a predecessor of a 

distributing corporation—(i) In general.

If a distribution and acquisitions of 

stock that in the aggregate represent a 

50-percent or greater interest in a 

predecessor of Distributing are part of a 

plan, the amount of gain recognized by 

Distributing by reason of section 355(e) 

as a result of the acquisitions shall not 

exceed the amount of gain, if any, that 

the predecessor of Distributing would 

have recognized if, immediately before 

the distribution, the predecessor of 

Distributing had transferred the 

property that was transferred to 

Controlled in the separating transfer and 

stock of Controlled that the predecessor 

of Distributing transferred to 

Distributing in the combining transfer to 

a newly formed, wholly owned 

corporation in exchange solely for stock 

of such corporation in an exchange to 

which section 351 applied and then 

sold the stock of that corporation to an 

unrelated person in exchange for cash 

equal to its fair market value. 

(ii) Operating rules. For purposes of 

applying paragraph (e)(2)(i) of this 

section, the following rules shall apply. 

(A) If before the distribution 

Distributing transfers any property it 

received from the predecessor of 

Distributing in the combining transfer in 

a transaction in which gain or loss is not 

recognized in whole, the property 

received by Distributing in exchange for 

such property shall be treated as 

transferred to Distributing in the 

combining transfer. 

(B) The basis of the property other 

than stock of Controlled treated as 

transferred to the newly formed, wholly 

owned corporation by the predecessor 

of Distributing shall equal the basis of 

such property in the hands of 

Controlled immediately before the 

distribution. 

(C) Only property (other than stock of 

Controlled) owned by Controlled at the 

time of the distribution shall be taken 

into account in computing the amount 

pursuant to paragraph (e)(2)(i) of this 

section. However, if before the 

distribution Controlled transfers any 

property it received in the separating 

transfer in a transaction in which gain 

or loss is not recognized in whole, the 

property received by Controlled in 

exchange for such property shall be 

treated as transferred to Controlled in 

the separating transfer. 

(D) The basis and fair market value of 

the stock of Controlled treated as 

transferred to the newly formed, wholly 

owned corporation shall equal the basis 

and fair market value, respectively, of 

such stock immediately before the 

combining transfer in which the 

predecessor of Distributing transferred 

such stock to Distributing. 

(3) Acquisitions of a distributing 

corporation. If a distribution and 

acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in Distributing are part 

of a plan and the acquisitions occur in 

a combining transfer, the amount of gain 

recognized by Distributing by reason of 

section 355(e) as a result of the 

acquisitions shall not exceed the excess, 

if any, of the amount described in 

section 355(c)(2) or section 361(c)(2), as 

applicable, over the amount of gain, if 

any, that Distributing would have been 

required to recognize if there had been 

acquisitions of stock that in the 

aggregate represent a 50-percent or 

greater interest in the predecessor of 

Distributing (but not Distributing) 

involved in the combining transfer that 

were part of a plan that includes the 

distribution, taking into account the 

limitation in paragraph (e)(2) of this 

section. For purposes of this paragraph 

(e)(3), references to Distributing shall 

not include a reference to a predecessor 

of Distributing. 

(4) Overall limitation on gain 

recognition. The sum of the amounts 

required to be recognized by 

Distributing under section 355(e) and 

the regulations promulgated thereunder 

(taking into account paragraphs (e)(2) 

and (3) of this section) shall not exceed 

the amount described in section 

355(c)(2) or section 361(c)(2), as 

applicable.

(f) Predecessor or successor as a 

member of the affiliated group. For 

purposes of section 355(e)(2)(C), a 

predecessor of Distributing shall be 

treated as continuing in existence 

following the combining transfer to 

which section 381 applies described in 

paragraph (b)(1) of this section, a 

predecessor of Controlled shall be 

treated as continuing in existence 

following the transaction to which 

section 381 applies described in 

paragraph (b)(2) of this section, and 

Distributing or Controlled shall be 

treated as continuing in existence 

following a successor transaction. 

(g) Examples. The following examples 

illustrate the principles of this section. 

Unless otherwise stated, assume 

throughout these examples that 

Distributing (D) owns all the stock of 

Controlled (C) and that D distributes the 

stock of C in a distribution to which 

section 355 applies, but to which 

section 355(d) does not apply. In 

addition, assume that X, Y, and Z are 

individuals, and that D, C, P, Q, and R 

are corporations and none of them is a 

member of a consolidated group. No 

inference should be drawn from any 

example concerning whether any 

requirements of section 355 other than 

those of section 355(e) are satisfied. The 

examples are as follows:

Example 1. Predecessor of distributing—(i) 

Facts. X owns 100 percent of the stock of P 

and Y owns 100 percent of the stock of D. 

P merges into D in a reorganization under 

section 368(a)(1)(A). Immediately after the 

merger, X and Y own 10 percent and 90 

percent, respectively, of the stock of D. D 

then contributes to C one of the assets 

acquired from P in the merger. At the time 

of the contribution, the asset has a basis of 

$40x and a fair market value of $110x. In 

exchange for the asset, D receives additional 

C stock and $10x. D distributes the stock of 

C (but not the cash) to X and Y pro rata. The 

contribution is described in section 

368(a)(1)(D) and D recognizes $10x of gain 

under section 361(b) in the contribution. 

Immediately before the distribution, the asset 

contributed to C has a basis of $50x and a 

fair market value of $110x, and the stock of 

C held by D has a basis of $100x and a fair 

market value of $200x. 

Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Proposed Rules 67879

(ii) Analysis. Under paragraph (b)(1) of this 

section, P is a predecessor of D because 

before the distribution P transferred property 

to D in a transaction to which section 381 

applies, D transferred some but not all of the 

acquired property to C, and immediately after 

its transfer to C, the property has a basis 

determined in whole or in part by reference 

to the basis of the property in the hands of 

D immediately before the transfer to C. 

(iii) Under paragraph (d)(1)(i) of this 

section, Y is treated as acquiring stock 

representing 90 percent of the voting power 

and value of P. 

(iv) If the distribution and Y’s deemed 

acquisition of a 90-percent interest in P were 

part of a plan, D would recognize gain in the 

amount described in section 361(c)(2). 

Without regard to the limitations in 

paragraph (e) of this section, D would be 

required to recognize $100x of gain. Under 

paragraph (e)(2) of this section, however, D’s 

gain recognized by reason of the acquisition 

of P would not exceed $60x, the gain P 

would have recognized if, immediately 

before the distribution, it had transferred the 

former P property transferred by D to C to a 

newly formed, wholly owned corporation 

solely for stock of such corporation in an 

exchange to which section 351 applied and 

then sold that stock to an unrelated person 

for cash equal to its fair market value. 

Therefore, D would recognize $60x of gain.

Example 2. Distributing’s predecessor owns 

controlled stock—(i) Facts. X owns 100 

percent of the stock of P, and Y owns 100 

percent of the stock of D. P owns 35 percent 

of the stock of C with a basis of $40x and a 

fair market value of $35x. D owns the 

remaining 65 percent of the C stock with a 

basis of $10x and a fair market value of $65x. 

P merges into D in a reorganization under 

section 368(a)(1)(A). Immediately after the 

merger, X and Y own 10 percent and 90 

percent, respectively, of the D stock, and D 

owns 100 percent of the C stock with a basis 

of $50x and a fair market value of $100x. D 

then contributes to C one of the assets it 

acquired from P in the merger in exchange 

for additional shares of C. The contribution 

qualifies as a reorganization under section 

368(a)(1)(D). After the contribution, D 

distributes all of the C stock to X and Y pro 

rata. Immediately before the distribution, the 

asset contributed to C has a basis of $40x and 

a fair market value of $100x, and the C stock 

held by D has a basis of $90x and a fair 

market value of $200x. 

(ii) Analysis. Under paragraph (b)(1) of this 

section, P is a predecessor of D because 

before the distribution P transferred property 

to D in a transaction to which section 381 

applies, D transferred some but not all of the 

acquired property to C, and immediately after 

its transfer to C, the property has a basis 

determined in whole or in part by reference 

to the basis of the property in the hands of 

D immediately before the transfer to C. P is 

also a predecessor of D under paragraph 

(b)(1) of this section because some but not all 

of the property transferred to D includes C 

stock and, after the merger, D does not 

transfer all of the property acquired from P 

to C. 

(iii) Under paragraph (d)(1)(i) of this 

section, Y is treated as acquiring stock 

representing 90 percent of the voting power 

and value of P. 

(iv) If the distribution and Y’s deemed 

acquisition of a 90-percent interest in P were 

part of a plan, D would recognize gain in the 

amount described in section 361(c)(2). 

Without regard to the limitations in 

paragraph (e) of this section, D would be 

required to recognize $110x of gain. Under 

paragraph (e)(2) of this section, however, D’s 

gain recognized by reason of the acquisition 

of P would not exceed $55x, the gain P 

would have recognized if, immediately 

before the distribution, it had transferred the 

former P property that was transferred by D 

to C and the stock of C acquired from P to 

a newly formed, wholly owned corporation 

solely for stock of such corporation in an 

exchange to which section 351 applies and 

then sold that stock to an unrelated person 

for cash equal to its fair market value. For 

this purpose, the basis and fair market value 

of the C stock is treated as its basis and fair 

market value, respectively, immediately 

before the merger. Therefore, D would 

recognize $55x of gain.

Example 3. Predecessor of controlled—(i) 

Facts. X owns 100 percent of the stock of P 

and P owns various assets including 100 

percent of the stock of R. Y owns 100 percent 

of the stock of D and D owns 100 percent of 

the stock of C. P merges into D in a 

reorganization under section 368(a)(1)(A). 

Immediately after the merger, X and Y own 

10 percent and 90 percent, respectively, of 

the stock of D. D then causes R to merge into 

C in a reorganization under section 

368(a)(1)(D). At the time of the P–D merger, 

the R stock has a basis of $40x and a fair 

market value of $110x. D distributes the stock 

of C to X and Y pro rata. Immediately before 

the distribution, the stock of C held by D has 

a basis of $100x and a fair market value of 

$200x. 

(ii) Analysis. Under paragraph (b)(2) of this 

section, R is a predecessor of C because 

before the distribution R transferred property 

to C in a transaction to which section 381 

applies. Under paragraph (b)(1) of this 

section, P is a predecessor of D because some 

but not all of the property transferred to D 

includes stock of R, a predecessor of C and, 

after the merger, D does not transfer all of the 

property acquired from P to C. 

(iii) Under paragraph (d)(1)(i) of this 

section, Y is treated as acquiring stock 

representing 90 percent of the voting power 

and value of P. 

(iv) If the distribution and Y’s deemed 

acquisition of a 90-percent interest in P were 

part of a plan, D would recognize gain in the 

amount described in section 361(c)(2). 

Without regard to the limitations in 

paragraph (e) of this section, D would be 

required to recognize $100x of gain. Under 

paragraph (e)(2) of this section, however, D’s 

gain recognized by reason of the acquisition 

of P would not exceed $70x, the gain P 

would have recognized if, immediately 

before the distribution, it had transferred the 

stock of R to a newly formed, wholly owned 

corporation solely for stock of such 

corporation in an exchange to which section 

351 applied and then sold that stock to an 

unrelated person for cash equal to its fair 

market value. For this purpose, the basis and 

fair market value of the R stock is treated as 

its basis and fair market value, respectively, 

immediately before the P–D merger. 

Therefore, D would recognize $70x of gain.

Example 4. Acquisition of a distributing 

corporation. (i) Facts. X owns 100 percent of 

the stock of P and Y owns 100 percent of the 

stock of D. P merges into D in a 

reorganization under section 368(a)(1)(A). In 

the merger, X acquires 60 percent of the D 

stock. After the merger, therefore, X and Y 

own 60 percent and 40 percent, respectively, 

of the stock of D. D then contributes to C, a 

newly formed corporation, some of the assets 

acquired from P in the merger and one asset 

that it owned prior to the merger, in 

exchange for C stock in a transfer that 

qualifies as a reorganization under section 

368(a)(1)(D). After the contribution, D 

distributes the C stock to its shareholders pro 

rata. Immediately before the distribution, the 

contributed asset that D had owned prior to 

the merger has a basis of $3x and a fair 

market value of $10x and the contributed 

assets acquired from P have an aggregate 

basis of $1x and an aggregate value of $30x. 

Finally, immediately before the distribution, 

D’s C stock has a basis of $4x and a fair 

market value of $40x. 

(ii) Analysis. Under paragraph (b)(1) of this 

section, P is a predecessor of D because 

before the distribution P transferred property 

to D in a transaction to which section 381 

applies, D transferred some but not all of the 

acquired property to C, and immediately after 

its transfer to C, the property has a basis 

determined in whole or in part by reference 

to the basis of the property in the hands of 

D immediately before the transfer to C. 

(iii) Under paragraph (d)(1)(i) of this 

section, Y is treated as acquiring stock 

representing 40 percent of the voting power 

and value of P. There are not acquisitions 

that in the aggregate represent a 50-percent 

or greater interest in P in the merger that is 

pursuant to a plan that includes a 

distribution. However, there is an acquisition 

by X of a 60-percent interest in D in the 

merger. If that acquisition were pursuant to 

a plan that includes the distribution, D 

would be required to recognize gain in the 

amount described in section 361(c)(2). 

Without regard to the limitations in 

paragraph (e) of this section, D would be 

required to recognize $36x of gain. Under 

paragraph (e)(3) of this section, however, 

because that acquisition occurred in 

connection with P’s merger into D, the 

amount of gain recognized by D would not 

exceed $7x, the excess of the gain described 

in section 361(c)(2) ($36x) over the gain that 

D would have been required to recognize if 

there had been an acquisition of stock 

representing a 50-percent or greater interest 

in P (but not D) that was part of a plan 

involving the distribution ($29x). Therefore, 

D would recognize $7x of gain.

Example 5. Successor of a controlled 

corporation—(i) Facts. X owns 100 percent of 

the stock of each of D and R. D owns 100 

percent of the C stock. D’s C stock has a basis 

of $10x and a fair market value of $30x. D 

distributes all of its C stock to X. Immediately 

after the distribution, C merges into R in a 

reorganization under section 368(a)(1)(D). 

Immediately after the merger, X owns all of 

67880 Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Proposed Rules 

the R stock. Subsequently, Z purchases 60 

percent of the stock of R from X. 

(ii) Analysis. Under paragraph (c) of this 

section, R is a successor of C because after 

the distribution C transfers property to R in 

a transaction to which section 381 applies. 

Accordingly, Z acquired an interest in a 

successor of C. In addition, under paragraph 

(d)(3)(ii) of this section, the stock of R is 

treated as stock of C such that Z is treated 

as acquiring 60 percent of the voting power 

and value of C. 

(iii) If the distribution and Z’s acquisition 

of a 60-percent interest in R were part of a 

plan, D would be required to recognize gain 

in the amount of $20x, the amount described 

in section 355(c)(2). 

(h) Effective date. This section applies to 

distributions occurring after the date these 

regulations are published as final regulations 

in the Federal Register.

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement.

[FR Doc. 04–25649 Filed 11–19–04; 8:45 am] 

BILLING CODE 4830–01–P

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[OR–04–002; FRL–7835–3] 

Approval and Promulgation of State 

Implementation Plans; Oregon

AGENCY: Environmental Protection 

Agency.

ACTION: Proposed rule.

SUMMARY: The Environmental Protection 

Agency (EPA) proposes to approve 

numerous revisions to the Oregon State 

Implementation Plan (SIP) in the State 

of Oregon Administrative Rules (OAR) 

relating to the inspection and 

maintenance (I/M) of motor vehicles. 

These revisions were submitted to EPA 

by the Director of the Oregon 

Department of Environmental Quality 

(ODEQ) on November 5, 1999, 

September 15, 2000, November 27, 

2000, January 10, 2003, and April 22, 

2004. 

The revisions were submitted in 

accordance with the requirements of 

section 110 of the Clean Air Act 

(hereinafter CAA or Act).

DATES: Written comments must be 

received on or before December 22, 

2004.

ADDRESSES: Comments may be mailed 

to: Wayne Elson, Environmental 

Protection Agency, Office of Air, Waste, 

and Toxics (OAWT–107), EPA, 1200 

Sixth Avenue, Seattle, Washington 

98101. Comments may also be 

submitted electronically or through 

hand delivery/courier. Please follow the 

detailed instructions in the ADDRESSES

section of the Direct Final Rule which 

is located in the Rules section of this 

Federal Register. To submit comments, 

please follow the detailed instructions 

described in the Direct Final Rule, 

SUPPLEMENTARY INFORMATION section, 

Part I, General Information. 

Copies of the State’s request and other 

information supporting this action are 

available for inspection during normal 

business hours at the following location: 

EPA, Office of Air, Waste, and Toxics 

(AWT–107), 1200 Sixth Avenue, Seattle, 

Washington 98101.

FOR FURTHER INFORMATION CONTACT:

Wayne Elson, Office of Air, Waste, and 

Toxics (AWT–107), EPA, Seattle, 

Washington 98101, (206) 553–1463.

SUPPLEMENTARY INFORMATION: In the 

Final Rules section of this Federal 

Register, the EPA is approving the 

State’s SIP submittal as a direct final 

rule without prior proposal because the 

Agency views this as a noncontroversial 

submittal and anticipates no adverse 

comments. If no adverse comments are 

received in response to this action, no 

further activity is contemplated. 

If the EPA receives adverse 

comments, the direct final rule will be 

withdrawn and all public comments 

received will be addressed in a 

subsequent final rule based on this 

proposed rule. The EPA will not 

institute a second comment period. Any 

parties interested in commenting on this 

action should do so at this time. Please 

note that if we receive adverse comment 

on an amendment, paragraph, or section 

of this rule and if that provision may be 

severed from the remainder of the rule, 

we may adopt as final those provisions 

of the rule that are not the subject of an 

adverse comment. 

For additional information, see the 

Direct Final rule which is located in the 

Rules section of this Federal Register.

Dated: October 26, 2004. 

Julie M. Hagensen, 

Acting Regional Administrator, Region 10.

[FR Doc. 04–25628 Filed 11–19–04; 8:45 am] 

BILLING CODE 6560–50–P

DEPARTMENT OF THE INTERIOR

Bureau of Land Management 

43 CFR Part 2530 

[WO–350–1430–PF–24 1A] 

RIN 1004–AB10 

Indian Allotments

AGENCY: Bureau of Land Management, 

Interior.

ACTION: Proposed rule; withdrawal.

SUMMARY: The Bureau of Land 

Management (BLM) is withdrawing the 

proposed rule that would have revised 

the regulations for Indian allotments to 

reduce the regulatory burden imposed 

on the public, to streamline and clarify 

the existing regulations and to remove 

redundant and unnecessary 

requirements. The proposal was 

published in the Federal Register on 

October 16, 1996. We reopened the 

comment period in the Federal Register

on July 15, 1999 for 60 days.

FOR FURTHER INFORMATION CONTACT: You 

may contact Jeff Holdren, Lands and 

Realty Group, on (202) 452–7779 

(Commercial or FTS). Persons who use 

a telecommunications device for the 

deaf (TDD) may call the Federal 

Information Relay Service (FIRS) at 1–

800–877–8339, 24 hours a day, seven 

days a week, except holidays, to contact 

Mr. Holdren.

SUPPLEMENTARY INFORMATION: The BLM 

published the proposed rule in the 

Federal Register on October 16, 1996 

(61 FR 53887). We reopened the 

comment period in the Federal Register

on July 15, 1999 (64 FR 38172) for 60-

days because we inadvertently omitted 

the information collection requirements. 

We received three comments. The BLM 

decided to withdraw the proposed rule 

and will take no further action on this 

proposal regarding Indian allotments.

Dated: September 24, 2004. 

Chad Calvert, 

Acting Assistant Secretary, Land and 

Minerals Management.

[FR Doc. 04–25766 Filed 11–19–04; 8:45 am] 

BILLING CODE 4310–84–P

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Parts 2, 22, 24, 74, 78, and 90 

[WT Docket No. 02–55; FCC 04–253] 

The 800 MHz Public Safety Interference 

Proceeding; Request for Comments on 

Ex Parte Presentations and Extension 

of Deadlines

AGENCY: Federal Communications 

Commission.

ACTION: Request for comments.

SUMMARY: Subsequent to release of the 

800 MHz Report and Order in the Public 

Safety Interference Proceeding on 

August 6, 2004, Nextel 

Communications, Inc. and others filed 

ex parte presentations in the rulemaking 

proceeding. Nextel sought clarification 

and/or modification of certain aspects of