43968 Federal Register / Vol. 71, No. 149 / Thursday, August 3, 2006 / Rules and Regulations 

and readability of the animal drug 

regulations. 

DATES: This rule is effective August 3, 

2006. 

FOR FURTHER INFORMATION CONTACT: 

George K. Haibel, Center for Veterinary 

Medicine (HFV–6), Food and Drug 

Administration, 7519 Standish Pl., 

Rockville, MD 20855, 301–827–4567, 

e-mail: george.haibel@fda.hhs.gov. 

SUPPLEMENTARY INFORMATION: FDA is 

amending the animal drug regulations 

in part 520 (21 CFR part 520) in 

§§ 520.1204 and 520.1205 to remove 

aminopentamide hydrogen sulfate and 

pectin from the specifications for an oral 

suspension and for tablets containing 

kanamycin, bismuth subcarbonate, and 

activated attapulgite. These ingredients 

have been declared inactive or have 

been removed from the formulations. In 

addition, these sections are being 

reformatted and consolidated. These 

actions are being taken to improve the 

accuracy and readability of the animal 

drug regulations. 

This rule does not meet the definition 

of ‘‘rule’’in 5 U.S.C. 804(3)(A) because it 

is a rule of ‘‘particular applicability’’

Therefore, it is not subject to the 

congressional review requirements in 5 

U.S.C. 801–808. 

List of Subjects in 21 CFR Part 520 

Animal drugs. 

■ Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs and redelegated to 

the Center for Veterinary Medicine, 21 

CFR part 520 is amended as follows: 

PART 520—ORAL DOSAGE FORM 

NEW ANIMAL DRUGS 

■ 1. The authority citation for 21 CFR 

part 520 continues to read as follows: 

Authority: 21 U.S.C. 360b. 

■ 2. In § 520.1204, revise the section 

heading and paragraphs (a) and (c) to 

read as follows: 

§ 520.1204 Kanamycin, bismuth 

subcarbonate, activated attapulgite. 

(a) Specifications—(1) Each 5 

milliliters (mL) of suspension contains 

100 milligrams (mg) kanamycin (as the 

sulfate), 250 mg bismuth subcarbonate, 

and 500 mg activated attapulgite 

(aluminum magnesium silicate). 

(2) Each tablet contains 100 mg 

kanamycin (as the sulfate), 250 mg 

bismuth subcarbonate, and 500 mg 

activated attapulgite. 

* * * * * 

(c) Conditions of use in dogs—(1) 

Amount. 5 mL of suspension or 1 tablet 

per 20 pounds body weight every 8 

hours. Maximum dose: 5 mL of 

suspension or 3 tablets every 8 hours. 

Dogs under 10 pounds: 2.5 mL of 

suspension or 1/2 tablet every 8 hours. 

A recommended initial loading dose 

should be twice the amount of a single 

dose. 

(2) Indications for use. For the 

treatment of bacterial enteritis caused by 

organisms susceptible to kanamycin and 

the symptomatic relief of the associated 

diarrhea. 

(3) Limitations. Federal law restricts 

this drug to use by or on the order of 

a licensed veterinarian. 

§ 520.1205 [Removed] 

■ 3. Remove § 520.1205. 

Dated: July 21, 2006. 

Daniel G. McChesney, 

Director, Office of Surveillance and 

Compliance, Center for Veterinary Medicine. 

[FR Doc. E6–12568 Filed 8–2–06; 8:45 am] 

BILLING CODE 4160–02–S 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9279] 

RIN 1545–BF86 

Reporting Rules for Widely Held Fixed 

Investment Trusts 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final and Temporary 

regulations. 

SUMMARY: This document contains final 

and temporary regulations amending 

§ 1.671–5, a provision which provides 

reporting rules for widely held fixed 

investment trusts (WHFITs). These 

regulations clarify and simplify 

reporting for trustees and middlemen of 

non-mortgage widely held fixed 

investment trusts (NMWHFITs). The 

text of these final and temporary 

regulations also serves, in part, as the 

text of the proposed regulations set forth 

in the notice of proposed rulemaking 

(REG–125071–06) on this subject in this 

issue of the Federal Register. 

DATES: Effective Date: These regulations 

are effective July 28, 2006. 

Applicability Date: For dates of 

applicability see § 1.671–5(m). 

FOR FURTHER INFORMATION CONTACT: 

Faith Colson, 202–622–3060 (not a tollfree number). 

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

These final and temporary regulations 

amend § 1.671–5. The collection of 

information contained in these 

regulations is in § 1.671–5 and has been 

previously reviewed and approved by 

the Office of Management and Budget in 

accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3507) 

under control number 1545–1540. 

Response to this collection of 

information is mandatory. This 

information is required to be reported to 

beneficial owners of trust interests to 

enable them to correctly report their 

share of the items of income, deduction, 

and credit of the WHFIT in which they 

have invested. This information is also 

required to be reported to the IRS to 

enable the IRS to verify that trustees and 

middlemen are accurately reporting 

information to beneficial owners of trust 

interests and that beneficial owners are 

properly reporting their ownership of a 

trust interest. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a valid control 

number assigned by the Office of 

Management and Budget. 

Books or records relating to a 

collection of information must be 

retained as long as their contents might 

become material in the administration 

of any internal revenue law. Generally, 

tax returns and tax return information 

are confidential, as required by 26 

U.S.C. 6103. 

Background 

This document contains amendments 

to 26 CFR part 1. On January 24, 2006, 

the Internal Revenue Service (IRS) and 

the Treasury Department published 

final regulations (TD 9241) (final 

regulations) under § 1.671–5 in the 

Federal Register (71 FR 4002) providing 

reporting rules for WHFITs. On 

February 23, 2006, in response to 

comments received subsequent to the 

publication of the final regulations, the 

IRS and the Treasury Department issued 

Notice 2006–29 (2006–12 I.R.B. 644). 

Notice 2006–29 informed trustees and 

middlemen of NMWHFITs that § 1.671–

5 would be amended to extend the 

availability of the qualified NMWHFIT 

exception (discussed in section I) 

beyond February 23, 2006, the cut-off 

date provided in the final regulations for 

funding a NMWHFIT that satisfied the 

exception, and to clarify the application 

of certain provisions in the final 

regulations to NMWHFITs. On May 25, 

2006, the IRS and Treasury Department 

issued Notice 2006–30 (2006–24 I.R.B. 

1044) stating that the IRS and the 


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Federal Register / Vol. 71, No. 149 / Thursday, August 3, 2006 / Rules and Regulations 43969 

Treasury Department expected to issue 

the additional guidance under § 1.671–

5 discussed in Notice 2006–29 in the 

near future but that such guidance 

would not be issued prior to the 

expiration of the extended cut-off date 

for the qualified NMWHFIT exception 

in Notice 2006–29. Accordingly, Notice 

2006–30 extended the cut-off date for 

the availability of the qualified 

NMWHFIT exception in Notice 2006–29 

for an additional 60 days. These 

temporary regulations extend the 

availability of the qualified NMWHFIT 

exception to the dates provided in 

Notice 2006–30 and clarify the 

NMWHFIT reporting rules as described 

in Notice 2006–29. These temporary 

regulations also simplify the application 

of § 1.671–5 as it applies to NMWHFIT 

sales and dispositions as well as sales or 

redemptions of trust interests in an 

equity trust (a trust, substantially all of 

whose income is comprised of 

dividends). 

Summary and Explanation of Revisions 

I. The Qualified NMWHFIT Exception 

In general, under the final regulations, 

trustees and middlemen of NMWHFITs 

are required to report information 

regarding market discount, bond 

premium, sales and dispositions of trust 

assets, redemptions, and sales of trust 

interests. Trustees and middlemen of 

NMWHFITs that satisfy the qualified 

NMWHFIT exception in § 1.671–

5(c)(2)(iv)(E) are, however, excepted 

from reporting market discount and 

bond premium and are permitted to use 

the simplified reporting rules for sales 

and dispositions of trust assets in 

§ 1.671–5(c)(2)(iv)(B) and the simplified 

reporting rules for sales or redemptions 

of trust interests in § 1.671–5(c)(2)(v)(C). 

As provided in Notice 2006–29 and 

subsequently modified in Notice 2006–

30, § 1.671–5T(c)(2)(iv)(E) of these final 

and temporary regulations provides that 

the qualified NMWHFIT exception is 

satisfied if the calendar year for which 

the trustee is reporting begins before 

January 1, 2011, and the NMWHFIT 

meets any of the following 

requirements: (1) The NMWHFIT has a 

start-up date as defined in § 1.671–

5(b)(19) before February 23, 2006; (2) 

the registration statement for the 

NMWHFIT becomes effective under the 

Securities Act of 1933 (15 U.S.C. 77a) 

(Securities Act of 1933) and trust 

interests are offered for sale to the 

public before February 23, 2006; or (3) 

the registration statement of the 

NMWHFIT becomes effective under the 

Securities Act of 1933 and trust interests 

are offered for sale to the public on or 

after February 23 and before July 31, 

2006, and the NMWHFIT is fully funded 

before October 1, 2006. The IRS and the 

Treasury Department have also received 

comments suggesting that the January 1, 

2011 cut-off date be extended or 

eliminated. The IRS and the Treasury 

Department are not adopting that 

suggestion. 

II. Availability of the NMWHFIT Safe 

Harbor 

Section 1.671–5(f) provides a 

reporting safe harbor for NMWHFITs. If 

trustees and middlemen report 

consistently with the safe harbor, 

trustees and middlemen are deemed to 

have provided information in a manner 

that enables a trust interest holder to 

reasonably accurately report the items of 

income, deduction, and credit of the 

trust on the trust interest holder’s own 

federal income tax return. Section 

1.671–5(f)(1)(i) provides that if 

substantially all of a NMWHFIT’s 

income is from dividends (as defined in 

section 6042(b) and the regulations 

thereunder) or interest (as defined in 

section 6049(b) and the regulations 

thereunder) and all trust interests have 

identical value and rights, a NMWHFIT 

may report under the safe harbor in 

§ 1.671–5(f). Commentators have 

expressed concern that, if a trustee of a 

NMWHFIT must sell or dispose of a 

significant number of trust assets and 

trust sales proceeds are included in the 

determination of whether ‘‘substantially 

all’’ of a trust’s income is from interest 

or dividends, the NMWHFIT will be 

ineligible for the safe harbor reporting 

rules in § 1.671–5(f). To address this 

concern, § 1.671–5T(f)(1)(i) of the final 

and temporary regulations provides that 

trust sales proceeds are to be ignored in 

determining whether a NMWHFIT is 

eligible to report under the NMWHFIT 

safe harbor in § 1.671–5(f). Accordingly, 

a NMWHFIT may be eligible to report 

under the NMWHFIT safe harbor even 

if it has significant trust sales proceeds 

from the sale or disposition of trust 

assets. 

Commentators also noted that 

§ 1.671–5(f)(1)(i)(1) refers to section 

6049(b) and the definition of interest in 

sectional 6049(b) does not include 

interest that is exempt from tax under 

section 103 of the Internal Revenue 

Code. These commentators were 

concerned that if a NMWHFIT’s income 

is from tax-exempt interest, the 

NMWHFIT would not be eligible to 

report under the NMWHFIT safe harbor 

reporting rules. To address this concern, 

§ 1.671–5T(f)(1)(i)(A)(1) of the final and 

temporary regulations does not refer to 

sections 6042(b) and 6049(b) and the 

regulations thereunder. Accordingly, 

NMWHFITs whose income is from 

taxπexempt interest, may be eligible to 

report under the NMWHFIT safe harbor 

reporting rules. 

III. Simplified Reporting of Sales and 

Redemptions of Trust Interests for 

Equity Trusts 

Section 1.671–5(c)(2)(v) requires 

trustees and middlemen to provide 

information regarding the income that is 

attributable to a redeeming, selling or 

purchasing beneficial owner up to the 

date of the sale or redemption of a trust 

interest. Section 1.671–5(c)(2)(v)(C) 

provides an exception to this rule for 

NMWHFITs if substantially all their 

income is comprised of dividends 

(equity trusts) and the NMWHFIT is 

required by its governing document to 

distribute income at least monthly. 

Commentators reported that some 

equity trusts do not receive significant 

dividend income and that it would not 

be feasible for these trusts to make 

monthly distributions. These 

commentators suggested that there be a 

de minimis exception to the 

requirement that the trust make monthly 

distributions. 

Accordingly, § 1.671–5T(c)(2)(v)(C) 

provides that a NMWHFIT will be 

considered to have satisfied the 

requirement that it make monthly 

distributions notwithstanding the fact 

that, although the governing document 

requires monthly distributions, the 

governing document of the NMWHFIT 

also permits the trustee to forego making 

its normally required monthly 

distribution if the cash held for 

distribution is less than 0.1% of the net 

asset value of the trust (aggregate fair 

market value of the trust’s assets less the 

trust’s liabilities) as of the date that the 

amount of the monthly distribution is 

required to be determined. 

Commentators suggested various other 

modifications to the § 1.675(c)(2)(v)(C) 

exception; however, the IRS and 

Treasury Department believe that the 

modification adopted above addresses 

the majority of the commentators’

concerns while maintaining the 

integrity of the reporting information to 

be provided under § 1.671–5. 

Similar to the ‘‘substantially all’’ test 

for eligibility to use the NMWHFIT safe 

harbor discussed in section II above, 

commentators have expressed concern 

that if a NMWHFIT has significant sales 

and dispositions and trust sales 

proceeds are included for the purpose of 

determining if ‘‘substantially all’’ of the 

NMWHFIT’s income is from dividends, 

then the NMWHFIT will not qualify for 

this exception even though the 

NMWHFIT only holds assets that 

produce dividend income. To address 

this concern, § 1.671–5T(c)(2)(v)(C) of 


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43970 Federal Register / Vol. 71, No. 149 / Thursday, August 3, 2006 / Rules and Regulations 

the final and temporary regulations 

provides that proceeds received by a 

NMWHFIT from the sale or disposition 

of trust assets are to be ignored for the 

purpose of determining whether an 

equity trust is eligible to report under 

that paragraph. 

IV. Simplified Reporting for Certain 

NMWHFIT Sales and Dispositions 

In addition to the qualified 

NMWHFIT exception, the final 

regulations provide that the trustees of 

NMWHFITs that meet the general de 

minimis test in § 1.671–5(c)(2)(iv)(D)(1) 

are only required, under § 1.671–

5(c)(2)(iv)(B), to provide information 

regarding the amount of trust sales 

proceeds distributed to a trust interest 

holder. The reason for the de minimis 

exception, as stated in the preamble to 

the final regulations, is that the IRS and 

the Treasury Department believe that if 

a NMWHFIT only sells or disposes of 

assets infrequently, although there will 

be some deferral of gains and losses if 

sales and dispositions are not fully 

reported, the deferral is acceptable, in 

light of the burden of fully, accurately 

reporting the sales and dispositions. 

Commentators reported that trustees 

of NMWHFITs frequently have to sell 

trust assets to obtain cash to effect 

redemptions. These commentators 

indicated that because of certain 

securities laws, trustees of many 

NMWHFITs must redeem trust interests 

every time an interest is tendered for 

redemption. Trustees have no control 

over the number of trust interests 

tendered for redemption and as a result, 

have no control over the number of 

corresponding sales of trust assets to 

obtain cash for these redemptions. 

Because of these sales to effect 

redemptions, many NMWHFITs will 

also not be able to meet the general de 

minimis test in § 1.671–5(c)(2)(iv)(D)(1). 

If a NMWHFIT does not meet the 

general de minimis test, trustees and 

middlemen must provide information 

regarding the amount of trust sales 

proceeds that are attributable to a trust 

interest holder, and information that 

will enable a trust interest holder to 

allocate with reasonable accuracy a 

portion of its basis and a portion of its 

market discount or premium to the 

assets sold. Commentators indicated 

that, under the final regulations, a 

significant number of NMWHFITs do 

not qualify for the reduced reporting in 

§ 1.671–5(c)(2)(iv)(B) and that as a 

result, many investors will be provided 

with more information than they can 

accurately process and trustees and 

middlemen will be subject to the 

significant reporting costs of supplying 

this information. These commentators 

requested that the final regulations be 

amended to provide for reduced 

reporting for other situations in which 

it will have little or no compliance 

impact. In response to these comments, 

the IRS and the Treasury Department 

provide the following modifications to 

the sales and disposition reporting rules 

for NMWHFITs in the final regulations: 

1. NMWHFIT Final Calendar Year 

Exception 

Commentators requested that the IRS 

and Treasury Department extend the 

simplified reporting in § 1.671–

5(c)(2)(iv)(B) to the final calendar year 

of a NMWHFIT regardless of whether 

the de minimis test or the qualified 

NMWHFIT exception is satisfied. The 

commentators reported that for a 

significant number of NMWHFITs, 95% 

of a trustee’s sales of assets to effect 

redemptions occur during the last three 

months of the NMWHFIT. The 

commentators asserted that there would 

not be significant deferral of gains or 

losses on sales or dispositions of assets 

by NMWHFITs in their final calendar 

year if information regarding the sales 

and dispositions of trust assets during 

these final months were not 

communicated to non-redeeming trust 

interest holders because the nonredeeming trust interest holders would 

be cashing out their investment during 

that calendar year. Accordingly, 

§ 1.671–5T(c)(2)(iv)(F) of the final and 

temporary regulations provide that all 

NMWHFITs qualify for the simplified 

reporting in § 1.671–5T(c)(2)(iv)(B) in 

the final calendar year of the 

NMWHFIT, regardless of whether the 

NMWHFIT has otherwise satisfied the 

de minimis test, provided that a trust 

interest holder cannot roll-over its 

investment in the NMWHFIT to another 

WHFIT. 

2. Pro-Rata Sale Exception 

Commentators also requested that 

pro-rata sales of trust assets be excepted 

from reporting. The commentators 

contended that trustees generally sell a 

redeeming trust interest holder’s prorata share of the trust assets to effect a 

redemption so that there is no change in 

the investments of the non-redeeming 

trust interest holders and therefore little 

or no compliance benefit of reporting to 

the non-redeeming trust interest 

holders. Accordingly, the commentators 

requested that pro-rata sales of trust 

assets to effect redemptions be excepted 

from the reporting requirements of 

§ 1.671–5(c)(2)(iv). 

In response to this request, § 1.671–

5T(c)(2)(iv)(G) of the final and 

temporary regulations provides that a 

pro-rata sale of a trust asset to effect a 

redemption is not required to be 

reported under § 1.671–5. A pro-rata 

sale of a trust asset occurs when (1) a 

trust interest holder tenders one or more 

trust interests for redemption; (2) the 

trustee sells the pro-rata share of a trust 

asset that is deemed to be owned by the 

trust interest holder as a result of the 

trust interest holder’s ownership of the 

trust interest or interests tendered for 

redemption; (3) the trustee engages in 

the sale solely to obtain cash that is 

immediately distributed to the 

redeeming trust interest holder as a 

result of the redemption; and (4) the 

redemption is reported as required 

under § 1.671–5(c)(2)(v). 

Commentators strongly urged the IRS 

and the Treasury Department to except 

NMWHFITs with a duration of no more 

than 15 months and that span no more 

than two calendar years (short-term 

NMWHFITs) from all reporting of sales 

and dispositions of trust assets. The IRS 

and the Treasury Department believe 

that the NMWHFIT final year exception, 

discussed in section IV(1), adequately 

provides reporting relief for most shortterm NMWHFITs for the sales and 

dispositions of trust assets to effect 

redemptions that a trustee must make 

during the final three months of the 

NMWHFIT. Further, § 1.671–5T(b)(21) 

provides an amended definition of trust 

sales proceeds excluding the gross 

proceeds paid to a NMWHFIT for a prorata sale of a trust asset to effect a 

redemption from the definition of trust 

sales proceeds. The effect of this change 

in the definition of trust sales proceeds 

is to exclude the proceeds from a prorata sale of a trust asset to effect a 

redemption when determining whether 

a trust has met the de minimis test. 

Since only the proceeds from non prorata sales of trust assets are considered 

for purposes of determining whether a 

NMWHFIT meets the de minimis test, 

more trusts will meet the de minimis 

test and qualify for the reduced 

reporting in § 1.671–5T(c)(2)(iv)(B). The 

IRS and the Treasury Department 

believe that the combined application of 

the pro-rata sales exception, the revised 

definition of trust sales proceeds, and 

the de minimis test adequately address 

the commentators’ concerns regarding 

sales and dispositions of trust assets by 

trustees of short-term NMWHFITs 

during the first year of the trust. 

Commentators also suggested that 

there be a reporting exception for when 

a trustee engages in a non pro-rata sale 

of a trust asset because the redeeming 

trust interest holder is only deemed to 

own a fractional share of a trust asset or 

because market conditions or 

restrictions prevent a pro-rata sale of a 

trust asset. The IRS and the Treasury 


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Federal Register / Vol. 71, No. 149 / Thursday, August 3, 2006 / Rules and Regulations 43971 

Department believe that this issue is 

also adequately addressed by the 

combined application of the pro-rata 

sale exception, the revised definition of 

trust sales proceeds and the de minimis 

test. 

Effective Date 

These amendments are effective July 

28, 2006. The amendments are 

applicable to the reporting required 

under § 1.671–5 as of January 1, 2007 

(see § 1.671–5(m)) and will be applied 

as though these amendments were 

included in TD 9241. 

Special Analysis 

These regulations are necessary to 

provide trustees and middlemen of 

NMWHFITs with immediate guidance 

on the application of the final 

regulations so they can take measures 

necessary to be able to comply with the 

final regulations on their January 1, 

2007, effective date. Additionally, the 

IRS and the Treasury Department have 

published Notice 2006–29 and Notice 

2006–30 indicating that § 1.671–5 

would be amended as provided in these 

temporary regulations and received 

comments regarding the application of 

§ 1.671–5 from trustees and middlemen 

of NMWHFITs. Accordingly, good cause 

is found for dispensing with notice and 

public comment pursuant to 5 U.S.C. 

553(b)(B)(3). The final and temporary 

regulations are applicable more than 30 

days after they are published in the 

Federal Register and accordingly, no 

exemption is required under 5 U.S.C. 

553(d). For the applicability of the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) refer to the Special Analysis 

section of the preamble to the crossreferenced notice of proposed 

rulemaking published in this issue of 

the Federal Register. Pursuant section 

7805(f) of the Code, these final and 

temporary regulations will be submitted 

to the Chief Counsel for Advocacy of 

Small Business Administration for 

comment on its impact on small 

business. 

Drafting Information 

The principal author of these 

regulations is Faith Colson, Office of 

Associate Chief Counsel (Passthroughs 

& Special Industries). However, other 

personnel from the IRS and the Treasury 

Department participated in their 

development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Amendments to the Regulations 

■ Accordingly, 26 CFR part 1 is 

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 1.671–5 is amended 

by: 

■ 1. Revising paragraphs (b)(5), (b)(8), 

and (b)(21) 

■ 2. Revising paragraphs (c)(2)(iv), 

(v)(C), (vi), and (vii) 

■ 3. Revising paragraphs (f)(1)(i)(A) and 

(viii)(A) 

The revisions read as follows: 

§ 1.671–5 Reporting for widely held fixed 

investment trusts. 

* * * * * 

(b) * * * 

(5) [Reserved.] For further guidance, 

see § 1.671–5T(b)(5). 

* * * * * 

(8) [Reserved.] for further guidance, 

see § 1.671–5T(b)(8). 

* * * * * 

(21) [Reserved.] For further guidance, 

see § 1.671–5T(b)(21). 

* * * * * 

(c) * * * 

(2) * * * 

(iv) [Reserved.] For further guidance, 

see § 1.671–5T(c)(2)(iv). 

(v) * * * 

(C) [Reserved.] For further guidance, 

see § 1.671–5T(c)(2)(v)(C). 

(vi) [Reserved.] For further guidance, 

see § 1.671–5T(c)(2)(vi). 

(vii) [Reserved.] For further guidance, 

see § 1.671–5T(c)(2)(vii). 

* * * * * 

(f) * * * 

(1) * * * 

(i) * * * 

(A) [Reserved] For further guidance, 

see § 1.671–5T(f)(1)(i)(A). 

* * * * * 

(viii) * * * 

(A) [Reserved.] For further guidance, 

see § 1.671–5T(f)(1)(viii). 

■ Par. 3. Section 1.671–5T is added to 

read as follows: 

§ 1.671–5T Reporting for widely held fixed 

investment trusts (temporary). 

(a) Through (b)(4) [Reserved.] For 

further guidance, see § 1.671–5(a) 

through (b)(4). 

(5) The cash held for distribution is 

the cash held by the WHFIT (other than 

trust sales proceeds and proceeds from 

sales described in paragraph (c)(2)(iv)(G) 

of this section) less reasonably required 

reserve funds as of the date that the 

amount of a distribution is required to 

be determined under the WHFIT’s 

governing document. 

(b)(6) and (b)(7) [Reserved.] For 

further guidance, see § 1.671–5(b)(6) and 

(b)(7). 

(8) An in-kind redemption is a 

redemption in which a beneficial owner 

receives a pro-rata share of each of the 

assets of the WHFIT that the beneficial 

owner is deemed to own under section 

671. For example, for purposes of this 

paragraph (b)(8), if beneficial owner A 

owns a one percent interest in a WHFIT 

that holds 100 shares of X corporation 

stock, so that A is considered to own a 

one percent interest in each of the 100 

shares, A’s pro-rata share of the X 

corporation stock for this purpose is one 

share of X corporation stock. 

(b)(9) through (b)(20) [Reserved.] For 

further guidance, see § 1.671–5(b)(9) 

through (b)(20). 

(21) Trust sales proceeds equal the 

amount paid to a WHFIT for the sale or 

disposition of an asset held by the 

WHFIT, including principal payments 

received by the WHFIT that completely 

retire a debt instrument (other than a 

final scheduled principal payment) and 

pro-rata partial principal prepayments 

described under § 1.1275–2(f)(2). Trust 

sales proceeds do not include amounts 

paid for any interest income that would 

be required to be reported under 

§ 1.6045–1(d)(3). Trust sales proceeds 

also do not include amounts paid to a 

NMWHFIT as the result of a pro-rata 

sales of trust assets to effect a 

redemption described in paragraph 

(c)(2)(iv)(G) of this section. 

(b)(22) through (c)(2)(iii) [Reserved.] 

For further guidance, see § 1.671–

5(b)(22) through (c)(2)(iii). 

(iv) Asset sales and dispositions. The 

trustee must report information 

regarding sales and dispositions of 

WHFIT assets as required in this 

paragraph (c)(2)(iv). For purposes of this 

paragraph (c)(2)(iv), a payment (other 

than a final scheduled payment) that 

completely retires a debt instrument 

(including a mortgage held by a WHMT) 

or a pro-rata prepayment on a debt 

instrument (see § 1.1275–2(f)(2)) held by 

a WHFIT must be reported as a full or 

partial sale or disposition of the debt 

instrument. A pro-rata sale of a trust 

asset to effect a redemption, as defined 

in paragraph (c)(2)(iv)(G) of this section, 

is not reported as a sale or disposition 

under this paragraph (c)(2)(iv). 

(A) General rule. Except as provided 

in paragraph (c)(2)(iv)(B) of this section 

(regarding the exception for certain 

NMWHFITs) or paragraph (c)(2)(iv)(C) 

(regarding the exception for certain 

WHMTs) of this section, the trustee 


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43972 Federal Register / Vol. 71, No. 149 / Thursday, August 3, 2006 / Rules and Regulations 

must report with respect to each sale or 

disposition of a WHFIT asset—

(1) The date of each sale or 

disposition; 

(2) Information that enables a 

requesting person to determine the 

amount of trust sales proceeds (as 

defined in paragraph (b)(21) of this 

section) attributable to a beneficial 

owner as a result of each sale or 

disposition; and 

(3) Information that enables a 

beneficial owner to allocate, with 

reasonable accuracy, a portion of the 

owner’s basis in its trust interest to each 

sale or disposition. 

(B) Exception for certain NMWHFITs. 

If a NMWHFIT meets either the general 

WHFIT de minimis test of paragraph 

(c)(2)(iv)(D)(1) of this section for a 

calendar year, the qualified NMWHFIT 

exception of paragraph (c)(2)(iv)(E) of 

this section, or the NMWHFIT final 

calendar year exception of paragraph 

(c)(2)(iv)(F) of this section, the trustee is 

not required to report under paragraph 

(c)(2)(iv)(A) of this section. Instead, the 

trustee must report sufficient 

information to enable a requesting 

person to determine the amount of trust 

sales proceeds distributed to a beneficial 

owner during the calendar year with 

respect to each sale or disposition of a 

trust asset. The trustee also must 

provide requesting persons with a 

statement that the NMWHFIT is 

permitted to report under this paragraph 

(c)(2)(iv)(B). 

(C) Exception for certain WHMTs. If a 

WHMT meets either of the de minimis 

tests of paragraph (c)(2)(iv)(D) of this 

section for the calendar year, the trustee 

is not required to report under 

paragraph (c)(2)(iv)(A) of this section. 

Instead, the trustee must report 

information to enable a requesting 

person to determine the amount of trust 

sales proceeds attributable to a 

beneficial owner as a result of the sale 

or disposition. The trustee also must 

provide requesting persons with a 

statement that the WHMT is permitted 

to report under this paragraph 

(c)(2)(iv)(C). 

(D) De minimis tests—(1) General 

WHFIT de minimis test. The general 

WHFIT de minimis test applies to a 

NMWHFIT or to a WHMT that does not 

meet the requirements for the special 

WHMT test in paragraph (c)(2)(iv)(D)(2) 

of this section. The general WHFIT de 

minimis test is satisfied if trust sales 

proceeds for the calendar year are not 

more than five percent of the net asset 

value of the trust (aggregate fair market 

value of the trust’s assets less the trust’s 

liabilities) as of the later of January 1 of 

that year or the trust’s start-up date (as 

defined in § 1.671–5(b)(19)). 

(2) Special WHMT de minimis test. A 

WHMT that meets the asset requirement 

of § 1.671–5(g)(1)(ii)(E) satisfies the 

special WHMT de minimis test in this 

paragraph (c)(2)(iv)(D)(2) if trust sales 

proceeds for the calendar year are not 

more than five percent of the aggregate 

outstanding principal balance of the 

WHMT (as defined in § 1.671–

5(g)(1)(iii)(D)) as of the later of January 

1 of that year or the trust’s start-up date. 

For purposes of applying the special 

WHMT de minimis test in this 

paragraph (c)(2)(iv)(D)(2), amounts that 

result from the complete or partial 

payment of the outstanding principal 

balance of the mortgages held by the 

trust are not included in the amount of 

trust sales proceeds. 

(3) Effect of clean-up call. If a WHFIT 

fails to meet either de minimis test 

described in this paragraph (c)(2)(iv)(D) 

solely as the result of a clean-up call, as 

defined in § 1.671–5(b)(6), the WHFIT 

will be treated as having met the de 

minimis test. 

(E) Qualified NMWHFIT exception. 

The qualified NMWHFIT exception is 

satisfied if the calendar year for which 

the trustee is reporting begins before 

January 1, 2011 and—

(1) The NMWHFIT has a start-up date 

(as defined in § 1.671–5(b)(19)) before 

February 23, 2006; 

(2) The registration statement of the 

NMWHFIT becomes effective under the 

Securities Act of 1933, as amended (15 

U.S.C. 77a, et seq.) and trust interests 

are offered for sale to the public before 

February 23, 2006; or 

(3) The registration statement of the 

NMWHFIT become effective under the 

Securities Act of 1933 and trust interests 

are offered for sale to the public on or 

after February 23, 2006, and before July 

31, 2006, and the NMWHFIT is fully 

funded before October 1, 2006. 

(F) NMWHFIT final calendar year 

exception. The NMWHFIT final 

calendar year exception is satisfied if—

(1) The NMWHFIT terminates on or 

before December 31 of the year for 

which the trustee is reporting; 

(2) A trust interest holder may not 

roll-over its investment in the 

NMWHFIT to another WHFIT; and 

(3) The trustee makes reasonable 

efforts to engage in pro-rata sales of trust 

assets to effect redemptions. 

(G) Pro-rata sales of trust assets to 

effect a redemption—(1) Definition. A 

pro-rata sale of a trust asset to effect a 

redemption is not required to be 

reported under this paragraph (c)(2)(iv). 

A pro-rata sale of a trust asset to effect 

a redemption occurs when a—

(i) A trust interest holder tenders one 

or more trust interests for redemption; 

(ii) The trustee sells the pro-rata share 

of the trust asset that is deemed to be 

owned by the trust interest holder under 

section 671 as a result of the trust 

interest holder’s ownership of the trust 

interest or interests tendered for 

redemption (See paragraph (b)(8) of this 

section for a description of how pro-rata 

is to be applied for purposes of this 

paragraph (c)(2)(iv)(G)); 

(iii) The trustee engages in the sale 

solely to obtain cash that is immediately 

distributed to the redeeming trust 

interest holder as a result of the 

redemption; and 

(iv) The redemption is reported as 

required under § 1.671–5(c)(2)(v) by the 

trustee. 

(2) Example. The following example 

illustrates the definition of a pro-rata 

sale of a trust asset to effect a 

redemption: 

Example: Trust has two hundred trust 

interests and all interests have equal value 

and rights. Trust owns two hundred shares 

of stock in corporation X, two hundred 

shares of stock in corporation Y, and one 

hundred shares of stock in corporation Z. C 

owns one trust interest and tenders it for 

redemption. To obtain cash for the 

redemption, the trustee of Trust sells one 

share of each of the X and Y stock and one 

share of Z stock. Trustee immediately 

distributes the proceeds from the sale of the 

X and the Y stock, as well as 50% of the 

proceeds from the sale of the Z stock to C as 

redemption proceeds. Trustee will report the 

redemption under § 1.671–5(c)(2)(v). The sale 

of the share of X stock and the sale of the 

share of Y stock are each a pro-rata sale of 

a trust asset to effect a redemption and are 

not required to be reported under this 

paragraph (c)(2)(iv)(G). The proceeds from 

the sale of the X stock and the Y stock are 

not trust sales proceeds under paragraph 

(b)(21) of this section and are not included 

for the purpose of determining whether Trust 

meets the de minimis test. The sale of the Z 

stock, because it was not a sale of the prorata share of the trust asset that is treated as 

owned by C is not a pro-rata sale of a trust 

asset to effect a redemption and is required 

to be reported as provided under paragraph 

(c)(2)(iv)(A) or (B) of this section, whichever 

is applicable. The proceeds from the sale of 

the Z stock are trust sales proceeds under 

paragraph (b)(21) of this section and included 

for the purpose of determining whether Trust 

meets the de minimis test in paragraph 

(c)(2)(iv)(D)(1) of this section. 

(c)(2)(v)(A) and (B) [Reserved.] For 

further guidance, see § 1.671–

5(c)(2)(v)(A) and (B). 

(C) Exception for certain NMWHFITs 

with dividend income—(1) In general. 

The trustee of a NMWHFIT described in 

paragraph (c)(2)(v)(C)(2) of this section 

is not required to report the information 

described in § 1.671–5(c)(2)(v)(A) 

(regarding redemptions) or (c)(2)(v)(B) 

(regarding sales). However, the trustee 

must report to requesting persons, for 


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Federal Register / Vol. 71, No. 149 / Thursday, August 3, 2006 / Rules and Regulations 43973 

each date on which the amount of 

redemption proceeds to be paid for the 

redemption of a trust interest is 

determined, information that will 

enable requesting persons to determine 

the redemption proceeds per trust 

interest on that date. The trustee also 

must provide requesting persons with a 

statement that this paragraph applies to 

the NMWHFIT. 

(2) NMWHFITs that qualify for the 

exception. This paragraph (c)(2)(v)(C) 

applies to a NMWHFIT if substantially 

all the income of the NMWHFIT 

consists of dividends (as defined in 

section 6042(b) and the regulations 

thereunder) and the NMWHFIT satisfies 

either paragraph (c)(2)(v)(C)(2)(i) or (ii) 

of this section. Trust sales proceeds and 

gross proceeds from a sale described in 

paragraph (c)(2)(iv)(G) of this section are 

ignored for the purpose of determining 

if substantially all of a NMWHFIT’s 

income consists of dividends. 

(i) The trustee is required by the 

governing document of the NMWHFIT 

to determine and distribute all cash held 

for distribution (as defined in paragraph 

(b)(5) of this section) no less frequently 

than monthly. A NMWHFIT will be 

considered to have satisfied this 

paragraph (c)(2)(v)(C)(2)(i) 

notwithstanding that the governing 

document of the NMWHFIT permits the 

trustee to forego making a required 

monthly or more frequent distribution, 

if the cash held for distribution is less 

than 0.1% of the aggregate net asset 

value of the trust as of the date specified 

in the governing document for 

calculating the amount of the monthly 

distribution. 

(ii) The qualified NMWHFIT 

exception of paragraph (c)(2)(iv)(E) of 

this section is satisfied. 

(vi) Information regarding bond 

premium. The trustee generally must 

report information that enables a 

beneficial owner to determine, in any 

manner that is reasonably consistent 

with section 171, the amount of the 

beneficial owner’s amortizable bond 

premium, if any, for each calendar year. 

However, if a NMWHFIT meets the 

general de minimis test of paragraph 

(c)(2)(iv)(D)(1) of this section, the 

qualified NMWHFIT exception of 

paragraph (c)(2)(iv)(E) of this section, or 

the NMWHFIT final calendar year 

exception of paragraph (c)(2)(iv)(F) of 

this section, the trustee of such 

NMWHFIT is not required to report 

information regarding bond premium. 

(vii) Information regarding market 

discount. The trustee generally must 

report information that enables a 

beneficial owner to determine, in any 

manner reasonably consistent with 

section 1276 (including section 

1276(a)(3)), the amount of market 

discount that has accrued during the 

calendar year. However, if a NMWHFIT 

meets the general de minimis test of 

paragraph (c)(2)(iv)(D)(1) of this section, 

the qualified NMWHFIT exception of 

paragraph (c)(2)(iv)(E) of this section, 

NMWHFIT final calendar year 

exception of paragraph (c)(2)(iv)(F) of 

this section, the trustee of such 

NMWHFIT is not required to provide 

information regarding market discount. 

(c)(3) through (f)(1)(i) [Reserved.] For 

further guidance, see § 1.671–5(c)(3) 

through (e)(4). 

(f) Safe harbor for providing 

information for certain NMWHFITs—(1) 

Safe harbor for trustee reporting of 

NMWHFIT information. The trustee of a 

NMWHFIT that meets the requirements 

of paragraph (f)(1)(i) of this section is 

deemed to satisfy paragraph (c)(1)(i) of 

this section, if the trustee calculates and 

provides WHFIT information in the 

manner described in this paragraph (f) 

and provides a statement to a requesting 

person giving notice that information 

has been calculated in accordance with 

this paragraph (f)(1). 

(i) In general—(A) Eligibility to report 

under this safe harbor. Only 

NMWHFITs that meet the requirements 

set forth in paragraphs (f)(1)(i)(A)(1) and 

(2) of this section may report under this 

safe harbor. For purposes of determining 

whether paragraph (f)(1)(i)(A)(1) of this 

section is met, trust sales proceeds and 

gross proceeds from sales described in 

paragraph (c)(2)(iv)(G) of this section are 

ignored: 

(1) Substantially all of the 

NMWHFIT’s income is from dividends 

or interest; and 

(2) All trust interests have identical 

value and rights. 

(f)(1)(i)(B) through (f)(vii) [Reserved.] 

For further guidance, see § 1.671–

5(f)(1)(i)(B) through (f)(vii). 

(viii) Reporting market discount 

information under the safe harbor—(A) 

In general. If the trustee of a NMWHFIT 

is required to provide information 

regarding market discount under 

paragraph (c)(2)(vii) of this section, the 

trustee must provide the information 

required under § 1.671–

5(f)(1)(iv)(A)(1)(iii) of this section. If the 

trustee is not required to provide market 

discount information under paragraph 

(c)(2)(vii) of this section (because 

paragraph (c)(2)(iv) of this section 

applies to the NMWHFIT), the trustee is 

not required under this paragraph (f) to 

provide any information regarding 

market discount. 

(f)(1)(viii)(B) through (m) [Reserved.] 

For further guidance, see § 1.671–

5(f)(1)(viii)(B) through (m). 

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: July 28, 2006. 

Eric Solomon, 

Acting Deputy Assistant Secretary (Tax 

Policy). 

[FR Doc. 06–6649 Filed 7–28–06; 4:15 pm] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[CGD01–06–061] 

RIN 1625–AA00 

Safety Zone; Lynch Wedding 

Fireworks Display, Marblehead, MA 

AGENCY: Coast Guard, DHS. 

ACTION: Temporary final rule. 

SUMMARY: The Coast Guard is 

establishing a temporary safety zone for 

the Lynch Wedding Fireworks display 

on August 5, 2006 in Marblehead, 

Massachusetts, temporarily closing all 

waters of the Atlantic Ocean between 

Marblehead Neck and Marblehead Rock 

in the vicinity of Lasque Ledge within 

a four hundred (400) yard radius of the 

fireworks barges located at approximate 

positions 42°30.142′ N, 070°49.813′ W 

and 42°30.146′ N, 070°49.733′ W. This 

zone is necessary to protect the 

maritime public from the potential 

hazards posed by a fireworks display. 

The safety zone temporarily prohibits 

entry into or movement within this 

portion of the Atlantic Ocean during its 

closure period. Entry into this zone is 

prohibited unless authorized by the 

Captain of the Port, Boston, 

Massachusetts or the COTP’s designated 

representative. 

DATES: This rule is effective from 7:30 

p.m. until 10 p.m. on August 5, 2006. 

ADDRESSES: Documents indicated in this 

preamble as being available in the 

docket are part of docket [CGD01–06–

061] and are available for inspection or 

copying at Sector Boston, 427 

Commercial Street, Boston, MA, 

between 8 a.m. and 3 p.m., Monday 

through Friday, except Federal holidays. 

FOR FURTHER INFORMATION CONTACT: 

Chief Petty Officer Paul English, Sector 

Boston, Waterways Management 

Division, at (617) 223–5456. 

SUPPLEMENTARY INFORMATION: 


rwilkins on PROD1PC63 with RULES