17804 Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations 

Dated: March 29, 2007. 

John C. Dugan, 

Comptroller of the Currency, Office of the 

Comptroller of the Currency. 

Board of Governors of the Federal Reserve 

System, April 3, 2007. 

Jennifer J. Johnson, 

Secretary of the Board. 

Dated at Washington, DC, this 20th day of 

March, 2007. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

Dated: April 2, 2007. 

By the Office of Thrift Supervision. 

John M. Reich, 

Director. 

[FR Doc. 07–1716 Filed 4–9–07; 8:45 am] 

BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P; 

6720–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 71 

[Docket No. FAA–2006–24826; Airspace 

Docket No. 06–ANM–3] 

Establishment of Class E Airspace; 

Nucla, CO 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule; correction. 

SUMMARY: This action corrects an error 

in the northwest boundary description 

of a final rule that was published in the 

Federal Register on February 23, 2007 

(72 FR 8100) Federal Register Docket 

No. FAA–2006–24826, Airspace Docket 

No. 06–ANM–3. 

DATES: Effective Date: 0901 UTC, May 

10, 2007. The Director of the Federal 

Register approves this incorporation by 

reference action under 1 CFR part 51, 

subject to the annual revision of FAA 

Order 7400.9 and publication of 

conforming amendments. 

FOR FURTHER INFORMATION CONTACT: Ed 

Haeseker, Federal Aviation 

Administration, Western Service Area, 

System Support Group, 1601 Lind 

Avenue, SW., Renton, WA 98057; 

telephone: (425) 917–6714. 

SUPPLEMENTARY INFORMATION: 

History 

Federal Register Docket FAA–2006–

24826, Airspace Docket No. 06–ANM–3, 

published on February 23, 2007 (72 FR 

8100), establishes Class E Airspace at 

Hopkins Field, Nucla, CO, effective May 

10, 2007. An error was discovered in the 

northwest geographic boundary of the 

Class E airspace. This action corrects 

this error. 

Correction to Final Rule 

■ Accordingly, pursuant to the authority 

delegated to me, the legal description as 

published in the Federal Register 

February 23, 2007 (72 FR 8100), Federal 

Register Docket No. FAA–2006–24826, 

Airspace Docket No. 06–ANM–3, and 

incorporated by reference in 14 CFR 

71.1, is corrected as follows: 

PART 71—[AMENDED] 

§ 71.1 [Amended] 

* * * * * 

ANM CO E5 Nucla, CO [Corrected] 

Hopkins Field, CO 

(Lat. 38°14′20′′ N., long. 108°33′48′′ W.) 

That airspace extending upward from 700 

feet above the surface within a 6.0-mile 

radius of Hopkins Field and within 4 miles 

each side of the 317° bearing from Hopkins 

Field extending from the 6.0-mile radius of 

Hopkins Field northwest to 12.0 miles from 

Hopkins Field; that airspace extending 

upward from 1,200 feet above the surface 

beginning at lat. 38°45′00′′ N., long. 

109°00′00′′ W.; to lat. 38°30′00′′ N., long. 

108°30′00′′ W.; to CONES VOR/DME; to 

DOVE CREEK VORTAC; to lat. 38°30′00′′ N., 

long. 109°10′00′′ W.; to point of beginning. 

* * * * * 

Issued in Seattle, Washington, on March 

30, 2007. 

Steven M. Osterdahl, 

Director of Operations, En Route and Oceanic, 

Western Service Area. 

[FR Doc. E7–6649 Filed 4–9–07; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9322] 

RIN 1545–BG26 

Anti-Avoidance and Anti-Loss 

Reimportation Rules Applicable 

Following a Loss on Disposition of 

Stock of Consolidated Subsidiaries 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final and temporary 

regulations. 

SUMMARY: This document contains final 

and temporary regulations under section 

1502 of the Internal Revenue Code 

(Code). These regulations provide 

guidance to corporations filing 

consolidated returns. These regulations 

apply an anti-avoidance rule and revise 

an anti-loss reimportation rule that 

applies following a disposition of stock 

of a subsidiary at a loss. The text of the 

temporary regulations also serves as the 

text of the proposed regulations (REG–

156420–06) set forth in the notice of 

proposed rulemaking on this subject in 

the Proposed Rules section in this issue 

of the Federal Register. 

DATES: Effective Date: These regulations 

are effective April 10, 2007. 

Applicability Date: For dates of 

applicability, see §§ 1.1502–32T(k) and 

1.1502–35T(j)(2). 

FOR FURTHER INFORMATION CONTACT: 

Theresa Abell, (202) 622–7700 or 

Phoebe Bennett, (202) 622–7770 (not 

toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background and Explanation of 

Provisions 

Section 1.1502–35 currently addresses 

loss duplication. The rule generally 

applies whenever there is a disposition 

of loss shares of subsidiary stock or a 

subsidiary is deconsolidated. The 

regulation includes several specific antiabuse rules, including a rule intended to 

prevent a group from getting the benefit 

of a loss on the stock of one of its 

subsidiaries and then reimporting the 

same economic loss back to into the 

group (or its successor) in order to claim 

a duplicative benefit from the one loss. 

The current anti-loss reimportation 

rule generally disallows reimported 

losses that duplicate a loss recognized 

and allowed with respect to the 

disposition of subsidiary stock. The 

term ‘‘subsidiary’’ is defined in 

§ 1.1502–1(c) to mean a corporation that 

is a member of a consolidated group but 

is not the common parent of the group. 

Taxpayers have attempted to avoid the 

anti-loss reimportation rule by first 

deconsolidating a subsidiary and then 

selling loss shares of the subsidiary’s 

stock. The loss on the stock is one that 

was reflected in the subsidiary’s 

attributes at the time of the 

deconsolidation and is thus one that the 

anti-loss reimportation rule is intended 

to address. But because the sale occurs 

after the subsidiary ceases to be a 

member of the group, taxpayers take the 

position that the loss recognized is not 

with respect to ‘‘subsidiary’’ stock and 

therefore is not subject to the anti-loss 

reimportation rule. Thus, after obtaining 

the tax benefit of its economic loss (on 

the disposition of the stock), the group 

would be free to reimport the loss and 

then (directly or through a successor 

group) claim a second tax benefit for its 

one economic loss. 

The IRS and Treasury Department 

believe that the duplication of a group 


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Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations 17805 

loss distorts group income, and is 

therefore inappropriate, regardless of 

whether or not a duplicative recognition 

of the loss occurs while the subsidiary 

is a member. In either case, the group 

would obtain more than a single tax 

benefit for one economic loss. The IRS 

and Treasury Department recognize that 

such transactions remain subject to, and 

reimportation will be prevented by, 

other principles of law, such as the 

Step-Transaction Doctrine and other 

anti-avoidance rules of law. However, 

the IRS and Treasury Department have 

concluded that tax administration 

would be better served by revising the 

current anti-loss reimportation rule to 

address these situations more directly. 

Accordingly, these final and 

temporary regulations revise the antiloss reimportation rule to clarify that 

losses reflected in the basis of 

subsidiary stock at the time of 

deconsolidation may not be recognized 

and reimported into the group, 

regardless of whether the stock losses 

are recognized when the subsidiary is a 

member of the group. To discourage 

further structuring to avoid its purposes, 

the loss reimportation rule is also 

revised to replace the list of events that 

cause the application of the rule with a 

list of criteria that identify 

reimportation transactions that will be 

treated as subject to the rule. 

In addition, the temporary regulations 

add a general anti-avoidance rule under 

§ 1.1502–35T(g)(6), which provides that 

appropriate adjustments will be made if 

a taxpayer acts with a view to avoid the 

purposes of § 1.1502–35. The temporary 

regulations also remove § 1.1502–35(h) 

(continued applicability of other rules of 

law) because it unnecessarily duplicates 

§ 1.1502–80(a), which provides that 

other rules of law apply to members of 

consolidated groups unless otherwise 

provided in the regulations. 

The temporary regulations that revise 

the anti-loss reimportation rule apply to 

reimportation events that occur on or 

after April 10, 2007 if they occur with 

respect to stock of a subsidiary sold on 

or after March 7, 2002, or with respect 

to stock of a subsidiary or former 

subsidiary sold on or after April 10, 

2007. The temporary regulations 

provide a general anti-avoidance rule 

that applies on or after April 10, 2007. 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12666. Therefore, a 

regulatory assessment is not required. 

These temporary regulations address 

situations in which taxpayers 

inappropriately attempt to recognize 

duplicative tax losses by attempting to 

avoid the application of the anti-loss 

reimportation rule. For this reason, it 

has been determined pursuant to 5 

U.S.C. 553(b)(B) that prior notice and 

public procedure are impracticable and 

contrary to the public interest. For the 

same reason, it has been determined 

pursuant to 5 U.S.C. 553(d)(3) that good 

cause exists to make these temporary 

regulations effective upon the date of 

publication. For applicability of the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) refer to the Special Analyses 

section of the preamble to the crossreference notice of the proposed 

rulemaking published in the Proposed 

Rules section in this issue of the Federal 

Register. Pursuant to section 7805(f) of 

the Code, these temporary regulations 

will be submitted to the Chief Counsel 

for Advocacy of the Small Business 

Administration for comment on their 

impact on small business. 

Drafting Information 

The principal author of these 

regulations is Phoebe Bennett, Office of 

the Associate Chief Counsel (Corporate). 

However, other personnel from the IRS 

and Treasury Department participated 

in their development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

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 as follows: 

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

Sections 1.1502–32T and 1.1502–35T also 

issued under 26 U.S.C. 1502 * * *. 

■ Par. 2. Section 1.1502–32 is amended 

by revising paragraph (b)(3)(iii)(D) and 

adding paragraph (k) to read as follows: 

§ 1.1502–32 Investment adjustments. 

* * * * * 

(b) * * * 

(3) * * * 

(iii)* * * 

(D) [Reserved]. For further guidance, 

see § 1.1502–32T(b)(3)(iii)(D). 

* * * * * 

(k) [Reserved]. For further guidance, 

see § 1.1502–32T(k). 

■ Par. 3. Section 1.1502–32T is 

amended by revising paragraphs (a) 

through (b)(4)(iii) and adding paragraph 

(k) to read as follows: 

§ 1.1502–32T Investment adjustments 

(temporary). 

(a) through (b)(3)(iii)(C) [Reserved]. 

For further guidance, see § 1.1502–32(a) 

through (b)(3)(iii)(C). 

(D) Loss disallowed under § 1.1502–

35T(g)(3)(ii). Any loss or deduction the 

use of which is disallowed pursuant to 

§ 1.1502–35T(g)(3)(ii) (other than 

duplicating items that are carried back 

to a consolidated return year of the 

group), and with respect to which no 

waiver described in paragraph (b)(4) of 

this section is filed, is treated as a 

noncapital, nondeductible expense 

incurred during the taxable year that 

such loss would otherwise be absorbed. 

(b)(3)(iv) through (b)(4)(iii) [Reserved]. 

For further guidance, see § 1.1502–

32(b)(3)(iv) through (b)(4)(iii). 

* * * * * 

(k) Effective date—(1) Applicability 

date. Paragraph (b)(3)(iii)(D) of this 

section applies to any original 

consolidated Federal income tax return 

due (without extensions) after April 10, 

2007. 

(2) Expiration date. The applicability 

of paragraphs (b)(3)(iii)(D) and (k) of this 

section will expire on April 9, 2010. 

■ Par. 4. Section 1.1502–35 is amended 

by: 

■ 1. Revising paragraphs (g)(3) and (h). 

■ 2. Adding new paragraph (g)(6). 

■ 3. Revising paragraph (j). 

The revisions and additions read as 

follows: 

§ 1.1502–35 Transfers of subsidiary stock 

and deconsolidations of subsidiaries. 

* * * * * 

(g) * * * 

(3) [Reserved]. For further guidance, 

see § 1.1502–35T(g)(3). 

* * * * * 

(6) [Reserved]. For further guidance, 

see § 1.1502–35T(g)(6). 

(h) [Reserved]. For further guidance, 

see § 1.1502–35T(h). 

* * * * * 

(j) Effective dates—(1) In general. This 

section applies with respect to stock 

transfers, deconsolidations of 

subsidiaries, determinations of 

worthlessness, and stock dispositions 

on or after March 10, 2006. For rules 

applicable before March 10, 2006, see 

§ 1.1502–35T(j) as contained in 26 CFR 

part 1 in effect on January 1, 2006. 

(2) [Reserved]. For further guidance, 

see § 1.1502–35T(j)(2). 

* * * * * 

■ Par. 5. Section 1.1502–35T is 

amended by revising paragraphs 

(c)(4)(ii) through (j) to read as follows: 


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17806 Federal Register / Vol. 72, No. 68 / Tuesday, April 10, 2007 / Rules and Regulations 

§ 1.1502–35T Transfers of subsidiary stock 

and deconsolidations of subsidiaries 

(temporary). 

* * * * * 

(c)(4)(ii) through (g)(2) [Reserved]. For 

further guidance, see § 1.1502–

35(c)(4)(ii) through (g)(2). 

(3) Anti-loss reimportation rule—(i) 

Conditions for application. This 

paragraph (g)(3) applies when—

(A) A member of a group (the selling 

group) recognized and was allowed a 

loss with respect to a share of stock of 

S, a subsidiary or former subsidiary of 

the selling group; 

(B) That stock loss was duplicated (in 

whole or in part) in S’s attributes 

(duplicating items) at the earlier of the 

time that the loss was recognized or that 

S ceased to be a member; and 

(C) Within ten years of the date that 

S ceased to be a member, there is a 

reimportation event. For this purpose, a 

reimportation event is any event after 

which a duplicating item is a 

reimported item. A reimported item is 

any duplicating item that is reflected in 

the attributes of any member of the 

selling group, including S, or, if not 

reflected in the attributes, would be 

properly taken into account by any 

member of the selling group (for 

example as the result of a carryback) (a 

reimported item). 

(ii) Effect of application. Immediately 

before the time that a reimported item 

(or any portion of a reimported item) 

would be properly taken into account 

(but for the application of this paragraph 

(g)(3)), such item (or such portion of the 

item) is reduced to zero and no 

deduction or loss is allowed, directly or 

indirectly, with respect to that item. 

(iii) Operating rules. For purposes of 

this paragraph (g)(3)—

(A) The terms member, subsidiary, 

and group include their predecessors 

and successors to the extent necessary 

to effectuate the purposes of this 

section; 

(B) The determination of whether a 

loss is duplicative is made under the 

principles of paragraph (d)(4) of this 

section; and 

(C) The reduction of a reimported 

item (other than duplicating items that 

are carried back to a consolidated return 

year of the selling group) is a 

noncapital, nondeductible expense 

within the meaning of § 1.1502–

32(b)(3)(iii). 

(g)(4) through (g)(5) [Reserved]. For 

further guidance, see § 1.1502–35(g)(4) 

through (g)(5). 

(6) General anti-avoidance rule 

applicable on or after April 10, 2007. If 

a taxpayer acts with a view to avoid the 

purposes of this section, appropriate 

adjustments will be made to carry out 

the purposes of this section. 

(h) Application of other rules of law. 

See § 1.1502–80(a) regarding the general 

applicability of other rules of law. 

(i) [Reserved]. For further guidance, 

see § 1.1502–35(i). 

(j)(1) [Reserved]. For further guidance, 

see § 1.1502–35(j)(1). 

(2) Transactions after April 10, 

2007—(i) Effective date. Paragraph (g)(3) 

of this section applies to reimported 

items if the related stock loss is 

recognized on or after April 10, 2007. 

Paragraph (g)(3) (other than paragraph 

(g)(3)(i)(A)) of this section also applies 

with respect to the duplication of 

subsidiary stock loss recognized in 

dispositions (described in § 1.1502–

35(g)(3)(i)(A), as contained in 26 CFR 

part 1, revised as of January 1, 2007) on 

or after March 7, 2002, if the 

reimportation event with respect to that 

loss occurs on or after April 10, 2007. 

For rules applicable to losses 

reimported before April 10, 2007, see 

§ 1.1502–35(g)(3), as contained in 26 

CFR part 1 in effect on January 1, 2007. 

Paragraphs (g)(6) and (h) of this section 

apply on or after April 10, 2007. For 

rules applicable prior to April 10, 2007, 

see § 1.1502–35 as contained in 26 CFR 

part 1 in effect on January 1, 2007. 

(ii) Expiration date. The applicability 

of paragraphs (g)(3), (g)(6), and (h) of 

this section will expire on April 9, 2010. 

* * * * * 

Linda M. Kroening, 

Acting Deputy Commissioner for Services and 

Enforcement. 

Approved: March 29, 2007. 

Eric Solomon, 

Assistant Secretary of the Treasury. 

[FR Doc. E7–6541 Filed 4–9–07; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 648 

[Docket No. 04011–2010–4114–02; I.D. 

040407D] 

Magnuson-Stevens Fishery 

Conservation and Management Act 

Provisions; Fisheries of the 

Northeastern United States; Northeast 

(NE) Multispecies Fishery; Modification 

of the Yellowtail Flounder Landing 

Limit for the U.S./Canada Management 

Area 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Temporary rule; landing limit. 

SUMMARY: NMFS announces that the 

Administrator, Northeast (NE) Region, 

NMFS (Regional Administrator), is 

increasing the Georges Bank (GB) 

yellowtail flounder trip limit to 25,000 

lb (11,340 kg) for NE multispecies daysat-sea (DAS) vessels fishing in the U.S./ 

Canada Management Area. This action 

is authorized by the regulations 

implementing Amendment 13 to the NE 

Multispecies Fishery Management Plan 

and is intended to prevent underharvesting of the Total Allowable Catch 

(TAC) for GB yellowtail flounder while 

ensuring that the TAC will not be 

exceeded during the 2006 fishing year. 

This action is being taken to provide 

additional opportunities for vessels to 

fully harvest the GB yellowtail flounder 

TAC under the authority of the 

Magnuson-Stevens Fishery 

Conservation and Management Act 

(Magnuson-Stevens Act). 

DATES: Effective April 5, 2007, through 

April 30, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Tobey Curtis, Fishery Management 

Specialist, (978) 281–9273, fax (978) 

281–9135. 

SUPPLEMENTARY INFORMATION: 

Regulations governing the GB yellowtail 

flounder landing limit within the U.S./ 

Canada Management Area are found at 

§ 648.85(a)(3)(iv)(C) and (D). The 

regulations authorize vessels issued a 

valid limited access NE multispecies 

permit and fishing under a NE 

multispecies DAS to fish in the U.S./ 

Canada Management Area, as defined at 

§ 648.85(a)(1), under specific 

conditions. The TAC for GB yellowtail 

flounder for the 2006 fishing year (May 

1, 2006 - April 30, 2007) is 2,070 mt. 

The regulations at § 648.85(a)(3)(iv)(D) 

authorize the Regional Administrator to 

increase or decrease the trip limits in 

the U.S./Canada Management Area to 

prevent over-harvesting or underharvesting the TAC allocation. On 

March 8, 2007, the 10,000–lb (4,536–kg) 

trip limit for GB yellowtail flounder was 

reduced to 5,000 lb (2,268 kg) in the 

Eastern U.S./Canada Area to prevent 

over-harvesting the TAC (72 FR 10426), 

and the requirement to only use a 

haddock separator trawl in the Eastern 

U.S./Canada Area was removed. 

Currently, NE multispecies vessels 

fishing in the Eastern U.S./Canada Area 

under a NE multispecies day-at-sea 

(DAS) with trawl gear must use either a 

haddock separator trawl or a flounder 

trawl net, as specified at 

§ 648.85(a)(3)(iii). Based upon the most 


cprice-sewell on PROD1PC66 with RULES