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###### Department of the Treasury

###### Internal Revenue Service 

          - 26 CFR Part 1 
          - [REG-156420-06] 
          - RIN 1545-BG25 

# AGENCY:

Internal Revenue Service (IRS), Treasury. 

# ACTION:

Notice of proposed rulemaking by cross-reference to temporary regulations. 

# SUMMARY:

                        In the Rules and Regulations section of this issue of the                         **Federal                                   ( print page 17815)                                Register**                        , the IRS is issuing temporary regulations under section 1502 of the Internal Revenue Code (Code). The temporary regulations provide guidance to corporations filing consolidated returns. The temporary regulations apply an anti-avoidance rule and revise an anti-loss reimportation rule that applies after a disposition of stock of a subsidiary at a loss. The text of those regulations also serves as the text of these proposed regulations.                     

# DATES:

Written or electronic comments or a request for a public hearing must be received by July 9, 2007. 

# ADDRESSES:

                        Send submissions to CC:PA:LPD:PR (REG-156420-06), room 5203 Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-156420-06), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at                         *www.regulations.gov*                         (IRS-REG-156420-06).                     

# FOR FURTHER INFORMATION CONTACT:

                        Concerning the proposed regulations, Theresa Abell (202) 622-7700 or Phoebe Bennett (202) 622-7770; concerning submission of comments and request for public hearing, Richard Hurst at                         *Richard.A.Hurst@irscounsel.treas.gov*                         or (202) 622-7180 (not toll free numbers).                     

# SUPPLEMENTARY INFORMATION:

## Background and Explanation of Provisions 

                    Temporary regulations in the Rules and Regulations section of this issue of the                     **Federal Register**                     amend the Income Tax Regulations (26 CFR part 1) relating to section 1502. The temporary regulations provide guidance to corporations filing consolidated returns. The temporary 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 those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the amendments.                 

## Special Analyses 

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12666. Therefore, a regulatory assessment is not required. It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that these regulations primarily will affect affiliated groups of corporations that have elected to file consolidated returns, which tend to be larger entities. Therefore, a Regulatory Flexibility Analysis under Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. 

## Comments and Requests for Public Hearing 

                    Before these proposed regulations are adopted as final regulations, consideration will be given to any written (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the                     **Federal Register**                    .                 

## Drafting Information 

The principal author of these 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

## Proposed Amendments to the Regulations 

Accordingly, 26 CFR part 1 is proposed to be amended as follows: 

# PART 1—INCOME TAXES 

**Paragraph 1.**                         The authority citation for part 1 is amended by adding an entry in numerical order to read as follows:                     

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

**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 

* * * * *

(b) * * *

(3) * * *

(iii)* * *

                            (D) [The text of the proposed amendment to § 1.1502-32(b)(3)(iii)(D) is the same as the text of § 1.1502-32T(b)(3)(iii)(D) published elsewhere in this issue of the                             **Federal Register**                            ].                         

* * * * *

                            (k) [The text of the proposed amendment to § 1.1502-32(k) is the same as the text of § 1.1502-32T(k) published elsewhere in this issue of the                             **Federal Register**                            ].                         

**Par. 3.**                             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 

* * * * *

(g) * * *

                            (3) [The text of the proposed amendment to § 1.1502-35(g)(3) is the same as the text of § 1.1502-35T(g)(3) published elsewhere in this issue of the                             **Federal Register**                            ].                         

* * * * *

                            (6) [The text of the proposed amendment to § 1.1502-35(g)(6) is the same as the text of § 1.1502-35T(g)(6) published elsewhere in this issue of the                             **Federal Register**                            ].                         

                            (h) [The text of the proposed amendment to § 1.1502-35(h) is the same as the text of § 1.1502-35T(h) published elsewhere in this issue of the                             **Federal Register**                            ].                         

* * * * *

                            (j) [The text of the proposed amendment to § 1.1502-35(j) is the same as the text of § 1.1502-35T(j) published elsewhere in this issue of the                             **Federal Register**                            ].                         

* * * * *

Linda M. Kroening, 

Acting Deputy Commissioner for Services and Enforcement.

 [FR Doc. E7-6534 Filed 4-9-07; 8:45 am] 

BILLING CODE 4830-01-P