Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Rules and Regulations 78351 

7. Options, SARs and similar option-like 

instruments granted in connection with a 

repricing transaction or other material 

modification shall be reported in this Table. 

However, the disclosure required by this 

Table does not apply to any repricing that 

occurs through a pre-existing formula or 

mechanism in the plan or award that results 

in the periodic adjustment of the option or 

SAR exercise or base price, an antidilution 

provision in a plan or award, or a 

recapitalization or similar transaction equally 

affecting all holders of the class of securities 

underlying the options or SARs. 

* * * * * 

(k) * * * 

(2) * * * 

(iii) For awards of stock, the dollar 

amount recognized for financial 

statement reporting purposes with 

respect to the fiscal year in accordance 

with FAS 123R (column (c)); 

(iv) For awards of stock options, with 

or without tandem SARs, the dollar 

amount recognized for financial 

statement reporting purposes with 

respect to the fiscal year in accordance 

with FAS 123R (column (d)); 

Instruction to Item 402(k)(2)(iii) and (iv). 

For each director, disclose by footnote to 

the appropriate column: the grant date fair 

value of each equity award computed in 

accordance with FAS 123R; for each option, 

SAR or similar option like instrument for 

which the registrant has adjusted or amended 

the exercise or base price during the last 

completed fiscal year, whether through 

amendment, cancellation or replacement 

grants, or any other means (‘‘repriced’’), or 

otherwise has materially modified such 

awards, the incremental fair value, computed 

as of the repricing or modification date in 

accordance with FAS 123R; and the aggregate 

number of stock awards and the aggregate 

number of option awards outstanding at 

fiscal year end. However, the disclosure 

required by this Instruction does not apply to 

any repricing that occurs through a preexisting formula or mechanism in the plan or 

award that results in the periodic adjustment 

of the option or SAR exercise or base price, 

an antidilution provision in a plan or award, 

or a recapitalization or similar transaction 

equally affecting all holders of the class of 

securities underlying the options or SARs. 

* * * * * 

(vii) * * * 

(I) The dollar value of any dividends 

or other earnings paid on stock or 

option awards, when those amounts 

were not factored into the grant date fair 

value for the stock or option award; and 

* * * * * 

Instruction to Item 402(k). 

In addition to the Instruction to paragraphs 

402(k)(2)(iii) and (iv) and the Instructions to 

paragraph (k)(2)(vii) of this Item, the 

following apply equally to paragraph (k) of 

this Item: Instructions 2 and 4 to paragraph 

(c) of this Item; Instructions to paragraphs 

(c)(2)(iii) and (iv) of this Item; the Instruction 

to paragraphs (c)(2)(v) and (vi) of this Item; 

Instructions to paragraph (c)(2)(vii) of this 

Item; Instructions to paragraph (c)(2)(viii) of 

this Item; and Instructions 1 and 5 to 

paragraph (c)(2)(ix) of this Item. These 

Instructions apply to the columns in the 

Director Compensation Table that are 

analogous to the columns in the Summary 

Compensation Table to which they refer and 

to disclosures under paragraph (k) of this 

Item that correspond to analogous 

disclosures provided for in paragraph (c) of 

this Item to which they refer. 

Dated: December 22, 2006. 

By the Commission. 

J. Lynn Taylor, 

Assistant Secretary. 

[FR Doc. 06–9932 Filed 12–26–06; 2:29 pm] 

BILLING CODE 8011–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9308] 

RIN 1545–BF75 

Reporting Rules for Widely Held Fixed 

Investment Trusts 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations and removal of 

the temporary regulations. 

SUMMARY: This document contains final 

regulations amending § 1.671–5 which 

provides reporting rules for widely held 

fixed investment trusts (WHFITs). These 

final regulations clarify and simplify 

reporting for trustees and middlemen of 

non-mortgage widely held fixed 

investment trusts (NMWHFITs). These 

final regulations also provide temporary 

safe harbor reporting rules for widely 

held mortgage trusts (WHMTs) that are 

outside the WHMT safe harbor. The 

preamble to these regulations also 

provides that trustees of WHFITs are to 

indicate on the Form 1041, ‘‘U.S. 

Income Tax Return for Estates and 

Trusts,’’ filed for a WHFIT’s 2006 

calendar year that the return is a final 

return. 

DATES: Effective Date: These regulations 

are effective December 29, 2006. 

Applicability Date: For date of 

applicability see § 1.671–5(n). 

FOR FURTHER INFORMATION CONTACT: 

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

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

The collection of information 

contained in these final regulations 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. The collection of 

information in these final regulations is 

in § 1.671–5. 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. 

The estimated annual burden per 

recordkeeper varies from 1 to 4 hours, 

depending on individual circumstances, 

with an estimated average of 2 hours. 

Comments concerning the accuracy of 

this burden estimate should be sent to 

the Internal Revenue Service, Attn: IRS 

Reports Clearance Officer, 

SE:W:CAR:MP:T:T:SP, Washington DC 

20224, and to the Office of Management 

and Budget, Attn: Desk Officer for the 

Department of Treasury, Office of 

Information and Regulatory Affairs, 

Washington, DC 20503. 

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 the 

WHFIT reporting rules in the Federal 

Register (TD 9241) (71 FR 4002) under 

§ 1.671–5 (WHFIT reporting rules). On 

August 3, 2006, in response to 

comments received subsequent to the 

publication of the WHFIT reporting 

rules, the IRS and the Treasury 

Department published final and 

temporary regulations (TD 9279) (71 FR 

43968) (temporary regulations) as well 

as proposed regulations that, in part, 

cross-referenced the temporary 

regulations (71 FR 43998) (proposed 

regulations) (REG–125071–06) in the 

Federal Register. No public hearing was 

requested or held with respect to the 

temporary or proposed regulations. 


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78352 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Rules and Regulations 

Written comments responding to those 

regulations were received. After 

consideration of the comments, the 

proposed regulations, with certain 

revisions, are adopted as final 

regulations by this Treasury decision, 

and the corresponding temporary 

regulations are removed. The comments 

and the revisions are discussed in this 

preamble. 

Summary of Comments and 

Explanation of Revisions 

I. Application of the WHFIT Reporting 

Rules to NMWHFITs 

A. The Qualified NMWHFIT Exception 

Trustees and middlemen of 

NMWHFITs that satisfy the qualified 

NMWHFIT exception in § 1.671–

5(c)(2)(iv)(E) are excepted from 

reporting information regarding market 

discount and bond premium, and are 

permitted to use the simplified 

reporting 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). The temporary 

regulations provide 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, as amended (15 U.S.C. 77a, et. 

seq.) (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, 2006 and before July 

31, 2006, and the NMWHFIT is fully 

funded before October 1, 2006. These 

final regulations retain this amendment 

to the WHFIT reporting rules. 

Additionally, commentators on the 

temporary regulations expressed 

concern that certain trusts that 

otherwise satisfy the eligibility 

requirements for the qualified 

NMWHFIT exception would be 

disqualified because additional assets 

are deposited into the trust pursuant to 

a distribution reinvestment program. 

These final regulations clarify that for 

the purpose of determining whether a 

NMWHFIT is fully funded before 

October 1, 2006, deposits to the 

NMWHFIT pursuant to a distribution 

reinvestment program that is consistent 

with the requirements of § 301.7701–

4(c) will be disregarded. 

Commentators have also expressed 

concern regarding NMWHFITs that hold 

debt instruments (fixed income trusts) 

that were originated before the WHFIT 

reporting rules were published in the 

Federal Register. Commentators are 

concerned because the simplified 

reporting permitted under the exception 

terminates after December 31, 2010, and 

many fixed income trusts will be unable 

to comply with the WHFIT reporting 

rules once the simplified reporting 

permitted under the qualified 

NMWHFIT exception terminates 

because these NMWHFITs generally are 

not able to engage in pro-rata sales of 

trust assets to effect redemptions. 

Commentators have requested that these 

NMWHFITs be permanently permitted 

to report consistent with the qualified 

NMWHFIT exception. In response, these 

regulations amend § 1.671–5(c)(2)(iv)(E) 

to eliminate the requirement that the 

trustee must be reporting for a year that 

begins before January 1, 2011 for the 

NMWHFIT to be eligible for the 

simplified reporting. Accordingly, 

NMWHFITs that satisfy the qualified 

NMWHFIT exception and continue in 

existence after December 31, 2010 may 

report under the simplified reporting 

permitted under the exception until 

those NMWHFITs terminate. 

B. Simplified Reporting of Sales and 

Redemptions of Trust Interests 

With respect to the sale or redemption 

of a trust interest, section 1.671–

5(c)(2)(v) of the WHFIT reporting rules 

requires trustees and middlemen to 

provide information regarding the sales 

assets proceeds (as defined in § 1.671–

5(b)(17)) or the redemption assets 

proceeds (as defined in § 1.671–5(b)(14)) 

as well as 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) excepts a 

NMWHFIT from the requirement to 

provide information to enable 

requesting persons to differentiate 

between income and proceeds if 

substantially all the NMWHFIT’s 

income is comprised of dividends 

(equity trusts) and the NMWHFIT is 

required by its governing document to 

distribute the cash held for distribution 

by the NMWHFIT at least monthly. The 

temporary regulations, and these final 

regulations revise § 1.671–5(c)(2)(v)(C) 

to provide that a NMWHFIT will be 

considered to have satisfied the 

requirement that it distribute the cash 

held for distribution monthly 

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 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 date that the amount 

of the monthly distribution is required 

to be determined. 

Commentators have indicated that it 

will be extremely difficult for a certain 

class of NMWHFITs that are not equity 

trusts to comply with § 1.671–5(c)(2)(v). 

These NMWHFITs hold assets that 

produce income that is treated as 

interest income, not dividend income, 

for Federal income tax purposes. The 

assets of these NMWHFITs, however, 

are similar to assets that produce 

dividend income in that the assets are 

traded on a recognized exchange or 

securities market in such a way that the 

price of the assets is determined without 

a component attributable to accrued 

interest. As with NMWHFITs that hold 

assets that produce dividend income, it 

is difficult for the trustees and 

middlemen of these NMWHFITs to 

determine the income attributable to a 

redeeming, selling, or purchasing 

beneficial owner between trust 

distribution dates. For these reasons, the 

final regulations provide that 

NMWHFITs that hold assets that 

produce income that is treated as 

interest income for Federal income tax 

purposes will also qualify for the 

simplified reporting under § 1.671–

5(c)(2)(v)(C) but only if the assets are 

traded on a recognized exchange or 

securities market in such a way that the 

price of the assets is determined without 

a component attributable to accrued 

interest. 

C. Simplified Reporting for Sales and 

Dispositions by Certain NMWHFITs 

In addition to the qualified 

NMWHFIT exception, the WHFIT 

reporting rules 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 beneficial 

owner. A NMWHFIT meets the general 

de minimis test if trust sales proceeds 

(as defined in § 1.671–5(b)(21)) for the 

calendar year are not more than five 

percent of the net asset value of the trust 

as of the later of January 1 of the year 

for which the trustee is reporting or the 

start-up date. The reason for the de 

minimis exception, as stated in the 

preamble to the WHFIT reporting rules, 

is that the IRS and the Treasury 


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Department believe that if a NMWHFIT 

only sells or disposes of assets 

infrequently, although there may 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 on the WHFIT 

reporting rules reported that trustees of 

NMWHFITs frequently have to sell trust 

assets to obtain cash to effect 

redemptions and that, because of those 

sales, many NMWHFITs will not be able 

to meet the general de minimis test in 

§ 1.671–5(c)(2)(iv)(D)(1). Commentators 

on the WHFIT reporting rules requested 

that those regulations be amended to 

provide for reduced reporting where 

this will have little or no compliance 

impact. In response to those comments, 

the temporary regulations provide a 

number of modifications to the 

NMWHFIT reporting rules as applied to 

certain sales and dispositions of trust 

assets by NMWHFITs. Those 

modifications, as well as additional 

modification made by these final 

regulations, include: 

1. NMWHFIT Final Calendar Year 

Exception 

Section 1.671–5T(c)(2)(iv)(F) of the 

temporary regulations provides 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 

general de minimis test, provided that a 

beneficial owner cannot roll over its 

investment in the NMWHFIT to another 

WHFIT. Commentators on the 

temporary regulations requested that the 

IRS and Treasury Department clarify 

that a taxable roll-over would not 

preclude a trustee from reporting under 

the final year exception. Accordingly, 

these regulations remove the reference 

to a roll-over and instead require that, 

to be eligible for the final year 

exception, beneficial owners of trust 

interests must exchange their trust 

interests for cash or be treated as having 

exchanged their trust interests for cash 

for Federal income tax purposes upon 

the termination of the trust. 

2. Pro-rata Sales to Effect Redemptions 

Exception 

Section 1.671–5T(c)(2)(iv)(G) of the 

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. The 

temporary regulations describe a prorata sale of a trust asset as occurring 

when (1) a trust interest holder tenders 

one or more trust interests for 

redemption; (2) the trustee sells the prorata 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 on the temporary 

regulations have requested that the prorata sales to effect a redemption 

exception in the temporary regulations 

be adjusted to accommodate economic 

and practical issues that trustees 

confront in executing sales of trust 

assets to effect redemptions. These 

commentators requested that the prorata sales to effect a redemption 

exception be revised to provide the 

trustee with some flexibility regarding 

the time period in which the trustee has 

to execute sales following the tender of 

trust interests for redemptions and to 

permit trustees to aggregate sales of 

assets from several redemptions for the 

purpose of testing whether the asset 

sales have been pro-rata. In response, 

the final regulations provide that prorata sales to effect redemptions occur 

when (i) one or more trust interests are 

tendered for redemption; (ii) the trustee 

identifies the pro-rata share of the trust 

assets deemed to be owned by the trust 

interest or interests tendered for 

redemption, and sells those assets as 

soon as practicable; (iii) proceeds from 

the sale of the identified assets are used 

solely to effect redemptions; and (iv) the 

redemptions are reported as required 

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

Additionally, the final regulations 

provide that the trustee may compare 

the aggregate of the pro-rata share of the 

trust assets deemed to be owned by the 

trust interests tendered for redemption 

and the sales of assets sold to effect 

redemptions determine the pro-rata 

sales of assets to effect redemptions for 

a calendar month. Further, if the 

aggregate pro-rata share of the assets 

deemed to be owned by the redeemed 

trust interests for the month equals a 

fractional share, the trustee may round 

that amount to the next whole share for 

the purpose of determining the pro-rata 

sales to effect a redemption for the 

calendar month. 

3. De minimis Test Modifications 

Section 1.671–5T(b)(21) of the 

temporary regulations provides an 

amended definition of trust sales 

proceeds that excludes the gross 

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

redemption. The effect of this change in 

the definition of trust sales proceeds is 

to exclude the proceeds from pro-rata 

sales of trust assets to effect 

redemptions when determining whether 

a trust has met the general de minimis 

test. Since only the proceeds from non 

pro-rata sales of trust assets are 

considered for purposes of determining 

whether a NMWHFIT meets the general 

de minimis test, more trusts will meet 

the general de minimis test and qualify 

for the reduced reporting in § 1.671–

5(c)(2)(iv)(B). This amended definition 

is adopted by these final regulations. 

Commentators on the temporary 

regulations requested that the final 

regulations also except certain other 

trust sales proceeds for the purpose of 

determining whether a NMWHFIT has 

met the general de minimis test if these 

sales are fully reported under § 1.671–

5(c)(2)(iv)(A) (the general reporting rules 

for sales and dispositions). These sales 

and dispositions include corporate 

reorganizations and restructurings for 

which the trust receives cash, the sale 

of securities received by the trust in 

corporate reorganizations and 

restructurings (including conversions of 

closed-end investment companies to 

open-end investment companies), 

principal prepayments, bond calls, bond 

maturities, and the sale of securities by 

the trustee as required by the governing 

document or applicable law governing 

fiduciaries in order to maintain the 

sound investment character of the trust, 

and any other nonvolitional 

dispositions. 

The IRS and the Treasury Department 

agree that this exclusion may be 

appropriate but are concerned that there 

may be some potential for abuse if 

trustees can choose to fully report some 

of these sales and not fully report other 

sales. Accordingly, the final regulations 

provide that the trust sales proceeds 

from these sales and dispositions may 

be excluded when determining whether 

the general de minimis test has been 

met, provided that the trustee 

consistently reports all such sales or 

dispositions, other than certain small 

excepted sales or dispositions 

(described in § 1.671–

5(c)(2)(iv)(D)(4)(iii)), under § 1.671–

5(c)(2)(iv)(A) during the life of the 

WHFIT. 

The regulations currently provide that 

a WHFIT meets the general de minimis 

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

initial year if trust sales proceeds equal 

five percent or less of the net fair market 

value of the trust assets as of the startup date. The start-up date is defined as 

the date when substantially all of the 

assets have been deposited with the 


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78354 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Rules and Regulations 

trustee. Commentators suggested that 

the regulations provide trustees with an 

alternative date for measuring whether 

the de minimis test has been met for the 

initial trust year. They suggested that 

trustees be permitted to measure 

whether the de minimis test has been 

met by using the net fair market value 

of the trust’s assets as of the date of the 

last deposit of trust assets into the 

NMWHFIT (not including any deposit 

of assets into the NMWHFIT pursuant to 

a distribution reinvestment program), 

not to exceed 90 days after the date the 

registration statement of the WHFIT 

becomes effective under the Securities 

Act of 1933. The final regulations adopt 

this suggestion. 

The special WHMT de minimis test in 

§ 1.671–5(c)(2)(iv)(D)(2) of the WHFIT 

reporting rules was added to the WHFIT 

reporting rules in response to comments 

from the WHMT industry indicating 

that WHMT trustees would have 

difficulty applying the general de 

minimis test because it would be 

extremely difficult for the trustee to 

determine the fair market value of the 

mortgages held by the WHMT on an 

annual basis, as required under the 

general de minimis test. Under the 

special WHMT de minimis test, trustees 

of certain WHMTs are permitted to 

determine whether the de minimis test 

has been met using the outstanding 

principal balance of the mortgages of the 

trust as of January 1 rather than the net 

fair market value of the trust’s assets. A 

commentator suggested that this de 

minimis test be expanded so that all 

WHFITs with hard to value debt 

instruments be permitted to use this de 

minimis test. In response, the IRS and 

Treasury Department request that 

trustees of WHFITs that hold hard to 

value debt instruments and that believe 

the application of the WHMT de 

minimis test to the instruments held by 

the WHFIT for which the trustees act 

would be useful, submit additional 

comments on this issue. The final 

regulations amend § 1.671–

5(c)(2)(iv)(D)(2) to provide that the 

application of the special de minimis 

test may be expanded by revenue ruling 

or other published guidance. 

4. Non Taxable Exchanges of Assets 

Commentators suggested that the final 

regulations provide an exception to the 

reporting rules for sales and 

dispositions of trust assets for exchanges 

of trust assets that result from 

nontaxable corporate reorganizations. 

The final regulations adopt this 

suggestion. 

D. Market Discount 

Commentators requested amendments 

to the information required to be 

reported under the NMWHFIT safe 

harbor with respect to market discount. 

If a NMWHFIT is required to provide 

information regarding market discount 

under the general rules in § 1.671–

5(c)(2)(vii), the NMWHFIT safe harbor 

provides that a trustee’s requirement to 

provide information regarding market 

discount is satisfied by providing 

information regarding the portion of the 

trust that the assets sold represented. 

Assuming that a trust interest holder 

purchased its interest at a discount, it 

was contemplated that the trust interest 

holder would allocate the same portion 

of its discount to the sale as the assets 

represented to the NMWHFIT. 

This information was incomplete, 

however, with respect to a NMWHFIT 

holding debt instruments with original 

issue discount (OID). Under both the 

general provisions (§ 1.671–5(c)(2)(ii)(A) 

and (vii)) and the safe harbor (§ 1.671–

5(f)(1)(vii) and (viii)), OID information 

and market discount information are 

required to be calculated and provided 

separately. Accordingly, for beneficial 

owners to determine the amount of 

market discount an owner must allocate 

to a particular sale or disposition of a 

debt instrument by the NMWHFIT, 

§ 1.671–5(f)(1)(viii)(A) is amended with 

respect to NMWHFITs that hold debt 

instruments with OID, to include a 

requirement that trustees provide a list 

of the aggregate adjusted issue prices of 

the debt instruments held by the 

NMWHFIT per trust interest as of the 

start-up date or the measuring date (as 

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

whichever will provide the more 

accurate information, as well as of 

January 1 of each subsequent year of the 

NMWHFIT. The IRS and the Treasury 

Department expect that beneficial 

owners of trust interests will use the 

adjusted issue price for the trust’s debt 

instruments per trust interest for the 

year in which the beneficial owner 

purchased its interest to determine 

whether a trust interest has market 

discount. 

II. Applicability of the WHFIT 

Reporting Rules to WHMTs 

A. Temporary WHMT Safe Harbor for 

WHMTs That Hold Interests in a REMIC, 

Hold Interests in Another WHFIT, or 

Hold or Issue Stripped Interests 

The WHFIT reporting rules include a 

safe harbor for WHMTs that directly 

hold mortgages (as defined in § 1.671–

5(b)(11)) and issue trust interests that 

represent an equal pro-rata right to 

payments of interest and principal on 

the underlying mortgages. WHMTs that 

hold or issue stripped interests, hold 

interests in another WHFIT, or hold 

interests in a REMIC, are not eligible to 

report under the WHMT safe harbor. 

The IRS and the Treasury Department 

received comments expressing concern 

about the application of the WHFIT 

reporting rules to WHMTs that are 

outside the WHMT safe harbor because 

trustees and middlemen of these 

WHMTs are required to comply with the 

general WHFIT reporting rules in 

§ 1.671–5(c). The commentators 

contended that some of the information 

required to be reported under the 

general information rules would be 

burdensome to obtain and moreover, is 

not required by beneficial owners to 

accurately report the tax consequences 

of owning a trust interest. In response to 

these concerns, pending the issuance of 

additional WHMT safe harbors, these 

final regulations provide a temporary 

safe harbor for all WHMTs that are 

outside the WHMT safe harbor in 

§ 1.671–5(g) of the WHFIT reporting 

rules because they hold or issue 

stripped interests, hold interests in a 

REMIC or hold an interest in another 

WHMT. Under the safe harbor, a trustee 

will be deemed to satisfy the 

requirements of § 1.671–5(c)(1) if the 

trustee calculates and provides trust 

information in a manner that enables a 

requesting person to provide trust 

information to a beneficial owner of a 

trust interest that enables the owner to 

reasonably accurately report the tax 

consequences of its ownership of a trust 

interest on the Federal income tax 

return of the beneficial owner. 

Additionally, in order to be deemed to 

have satisfied the requirements of 

§ 1.671–5(c)(1), the trustee must provide 

information regarding market discount 

and original issue discount (OID) that is 

calculated in any reasonable manner 

consistent with section 1272(a)(6). 

Pending the issuance of additional 

guidance, it is intended that this safe 

harbor except trustees from any 

penalties that may apply for not fully 

complying with paragraph (c) of the 

WHFIT reporting rules where it can be 

shown that full compliance with 

paragraph (c) is unnecessary in order to 

provide trust interest holders with 

appropriate information. A trustee or 

middleman required to provide 

information to the IRS under § 1.671–

5(d) and to beneficial owners under 

paragraph § 1.671–5(e) may satisfy those 

obligations by calculating and providing 

trust information consistent with the 

information provided by the trustee 

under this safe harbor. 


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B. Application of the Requirement To 

Provide Market Discount and OID 

Information for Existing WHMTs 

Section 1.671–5(c)(2)(ii)(A) requires a 

trustee of a WHFIT to provide 

information regarding OID. 

Commentators have expressed concern 

regarding the application of this 

requirement to existing WHMTs because 

the historical information that would 

enable the trustee to provide OID 

information has never been provided or 

maintained by the trustee or the persons 

responsible for information reporting. 

Commentators contend that it is 

unlikely that these trustees will be able 

to comply with this requirement for 

existing WHMTs. The IRS and the 

Treasury Department recognize that, in 

some cases, the information necessary 

for a WHMT to comply with this 

provision may not be available. If it can 

be demonstrated that a trustee of a 

WHMT with a start-up date on or after 

August 13, 1998 and on or before 

January 24, 2006, has attempted in good 

faith, but without success, to obtain the 

historical information required to 

provide OID information, the IRS will 

not impose any penalties that would 

apply under § 1.671–5(l) of the WHFIT 

reporting rules (redesignated § 1.671–

5(m) by these final regulations) as a 

result of a trustee’s failure to comply 

with the requirement to provide OID 

information. Further, § 1.671–

5(c)(2)(ii)(A) of these final regulations 

excepts a trustee of a WHMT with a 

start-up date prior to August 13, 1998 

from the requirement to provide OID 

information. For purposes of calculating 

the market discount fraction under the 

WHMT safe harbor in § 1.671–5(g)(1)(v), 

these trustees may assume that the 

WHMT is holding mortgages that were 

issued without OID. 

The WHMT safe harbor provisions for 

calculating OID information in § 1.671–

5(g)(i)(iv) and market discount 

information in § 1.671–5(g)(1)(v) require 

trustees to use the prepayment 

assumption used in pricing the original 

issue of trust interests. Commentators 

have indicated that trustees of existing 

WHMTs may not know the prepayment 

assumption used in pricing the original 

issue of trust interests. In response, the 

safe harbor is amended to provide that 

if the trustee does not know the 

prepayment assumption used in pricing 

the original issue of trust interests for a 

WHMT with a start-up date prior to 

January 24, 2006, and the trustee makes 

a good faith effort without success to 

obtain the prepayment assumption, the 

trustee may use any reasonable 

prepayment assumption when 

calculating OID and market discount 

information for that WHMT. 

III. Requirement to Register and 

Continued Consideration of a WHFIT 

Directory 

Prior to the publication of the WHFIT 

reporting rules, commentators expressed 

concern that middlemen would not be 

able to identify a client’s investment as 

an investment in a WHFIT and 

suggested that the IRS publish a 

directory or list of WHFITs that would 

include the name and CUSIP number of 

each WHFIT, along with the name, 

address and telephone number of the 

WHFIT’s representative. Commentators 

noted that a publicly available directory 

or list would assist middlemen and 

brokers in identifying a client’s 

investment as an investment in a 

WHFIT and in locating the WHFIT’s 

representative. The WHFIT reporting 

rules did not provide for a directory and 

instead, required the trustee to identify 

a representative of the trust to provide 

trust information in a publication 

generally read by and available to 

requesting persons, in the trust’s 

prospectus, or on the trustee’s Internet 

Web site. 

Following the publication of the 

WHFIT reporting rules, additional 

comments were received regarding the 

need for a directory of WHFITs. In 

response to those comments, the 

proposed regulations indicated that the 

IRS and Treasury Department 

considered expanding Publication 938, 

‘‘Real Estate Mortgage Investment 

Conduits (REMICs) Reporting 

Information (and other Collateralized 

Debt Obligations (CDOs)),’’ or creating a 

separate publication to list WHMT 

trustees and NMWHFITs. The IRS and 

Treasury Department continue to 

consider how a directory of WHFITs 

could be implemented. Pending the 

publication of such a directory, trustees 

must provide information regarding a 

trust representative in the manner 

provided in the WHFIT reporting rules. 

IV. Form 1041 Reporting 

A trustee of a WHFIT must indicate 

on the Form 1041 filed for the 2006 

calendar year that the return is a final 

return. 

Effective Date 

These final amendments are effective 

December 29, 2006. In general, these 

final regulations are applicable to the 

reporting required under § 1.671–5 as of 

January 1, 2007 (see § 1.671–5(m) 

(redesignated § 1.671–5(n) by these final 

regulations)) and will be applied as 

though these amendments were 

included in the WHFIT reporting rules. 

The IRS and the Treasury Department 

are aware that some trustees and 

middlemen were unable to complete 

updates to their computer and 

information reporting systems to 

comply with the WHFIT reporting rules 

until the amendments to the WHFIT 

reporting rules included in these 

regulations are finalized. Accordingly, 

the IRS will not impose any penalties 

that would apply under § 1.671–5(l) 

(redesignated § 1.671–5(m) by these 

final regulations) of the WHFIT 

reporting rules as a result of the failure 

to comply with the WHFIT reporting 

rules as amended by these final 

regulations with respect to the 2007 

calendar year in cases where a trustee or 

middleman was unable to change its 

information reporting systems to 

comply with the WHFIT reporting rules 

because of uncertainty regarding the 

application of certain provisions of 

those rules pending the publication of 

these final regulations. For example, 

penalties will not be imposed on a 

trustee of a NMWHFIT that reports the 

amount of trust sales proceeds 

distributed to trust interest holders for 

the 2007 calendar year under § 1.671–

5(c)(2)(iv)(B) even though the trustee is 

unable to determine whether the 

NMWHFIT has met the de minimis test 

for the 2007 calendar year, provided 

that the trustee’s failure to determine 

whether a NMWHFIT has met the de 

minimis test results from the trustee’s 

inability to alter its existing information 

reporting systems by January 1, 2007, to 

capture the necessary information. As 

an additional example, penalties will 

not be imposed on the trustees or the 

middlemen of WHMTs that are unable 

to comply with certain provisions of the 

WHFIT reporting rules with respect to 

the 2007 calendar year because those 

trustees and middlemen were not able 

to change their existing reporting 

systems to comply with the WHFIT 

reporting rules pending the publication 

of these final regulations. 

Special Analyses 

It has been determined that these final 

regulations are not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

is hereby certified that this regulation 

will not have a significant economic 

impact on a substantial number of small 

entities. This certification is based on 

the fact that the regulations will not 

have a significant economic impact on 

small entities because the reporting 

burdens in these regulations will fall 

primarily on large brokerage firms, large 

banks, and other large entities acting as 

trustees or middlemen, most of which 


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are not small entities within the 

meaning of the Regulatory Flexibility 

Act (5 U.S.C. chapter 6). Thus, a 

substantial number of small entities are 

not expected to be affected. Therefore, a 

Regulatory Flexibility Analysis under 

the Regulatory Flexibility Act (5 U.S.C. 

chapter 6) is not required. Pursuant to 

section 7805(f) of the Internal Revenue 

Code, the notice of proposed rulemaking 

preceding this regulation was submitted 

to the Chief Counsel for Advocacy of the 

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. 

Adoption of 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 paragraph (a) by 

redesignating entries for paragraphs (h), 

(j), (k), (l), and (m) as entries for 

paragraphs (j), (k), (l), (m) and (n) and 

adding a new entry for paragraph (h). 

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

(b)(21), (c)(2)(ii)(A), (c)(2)(iv), (c)(2)(v), 

(c)(2)(vi), (c)(2)(vii), (d)(2)(ii)(C), 

(d)(2)(ii)(F), (d)(2)(ii)(G), (f)(1), 

(f)(1)(i)(A), (f)(1)(viii)(A), (f)(2)(viii)(A), 

(f)(3)(i)(A)(1), (f)(3)(i)(B)(5), 

(f)(3)(i)(B)(9), (f)(3)(ii)(B)(4)(i), 

(f)(3)(ii)(B)(5), (f)(3)(ii)(B)(6), 

(g)(1)(iv)(A)(2), and (g)(1)(v)(A). 

■ 3. Redesignating paragraphs (h), (j), 

(k), (l) and (m) as (j), (k), (l), (m) and (n) 

respectively. 

■ 4. Adding new paragraph (h). 

Revising newly designated paragraph 

(m). 

The additions and revisions read as 

follows: 

§ 1.671–5 Reporting for widely held fixed 

investment trusts. 

(a) * * * 

(h) Additional safe harbors. 

(1) Temporary safe harbors. 

(2) Additional safe harbors provided 

by other published guidance. 

* * * * * 

(b) * * * 

(5) The cash held for distribution is 

the amount of cash held by the WHFIT 

(other than trust sales proceeds and 

proceeds from sales described in 

paragraphs (c)(2)(iv)(D)(4), (G), and (H) 

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. 

* * * * * 

(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. 

* * * * * 

(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 pro-rata sales 

of trust assets to effect a redemption 

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

this section or the value of assets 

received as a result of a tax-free 

corporate reorganization as described in 

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

* * * * * 

(c) * * * 

(2) * * * 

(ii) * * * 

(A) All items of gross income 

(including OID, except that OID is not 

required to be included for a WHMT 

that has a start-up date (as defined in 

paragraph (b)(19) of this section) prior to 

August 13, 1998). 

* * * * * 

(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. Pro-rata sales of trust assets 

to effect redemptions, as defined in 

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

exchanges of trust assets as the result of 

a corporate reorganization under 

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

are not reported as sales or dispositions 

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

(A) General rule. Except as provided 

in paragraph (c)(2)(iv)(B) (regarding the 

exception for certain NMWHFITs) or 

paragraph (c)(2)(iv)(C) (regarding the 

exception for certain WHMTs) of this 

section, the trustee 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 paragraph 

(c)(2)(iv)(D)(1)(regarding the general de 

minimis test), paragraph (c)(2)(iv)(E) 

(regarding the qualified NMWHFIT 

exception), or paragraph (c)(2)(iv)(F) 

(regarding the NMWHFIT final calendar 

year exception) 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 the general or the 

special de minimis test 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 


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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 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 and the start-up date (as 

defined paragraph (b)(19) of this 

section); or, if the trustee chooses, the 

later of January 1 and the measuring 

date. The measuring date is the date of 

the last deposit of assets into the WHFIT 

(not including any deposit of assets into 

the WHFIT pursuant to a distribution 

reinvestment program), not to exceed 90 

days after the date the registration 

statement of the WHFIT becomes 

effective under the Securities Act of 

1933. 

(2) Special WHMT de minimis test. A 

WHMT that meets the asset requirement 

of paragraph (g)(1)(ii)(E) of this section 

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 

paragraph (g)(1)(iii)(D) of this section) 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. The IRS 

and the Treasury Department may 

provide by revenue ruling, or by other 

published guidance, that the special de 

minimis test of this paragraph 

(c)(2)(iv)(D)(2) may be applied to 

WHFITs holding debt instruments other 

than those described in paragraph 

(g)(1)(ii)(E) of this section. 

(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 paragraph (b)(6) of this 

section, the WHFIT will be treated as 

having met the de minimis test. 

(4) Exception for certain fully reported 

sales—(i) Rule. If a trustee of a 

NMWHFIT reports the sales described 

in paragraph (c)(2)(iv)(D)(4)(ii) of this 

section as provided under paragraph 

(c)(2)(iv)(A) of this section (regardless of 

whether the general minimis test in 

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

is satisfied for a particular calendar 

year) consistently throughout the life of 

the WHFIT, a trustee may exclude the 

trust sales proceeds received by the 

WHFIT as a result of those sales from 

the trust sales proceeds used to 

determine whether a WHFIT has 

satisfied the general de minimis test in 

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

(ii) Applicable sales and dispositions. 

This paragraph (c)(2)(iv)(D)(4) applies to 

sales and dispositions resulting from 

corporate reorganizations and 

restructurings for which the trust 

receives cash, the sale of assets received 

by the trust in corporate reorganizations 

and restructurings (including 

conversions of closed-end investment 

companies to open-end investment 

companies), principal prepayments, 

bond calls, bond maturities, and the sale 

of securities by the trustee as required 

by the governing document or 

applicable law governing fiduciaries in 

order to maintain the sound investment 

character of the trust, and any other 

nonvolitional dispositions of trust 

assets. 

(iii) Certain small sales and 

dispositions. If the amount of trust sales 

proceeds from a sale or disposition 

described in paragraph (c)(2)(iv)(D)(4)(ii) 

of this section is less than .01 percent 

of the net fair market value of the 

WHFIT as determined for applying the 

de minimis test for the calendar year, 

the trustee is not required to report the 

sale or disposition under paragraph 

(c)(2)(iv)(A) of this section provided the 

trustee includes the trust sales proceeds, 

received for purposes of determining 

whether the trust has met the general de 

minimis test of paragraph (c)(2)(iv)(D)(1) 

of this section. 

(E) Qualified NMWHFIT exception. 

The qualified NMWHFIT exception is 

satisfied if—

(1) The NMWHFIT has a start-up date 

(as defined in paragraph (b)(19) of this 

section) 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 becomes 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. For 

purposes of determining whether a 

NMWHFIT is fully funded under this 

paragraph (c)(2)(iv)(E), deposits to the 

NMWHFIT after October 1, 2006, that 

are made pursuant to a distribution 

reinvestment program that is consistent 

with the requirements of § 301.7701–

4(c) of this chapter are disregarded. 

(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) Beneficial owners exchange their 

interests for cash or are treated as 

having exchanged their interests for 

cash upon termination of the trust; 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) Rule. Pro-rata 

sales of trust assets to effect 

redemptions are not required to be 

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

(2) Definition. Pro-rata sales of trust 

assets to effect redemptions occur 

when—

(i) One or more trust interests are 

tendered for redemption; 

(ii) The trustee identifies the pro-rata 

shares of the trust assets that are 

deemed to be owned by 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)) and sells those 

assets as soon as practicable; 

(iii) Proceeds from the sales of the 

assets identified in paragraph 

(c)(2)(iv)(G)(2)(ii) of this section are used 

solely to effect redemptions; and 

(iv) The redemptions are reported as 

required under paragraph (c)(2)(v) of 

this section by the trustee. 

(3) Additional rules—(i) Calendar 

month aggregation. The trustee may 

compare the aggregate pro-rata share of 

the assets deemed to be owned by the 

trust interests tendered for redemption 

during the calendar month with the 

aggregate sales of assets to effect 

redemptions for the calendar month to 

determine the pro-rata sales of trust 

assets to effect redemptions for the 

calendar month. If the aggregate pro-rata 

share of an asset deemed to be owned 

by the trust interests tendered for 

redemption for the month is a fractional 

amount, the trustee may round that 

number up to the next whole number 

for the purpose of determining the prorata sales to effect redemptions for the 

calendar month; 

(ii) Sales of assets to effect 

redemptions may be combined with 

sales of assets for other purposes. Sales 

of assets to effect redemptions may be 

combined with the sales of assets to 

obtain cash for other purposes but the 

proceeds from the sales of assets to 

effect redemptions must be used solely 


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78358 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Rules and Regulations 

to provide cash for redemptions and the 

sales of assets to obtain cash for other 

purposes must be reported as otherwise 

provided in this paragraph (c)(2)(iv). For 

example, if a trustee sells assets and the 

proceeds are used by the trustee to pay 

trust expenses, these amounts are to be 

included in the amounts reported under 

paragraph (c)(2)(iv)(A) or (B), as 

appropriate. 

(4) Example—(i) January 1, 2008. Trust has 

one million trust interests and all interests 

have equal value and equal rights. The 

number of shares of stock in corporations A 

through J and the pro-rata share of each stock 

that a trust interest is deemed to own as of 

January 1, 2008, is as follows: 

Stock Total shares Per trust interest 

A ....................... 24,845 .024845 

B ....................... 28,273 .028273 

C ....................... 35,575 .035575 

D ....................... 13,866 .013866 

E ....................... 25,082 .025082 

F ........................ 39,154 .039154 

G ....................... 16,137 .016137 

H ....................... 14,704 .014704 

I ......................... 17,436 .017436 

J ........................ 31,133 .031133 

(ii) Transactions of January 2, 2008. On 

January 2, 2008, 50,000 trust interests are 

tendered for redemption. The deemed prorata ownership of stocks A through J 

represented by the 50,000 redeemed trust 

interests and the stocks sold to provide cash 

for the redemptions are set out in the 

following table: 

Stock 

Deemed 

pro-rata 

ownership 

Shares sold 

A ....................... 1,242.25 1,242 

B ....................... 1,413.65 1,413 

C ....................... 1,778.75 1,779 

D ....................... 693.30 694 

E ....................... 1,254.10 1,254 

F ........................ 1,957.70 1,957 

G ....................... 806.85 807 

H ....................... 735.20 735 

I ......................... 871.80 872 

J ........................ 1,556.65 1,557 

(iii) Transactions on January 15 through 

17, 2008. On January 15, 2008, 10,000 trust 

interests are tendered for redemption. 

Trustee lends money to Trust for 

redemptions. On January 16, B merges into 

C at a rate of .55 per share. On January 17, 

Trustee sells stock to obtain cash to be 

reimbursed the cash loaned to Trust to effect 

the redemptions. The pro-rata share of the 

stock deemed to be owned by the 10,000 

redeemed trust interests and the stock sold 

by the trustee to effect the redemptions are 

set out in the following table: 

Stock 

Deemed prorata ownership 

Shares sold 

A ..................... 248 .45 249 

Stock 

Deemed prorata ownership 

Shares sold 

B ..................... 00 00 

C ..................... 511 .25 512 

D ..................... 138 .66 138 

E ..................... 250 .82 251 

F ...................... 391 .54 392 

G ..................... 161 .37 162 

H ..................... 147 .04 148 

I ....................... 174 .36 174 

J ...................... 311 .33 311 

(iv) Transactions on January 28 and 29, 

2008. On January 28, 2008, the value of the 

H stock is $30.00 per share and Trustee, 

pursuant to Trust’s governing document, 

sells the H stock to preserve the financial 

integrity of Trust and receives $414,630. 

Trustee intends to report this sale under 

paragraph (c)(2)(iv)(A) of this section and to 

distribute the proceeds of the sale pro-rata to 

trust interest holders on Trust’s next 

scheduled distribution date. On January 29, 

2008, while trustee still holds the proceeds 

from the January 28 sale, 10,000 trust 

interests are tendered for redemption. The 

pro-rata share of the stock deemed to be 

owned by the 10,000 redeemed trust interests 

and the stock sold by the trustee to effect the 

redemptions are set out in the following 

table: 

Stock 

Deemed prorata ownership 

Shares sold 

A ..................... 248 .45 248 

B ..................... 0 0 

C ..................... 511 .25 511 

D ..................... 138 .66 139 

E ..................... 250 .82 251 

F ...................... 391 .54 391 

G ..................... 161 .37 161 

H ..................... 1 0 0 

I ....................... 174 .36 175 

J ...................... 311 .33 312 

1Share of cash proceeds: $4,458.39. 

(v) Monthly amounts. To determine the 

pro-rata sales to effect redemptions for 

January, trustee compares the aggregate prorata share of stocks A through J (rounded to 

the next whole number) deemed to be owned 

by the trust interests tendered for redemption 

during the month of January with the sales 

of stocks A through J to effect redemptions: 

Stock 

Deemed 

pro-rata 

ownership 

Shares sold 

A ....................... 1740 1739 

B ....................... 0 0 

C ....................... 3579 3579 

D ....................... 971 971 

E ....................... 1756 1756 

F ........................ 2741 2741 

G ....................... 1130 1130 

H ....................... 883 883 

I ......................... 1221 1221 

J ........................ 2180 2180 

(vi) Pro-rata sales to effect redemptions for 

the month of January. For the month of 

January, the deemed pro-rata ownership of 

shares of stocks A through J equal or exceed 

the sales of stock to effect redemptions for 

the month. Accordingly, all of the sales to 

effect redemptions during the month of 

January are considered to be pro-rata and are 

not required to be reported under this 

paragraph (c)(2)(iv). 

(H) Corporate Reorganizations. The 

exchange of trust assets for other assets 

of equivalent value pursuant to a tax 

free corporate reorganization is not 

required to be reported as a sale or 

disposition under this paragraph 

(c)(2)(iv). 

(v) Redemptions and sales of WHFIT 

interests—(A) Redemptions—(1) In 

general. Unless paragraph (c)(2)(v)(C) of 

this section applies, for each date on 

which the amount of a redemption 

proceeds for the redemption of a trust 

interest is determined, the trustee must 

provide information to enable a 

requesting person to determine—

(i) The redemption proceeds (as 

defined in paragraph (b)(15) of this 

section) per trust interest on that date; 

(ii) The redemption asset proceeds (as 

defined in paragraph (b)(14) of this 

section) per trust interest on that date; 

and 

(iii) The gross income that is 

attributable to the redeeming beneficial 

owner for the portion of the calendar 

year that the redeeming beneficial 

owner held its interest (including 

income earned by the WHFIT after the 

date of the last income distribution. 

(2) In kind redemptions. The value of 

the assets received with respect to an inkind redemption (as defined in 

paragraph (b)(8) of this section) is not 

required to be reported under this 

paragraph (c)(2)(v)(A). Information 

regarding the income attributable to a 

redeeming beneficial owner must, 

however, be reported under paragraph 

(c)(2)(v)(A)(1)(iii) of this section. 

(B) Sale of a trust interest. Under 

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

applies, if a secondary market for 

interests in the WHFIT is established, 

the trustee must provide, for each day 

of the calendar year, information to 

enable requesting persons to 

determine—

(1) The sale assets proceeds (as 

defined in paragraph (b)(17) of this 

section) per trust interest on that date; 

and 

(2) The gross income that is 

attributable to a selling beneficial owner 

and to a purchasing beneficial owner for 

the portion of the calendar year that 

each held the trust interest. 

(C) Simplified Reporting for Certain 

NMWHFITs—(1) In general. The trustee 

of an NMWHFIT described in paragraph 

(c)(2)(v)(C)(2) of this section is not 


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required to report the information 

described in paragraph (c)(2)(v)(A) of 

this section (regarding redemptions) or 

(c)(2)(v)(B) of this section (regarding 

sales). However, the trustee must report 

to requesting persons, for 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—

(i) Substantially all the assets of the 

NMWHFIT produce income that is 

treated as interest income (but only if 

these assets trade on a recognized 

exchange or securities market without a 

price component attributable to accrued 

interest) or produce dividend income 

(as defined in section 6042(b) and the 

regulations under that section). (Trust 

sales proceeds and gross proceeds from 

sales described in paragraphs 

(c)(2)(iv)(G) and (H) of this section are 

ignored for the purpose of determining 

if substantially all of a NMWHFIT’s 

assets produce dividend or the interest 

income described in this paragraph); 

and 

(ii) The qualified NMWHFIT 

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

this section is satisfied, or 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 percent 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. 

(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 in 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 the 

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 in 

paragraph (c)(2)(iv)(D) 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 provide 

information regarding market discount. 

* * * * * 

(d) * * * 

(2) * * * 

(ii) * * * 

(C) Gross income. All items of gross 

income of the WHFIT attributable to the 

TIH for the calendar year (including OID 

(unless the exception for certain 

WHMTs applies (see paragraph 

(c)(2)(ii)(A) of this section)) and all 

amounts of income attributable to a 

selling, purchasing, or redeeming TIH 

for the portion of the calendar year that 

the TIH held its interest (unless 

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

(regarding an exception for certain 

NMWHFITs) applies)); 

* * * * * 

(F) Reporting Redemptions. All 

redemption asset proceeds (as defined 

in paragraph (b)(14) of this section) paid 

to the TIH for the calendar year, if any, 

or, if paragraph (c)(2)(v)(C) of this 

section (regarding an exception for 

certain NMWHFITs) applies, all 

redemption proceeds (as defined in 

paragraph (b)(15) of this section) paid to 

the TIH for the calendar year; 

(G) Reporting sales of a trust interest 

on a secondary market. All sales asset 

proceeds (as defined in paragraph 

(b)(17) of this section) paid to the TIH 

for the sale of a trust interest or interests 

on a secondary market established for 

the NMWHFIT for the calendar year, if 

any, or, if paragraph (c)(2)(v)(C) of this 

section (regarding an exception for 

certain NMWHFITs) applies, all sales 

proceeds (as defined in paragraph 

(b)(18) of this section) paid to the TIH 

for the calendar year; and 

* * * * * 

(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 the requirements of paragraph 

(f)(1)(i)(A)(1) of this section are met, 

trust sales proceeds and gross proceeds 

from sales described in paragraphs 

(c)(2)(iv)(G) and (H) 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. 

* * * * * 

(viii) Reporting market discount 

information under the safe harbor—(A) 

In general—(1) Trustee required to 

provide market discount information. If 

the trustee is required to provide 

information regarding market discount 

under paragraph (c)(2)(vii) of this 

section, the trustee must provide—

(i) The information required to be 

provided under paragraph 

(f)(1)(iv)(A)(1)(iii) of this section; and 

(ii) If the NMWHFIT holds debt 

instruments with OID, a list of the 

aggregate adjusted issue prices of the 

debt instruments per trust interest 

calculated as of the start-up date or 

measuring date (see paragraph 

(c)(2)(iv)(D)(4) of this section) 

(whichever provides more accurate 

information) and as of January 1 for 

each subsequent year of the NMWHFIT. 

(2) Trustee not required to provide 

market discount information. If the 

trustee is not required to provide market 

discount information under paragraph 

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

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 year 

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

this section), the trustee is not required 

under this paragraph (f) to provide any 

information regarding market discount. 

* * * * * 

(2) * * * 

(viii) * * * 


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(A) Except as provided in paragraph 

(f)(2)(viii)(B) of this section, the trustee 

or middleman must provide the TIH 

with the information provided under 

paragraph (f)(1)(viii) of this section. 

(3) * * * 

(i) * * * 

(A) * * * 

(1) Trust is a NMWHFIT that holds 

common stock in ten different corporations 

and has 100 trust interests outstanding. The 

start-up date for Trust is December 15, 2006, 

and Trust’s registration statement under the 

Securities Act of 1933 became effective after 

July 31, 2006. Trust terminates on March 15, 

2008. The agreement governing Trust 

requires Trust to distribute cash held by 

Trust reduced by accrued but unpaid 

expenses on April 15, July 15, and October 

15 of the 2007 calendar year. The agreement 

also provides that the trust interests will be 

redeemed by the Trust for an amount equal 

to the value of the trust interest, as of the 

close of business, on the day the trust interest 

is tendered for redemption. There is no 

reinvestment plan. A secondary market for 

interests in Trust will be created by Trust’s 

sponsor and Trust’s sponsor will provide 

Trustee with a list of dates on which sales 

occurred on this secondary market. 

(B) * * * 

(5) On June 1, 2007, Trustee sells shares of 

stock for $1000x to preserve the soundness 

of the trust. The stock sold on June 1, 2007, 

equaled 20% of the aggregate fair market 

value of the assets held by Trust on the startup date of Trust. Trustee has chosen not to 

report sales described in paragraph 

(c)(2)(iv)(4)(ii) of Trust’s assets under 

paragraph (c)(2)(iv)(D)(4) of this section. 

* * * * * 

(9) On December 10, 2007, J tenders a trust 

interest to Trustee for redemption through 

Broker1. Trustee determines that the amount 

of the redemption proceeds to be paid for a 

trust interest that is tendered for redemption 

on December 10, 2007 is $116x, of which 

$115x represents the redemption asset 

proceeds. Trustee pays this amount to 

Broker1 on J’s behalf. On December 12, 2007, 

trustee engages in a non pro-rata sale of 

shares of common stock for $115x to effect 

J’s redemption of a trust interest. The stock 

sold on December 12, 2007, equals 2% of the 

aggregate fair market value of all the assets 

of Trust as of the start-up date. 

* * * * * 

(ii) * * * 

(B) * * * 

(4) * * * (i) Application of the de minimis 

test. The aggregate fair market value of the 

assets of Trust as of January 1, 2007, was 

$10,000x. During the 2007 calendar year, 

Trust received trust sales proceeds of $1115x. 

The trust sales proceeds received by Trust for 

the 2007 calendar year equal 11.15% of 

Trust’s fair market value as of January 1, 

2007. Accordingly, the de minimis test is not 

satisfied for the 2007 calendar year. The 

qualified NMWHFIT exception in paragraph 

(c)(2)(iv)(E) of this section and the 

NMWHFIT final calendar year exception in 

(c)(2)(iv)(F) of this section also do not apply 

to Trust for the 2007 calendar year. 

* * * * * 

(5) Reporting redemptions. Because Trust 

is not required to make distributions at least 

as frequently as monthly, and Trust does not 

satisfy the qualified NMWHFIT exception in 

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

exception in paragraph (c)(2)(v)(C) does not 

apply to Trust. To satisfy the requirements of 

paragraph (f)(1) of this section, Trustee 

provides a list of dates for which the 

redemption proceeds to be paid for the 

redemption of a trust interest was determined 

for the 2007 calendar year and the 

redemptions asset proceeds paid for each 

date. During 2007, Trustee only determined 

the amount of redemption proceeds paid for 

the redemption of a trust interest once, for 

December 10, 2007 and the redemption asset 

proceeds determined for that date was $115x. 

(6) Reporting sales of trust interests. 

Because trust is not required to make 

distributions at least as frequently as 

monthly, and Trust does not satisfy the 

qualified NMWHFIT exception in paragraph 

(c)(2)(iv)(E) of this section, the exception in 

paragraph (c)(2)(v)(C) of this section does not 

apply to Trust. Sponsor, in accordance with 

the trust agreement, provides Trustee with a 

list of dates on which sales on the secondary 

market occurred. To satisfy the requirements 

of paragraph (f)(1) of this section, Trustee 

provides requesting persons with a list of 

dates on which sales on the secondary 

market occurred and the amount of cash held 

for distribution, per trust interest, on each 

date. The first sale during the 2007 calendar 

year occurred on September 30, 2007, and 

the amount of cash held for distribution, per 

trust interest, on that date is $1.35x. The 

second sale occurred on December 10, 2007, 

and the amount of cash held for distribution, 

per trust interest, on that date is $1.00x. 

(g) * * * 

(1) * * * 

(iv) * * * (A) * * * 

(2) In calculating the daily portion of 

OID, the trustee must use the 

prepayment assumption used in pricing 

the original issue of trust interests. If the 

WHMT has a start-up date prior to 

January 24, 2006, and the trustee, after 

a good faith effort to ascertain that 

information, does not know the 

prepayment assumption used in pricing 

the original issue of trust interests, the 

trustee may use any reasonable 

prepayment assumption to calculate 

OID provided it continues to use the 

same prepayment assumption 

consistently thereafter. 

* * * * * 

(v) * * * (A) * * * 

(3) Computing the total amount of 

stated interest remaining to be paid and 

the total remaining OID at the beginning 

of the month. To compute the total 

amount of stated interest remaining to 

be paid to the WHMT as of the 

beginning of the month and the total 

remaining OID as of the beginning of the 

month, the trustee must use the 

prepayment assumption used in pricing 

the original issue of trust interests. If the 

WHMT has a start-up date prior to 

January 24, 2006, and the trustee, after 

a good faith effort to ascertain that 

information, does not know the 

prepayment assumption used in pricing 

the original issue of trust interests, the 

trustee may use any reasonable 

prepayment assumption to calculate 

these amounts provided it continues to 

use the same prepayment assumption 

consistently thereafter. 

* * * * * 

(h) Additional safe harbors—(1) 

Temporary safe harbor for WHMTs—(i) 

Application. Pending the issuance of 

additional guidance, the safe harbor in 

this paragraph applies to trustees and 

middlemen of WHMTs that are not 

eligible to report under the WHMT safe 

harbor in paragraph (g) of this section 

because they hold interests in another 

WHFIT, in a REMIC, or hold or issue 

stripped interests. 

(ii) Safe harbor. A trustee is deemed 

to satisfy the requirements of paragraph 

(c) of this section, if the trustee 

calculates and provides trust 

information in a manner that enables a 

requesting person to provide trust 

information to a beneficial owner of a 

trust interest that enables the owner to 

reasonably accurately report the tax 

consequences of its ownership of a trust 

interest on its federal income tax return. 

Additionally, to be deemed to satisfy the 

requirements of paragraph (c) of this 

section, the trustee must calculate and 

provide trust information regarding 

market discount and OID by any 

reasonable manner consistent with 

section 1272(a)(6). A middleman or a 

trustee may satisfy its obligation to 

furnish information to the IRS under 

paragraph (d) of this section and to the 

trust interest holder under paragraph (e) 

of this section by providing information 

consistent with the information 

provided under this paragraph by the 

trustee. 

(2) Additional safe harbors provided 

by other published guidance. The IRS 

and the Treasury Department may 

provide additional safe harbor reporting 

procedures for complying with this 

section or a specific paragraph of this 

section by other published guidance 

(see § 601.601(d)(2) of this chapter). 

* * * * * 

(m) Penalties for failure to comply—

(1) In general. Every trustee or 

middleman who fails to comply with 

the reporting obligations imposed by 

this section is subject to penalties under 

sections 6721, 6722, and any other 

applicable penalty provisions. 


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(2) Penalties not imposed on trustees 

and middlemen of certain WHMTs for 

failure to report OID. Penalties will not 

be imposed as a result of a failure to 

provide OID information for a WHMT 

that has a start-up date on or after 

August 13, 1998 and on or before 

January 24, 2006, if the trustee of the 

WHMT does not have the historic 

information necessary to provide this 

information and the trustee 

demonstrates that it has attempted in 

good faith, but without success, to 

obtain this information. For purposes of 

calculating a market discount fraction 

under paragraph (g)(1)(v) of this section, 

for a WHMT described in this 

paragraph, it may be assumed that the 

WHMT is holding mortgages that were 

issued without OID. A trustee availing 

itself of this paragraph must include a 

statement to that effect when providing 

information to requesting persons under 

paragraph (c) of these regulations. 

* * * * * 

§ 1.671–5T [Removed] 

■ Par. 3. Section 1.671–5T is removed. 

Kevin M. Brown, 

Deputy Commissioner for Services and 

Enforcement. 

Eric Solomon, 

Assistant Secretary (Tax Policy). 

[FR Doc. 06–9924 Filed 12–26–06; 10:22 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[CGD05–07–123] 

RIN 1625–AA00 

Safety Zone: Transit of Industrial 

Cranes, Cape Fear River, Wilmington, 

NC 

AGENCY: Coast Guard, DHS. 

ACTION: Temporary final rule. 

SUMMARY: The Coast Guard is 

establishing a safety zone from the 

mouth of the Cape Fear River to the 

Cape Fear Memorial Bridge to provide 

for the safety of the public during the 

transit and mooring of a vessel carrying 

four (4) large industrial cranes. The 

cranes are of such size and dimension 

that they will create a significant 

obstruction to safe navigation for other 

vessels operating in the vicinity. 

Restricting vessel traffic is necessary to 

ensure the safety of the public. Vessel 

traffic will only be restricted during the 

transit of the vessel. 

DATES: This rule is effective from 1 a.m. 

on February 1, 2007 until 11 p.m. on 

February 15, 2007. 

ADDRESSES: Documents indicated in this 

preamble as being available in the 

docket are part of docket CGD05–06–

123 and are available for inspection or 

copying at the Coast Guard Marine 

Safety Unit Wilmington, North Carolina 

between 8 a.m. and 4 p.m., Monday 

through Friday, except Federal 

Holidays. 

FOR FURTHER INFORMATION CONTACT: LT 

Tim Grant, Chief of Response, Coast 

Guard Marine Safety Unit Wilmington, 

North Carolina at (910) 772–2191. 

SUPPLEMENTARY INFORMATION: 

Regulatory Information 

Pursuant to 5 U.S.C. 553(b)(B), a 

notice of proposed rulemaking (NPRM) 

was not published for this regulation. 

Good cause exists for not publishing a 

NPRM. Any delay encountered in this 

regulation’s effective date by publishing 

a NPRM would be contrary to public 

interest since immediate action is 

needed to prevent traffic from transiting 

the waters of the Cape Fear River. A 

safety zone is needed in order to 

provide for the safety of life and 

property on navigable waters of the 

Cape Fear River. The regulated area will 

consist of the complete closure of the 

Cape Fear River to vessel traffic 

movement beginning at the 

International Regulations for Prevention 

of Collisions at Sea, 1972 (COLREGS, 

72) Demarcation Line drawn from Oak 

Island Light House to Bald Head Island 

Abandon Light House noted on NOAA 

chart 11537 and proceeding north up 

the Cape Fear River bank to bank to the 

Cape Fear Memorial Bridge. The safety 

zone will be enforced until the vessel 

transporting the cranes has been safely 

moored at North Carolina State Port 

Authority berth #8. 

Background and Purpose 

Sometime between February 1, 2007 

and February 15, 2007, The North 

Carolina State Port Authority (NCSPA) 

intends to bring in four (4) new cranes 

to enhance container operations at the 

NCSPA’s facility located on the Cape 

Fear River, Wilmington, North Carolina. 

The combination of the size of the 

cranes and the restricted 

maneuverability in the Cape Fear River 

necessitates the temporary restriction of 

all commercial vessel movement in the 

Cape Fear River to protect mariners 

from the hazards associated with this 

event. This temporary safety zone will 

be enforced for approximately five (5) to 

seven (7) hours on a day between 

February 1 and February 15 when the 

transit of the vessel carrying four large 

industrial cranes occurs. The zone will 

only be enforced on the day during the 

transit. The zone will not be enforced on 

subsequent days during the duration of 

the effective period. The zone will have 

minimal impact on vessel transits 

because the waterway will only be 

closed for five to seven hours. 

Discussion of Rule 

The Coast Guard is establishing a 

safety zone on the specified waters of 

the Cape Fear River. The regulated area 

will consist of the complete closure of 

the Cape Fear River to vessel traffic 

movement beginning at the 

International Regulations for Prevention 

of Collisions at Sea, 1972 (COLREGS, 

72) Demarcation Line drawn from Oak 

Island Light House to Bald Head Island 

Abandon Light House noted on NOAA 

chart 11537 and proceeding north up 

the Cape Fear River bank to bank to the 

Cape Fear Memorial Bridge. The safety 

zone will be in effect from 1 a.m. on 

February 1, 2007 to 11 p.m. on February 

15, 2007. The zone will be enforced for 

approximately five (5) to seven (7) hours 

on a day between February 1 and 

February 15 when the transit of the 

vessel carrying four large industrial 

cranes occurs. After February 15, 2007 

the zone will no longer be in effect. 

Except for participants and vessels 

authorized by the Coast Guard Patrol 

Commander, no person or vessel may 

enter or remain in the regulated area. 

Regulatory Evaluation 

This rule is not a ‘‘significant 

regulatory action’’ under section 3(f) of 

Executive Order 12866, Regulatory 

Planning and Review, and does not 

require an assessment of potential costs 

and benefits under section 6(a)(3) of that 

Order. The Office of Management and 

Budget has not reviewed it under that 

Order. It is not ‘‘significant’’ under the 

regulatory policies and procedures of 

the Department of Homeland Security 

(DHS). 

We expect the economic impact of 

this rule to be so minimal that a full 

Regulatory Evaluation under the 

regulatory policies and procedures of 

DHS is unnecessary. Although this 

regulation restricts access to the 

regulated area, the effect of this rule will 

not be significant because: (i) The COTP 

may authorize access to the safety zone; 

(ii) the safety zone will be in effect for 

a limited duration; and (iii) the Coast 

Guard will make notifications via 

maritime advisories so mariners can 

adjust their plans accordingly. 


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