60132 Federal Register / Vol. 65, No. 196 / Tuesday, October 10, 2000 / Proposed Rules

paragraph (d) of this AD prior to the

accumulation of the number of flight cycles

specified in the ‘‘Subsequent Inspection

Interval’’ column of the Threshold Table

included in Paragraph 1.E. (‘‘Compliance’’) of

the service bulletin until the repair specified

in paragraph (h) of this AD is installed.

Optional Terminating Action

(f) Installation of the repair in accordance

with the Accomplishment Instructions of

Boeing Service Bulletin 757–54–0031,

Revision 2, dated December 19, 1996, or

Revision 4, dated November 11, 1999,

constitutes terminating action for the

requirements in paragraphs (a) and (d) of this

AD.

New Requirements of This AD

Revised Service Information

(g) Except as provided by paragraphs (c)

and (l)(3) of this AD: As of the effective date

of this new AD, Boeing Service Bulletin 757–

54–0031, Revision 4, dated November 11,

1999, must be used for accomplishment of

the actions required by this AD.

Second Bolt Hole Inspection

(h) Within 6,000 flight cycles after

accomplishment of paragraph (d) of this AD,

or within 60 days after the effective date of

this AD, whichever occurs later: Perform a

second eddy current inspection (bolt hole

inspection) to detect cracking of the two

fastener holes in the lower spar chord, in

accordance with Part IV of the

Accomplishment Instructions of Boeing

Service Bulletin 757–54–0031, Revision 4,

dated November 11, 1999. If no cracking is

found during the inspection required by this

paragraph, no further action is required by

this paragraph.

Third Bolt Hole Inspection

(i) After accomplishment of the inspection

required by paragraph (h) of this AD, when

the airplane has reached the flight cycle

threshold as defined by the flight cycle

threshold formula on page 9, Paragraph 1.E.

(‘‘Compliance’’) of Boeing Service Bulletin

757–54–0031, Revision 4, dated November

11, 1999: Perform a third eddy current

inspection (bolt hole inspection) to detect

cracking of the two fastener holes in the

lower spar chord, in accordance with Part II

of the Accomplishment Instructions of the

service bulletin.

Fourth Bolt Hole Inspection

(j) If, after accomplishment of the

inspection required by paragraph (i) of this

AD, paragraph (m) of this AD has not yet

been accomplished: When the airplane has

reached the flight cycle threshold as defined

by the flight cycle threshold formula on page

9, Paragraph 1.E. (‘‘Compliance’’) of Boeing

Service Bulletin 757–54–0031, Revision 4,

dated November 11, 1999; perform a fourth

eddy current inspection (bolt hole

inspection) to detect cracking of the two

fastener holes in the lower spar chord, in

accordance with Part II of the

Accomplishment Instructions of the service

bulletin.

Follow-On Actions

(k) If no cracking is found during any

inspection required by paragraph (d), (i), or

(j) of this AD, prior to further flight, increase

the diameter of the holes by the dimensions

specified in the Accomplishment

Instructions of Boeing Service Bulletin 757–

54–0031, Revision 2, dated December 19,

1996, or Revision 4, dated November 11,

1999, and install new fasteners in accordance

with the service bulletin.

(l) If any cracking is found during any

inspection required by paragraph (d), (h), (i),

or (j) of this AD, prior to further flight,

accomplish paragraph (l)(1), (l)(2), or (l)(3) of

this AD, as applicable, in accordance with

the Accomplishment Instructions of Boeing

Service Bulletin 757–54–0031, Revision 2,

dated December 19, 1996, or Revision 4,

dated November 11, 1999.

(1) If the cracking can be removed by

increasing the diameter of the hole in

accordance with the service bulletin: Increase

the diameter of the hole by the dimensions

specified in the Accomplishment

Instructions of the service bulletin, and

install new fasteners in accordance with the

service bulletin.

(2) If the cracking cannot be removed by

increasing the diameter of the hole in

accordance with the Accomplishment

Instructions of the service bulletin, but the

cracking is within the limits specified in the

service bulletin: Install the repair in

accordance with the service bulletin. No

further action is required by paragraph (d) of

this AD.

(3) If the cracking is outside the limits

specified in the service bulletin: Replace the

lower spar chord with a new or serviceable

chord in accordance with a method approved

by the Manager, Seattle ACO.

Optional Terminating Modification

(m) Accomplishment of the modification of

the nacelle strut and wing structure as

required by AD 99–24–07, amendment 39–

11431, constitutes terminating action for the

requirements of this AD.

Alternative Methods of Compliance

(n) An alternative method of compliance or

adjustment of the compliance time that

provides an acceptable level of safety may be

used if approved by the Manager, Seattle

ACO. Operators shall submit their requests

through an appropriate FAA Principal

Maintenance Inspector, who may add

comments and then send it to the Manager,

Seattle ACO.

Note 3: Information concerning the

existence of approved alternative methods of

compliance with this AD, if any, may be

obtained from the Seattle ACO.

Special Flight Permits

(o) Special flight permits may be issued in

accordance with sections 21.197 and 21.199

of the Federal Aviation Regulations (14 CFR

21.197 and 21.199) to operate the airplane to

a location where the requirements of this AD

can be accomplished.

Issued in Renton, Washington, on October

3, 2000.

Donald L. Riggin,

Acting Manager, Transport Airplane

Directorate, Aircraft Certification Service.

[FR Doc. 00–25969 Filed 10–6–00; 8:45 am]

BILLING CODE 4910–13–U

DEPARTMENT OF STATE

Bureau of Consular Affairs

22 CFR Part 51

[Public Notice 3428]

Passport Procedures—Amendment to

Requirements for Executing a

Passport Application on Behalf of a

Minor

AGENCY: Bureau of Consular Affairs,

State.

ACTION: Proposed rule.

SUMMARY: This proposed rule amends

regulations on Passports. The

amendments bring passport regulations

into conformity with current practice

and implement the requirements of

Section 236 of the Admiral James W.

Nance and Meg Donovan Foreign

Relations Authorization Act. That

Section requires that both parents

execute a passport application on behalf

of a minor under age 14 or, if only one

parent executes the application, such

parent must establish his or her

custodial status or the other parent’s

consent. It also provides for exceptions

in exigent circumstances, such as those

involving the health or welfare of the

child, or when the Secretary of State

determines that issuance of a passport is

warranted by special family

circumstances.

DATES: Written comments must be

received no later than November 6,

2000.

ADDRESSES: Written comments should

be addressed to: John Hotchner, Office

of Passport Policy, Planning and

Advisory Services, 2401 E. Street, N.W.,

Room 917, Washington, D.C. 20522–

0907.

FOR FURTHER INFORMATION CONTACT: John

Hotchner, Office of Passport Policy and

Advisory Services, Bureau of Consular

Affairs, Department of State, (202) 663–

2427.

SUPPLEMENTARY INFORMATION: As a

measure to prevent the use of the United

States passport in international child

abduction, Congress enacted Section

236 of the Admiral James W. Nance and

Meg Donovan Foreign Relations

Authorization Act, Pub.L. 106–113. The

Federal Register / Vol. 65, No. 196 / Tuesday, October 10, 2000 / Proposed Rules 60133

Section affects the passport application

process for minors under the age of 14

by requiring that both parents execute

the passport application on behalf of the

minor; if only one parent executes the

application, that parent must establish

sole authority to execute the application

or the other parent’s consent to the

application. This law will directly affect

the passport applications of about one

million families each year. Although

Section 236 places an additional burden

on the parents of minor children under

the age of 14, the statute clearly reflects

a judgment that its value in reducing

child abduction will be seen to

outweigh the burden of establishing

both parents’ consent to passport

applications for children.

Present Passport Regulations To Assist

in the Prevention of International

Parental Child Abduction

International parental child abduction

is an ever more frequent phenomenon,

reflecting in part the increasing number

of international marriages and the ease

with which persons can travel across

international boundaries. In recent

years, the Department of State, the

Department of Justice, and the Congress

of the United States have given cases of

international parental child abduction

greater attention and have sought new

and more effective mechanisms for

dealing with them. At present, both

criminal and civil remedies can be

invoked to deal with parental

abductions after they occur. Such cases

remain extremely difficult to resolve,

however, and it is clear that preventing

an abduction in the first instance is

preferable.

Under the Department’s existing

regulation, 22 CFR 51.27, a parent may

request that his or her minor child’s

name be placed in the Department’s

passport namecheck clearance system so

that, if an application is received for the

child, the objecting parent will be

notified before issuance. The passport

may be denied if the Department has on

file an order from a court of competent

jurisdiction granting the objecting

parent sole or joint custody or

prohibiting the child’s travel outside the

court’s jurisdiction without the express

permission of the court or of the other

parent. The Department recommends

that parents who have a specific

concern about international child

abduction make use of the existing

program in addition to relying on

Section 236. The public should note

that the provisions of the existing

regulation extend to all minor children

under age 18. This program for children

under age 18 will remain in place when

the new regulations relating to children

under 14 go into effect.

The Department recognizes that

denying passport issuance may not

prevent an abduction. Many U.S. citizen

children acquire a second nationality at

birth through a non-U.S. citizen parent

or by birth outside the United States to

a U.S. citizen parent. The inability to

obtain a U.S. passport, therefore, does

not prevent a child from obtaining and

traveling on a foreign passport. Even an

exit-control system, which the United

States does not have, could not fully

prevent all cases of dual-national

children being wrongfully removed

from the United States by an abducting

parent. Nevertheless, limiting access to

passports for minors may have some

preventative effect. Consistent with this

possibility, the Congress decided that

the Department’s long-standing

passport-denial-to-minors program

should be supplemented by a

requirement that both parents sign a

passport application for a minor child

under age 14 except in situations

specified by statute or regulation. This

regulation implements the new statutory

requirement in a way that the

Department believes meets the

requirements of the statute and

appropriately provides for exceptions.

Notice or Denial of a Passport at the

Request of a Parent

The proposed regulation amends

subsection 51.27(d)(l)(i) to extend it to

instances when court-ordered

limitations on a child’s travel are

brought to the Department’s attention in

the course of a passport application

rather than by an objecting parent. This

change, for example, will preclude a

parent with sole custody, ordinarily

entitled to apply for a child’s passport

under the Act, from obtaining a passport

if the custody order contains a

limitation on the minor’s ability to

travel.

General Requirement for Both Parents

To Consent to a Passport for a Minor

Child

Under current passport regulations,

either parent or the legal guardian,

regardless of citizenship, may execute a

passport application on behalf of a

minor under 13 years of age; minors 13

years of age and over are expected to

execute their own passport applications.

To implement the statutory requirement

that both parents must execute the

passport application on behalf of a child

under the age of 14, the proposed rule

raises the age at which a minor should

execute his or her own application to

14. The proposed rule adds the

requirement that both parents execute a

passport application on behalf of a

minor under the age of 14.

When only one parent is available to

execute the application, that parent

must provide, under penalty of perjury,

documentary evidence demonstrating

that he or she has sole legal custody of

the child or has the written consent of

the other parent to the issuance of the

passport. Documents supporting sole

custody or the authority to obtain a

passport include, but are not limited to:

a birth certificate or other official birth

registration which names only the

applying parent; an adoption decree

naming only the adopting parent; a

court order granting sole custody to the

applying parent if the order does not

limit the minor’s ability to travel; a

court order specifically authorizing

passport issuance, regardless of

custodial arrangements; a declaration of

incompetence of the non-applying

parent by a court of competent

jurisdiction; the non-applying parent’s

death certificate.

A written statement of a parent not

executing the passport application

giving consent to the issuance of the

passport will also be accepted at the

discretion of the adjudicating officer

who will take into account the totality

of the circumstances in deciding

whether to issue the passport.

Individuals Applying In Loco Parentis

The Department has long recognized

that there are instances when it is

impossible for a parent to execute a

passport application on behalf of a

minor. Many children are in the

physical custody of relatives or foster

parents, as well as adoption agencies or

child welfare agencies. In accepting

applications executed on behalf of

minors by individuals in loco parentis,

it has been the Department’s policy to

require that those individuals provide a

notarized statement or affidavit from a

parent authorizing the applying person

to execute the application.

The new regulation will require that

the individual executing the passport

application on behalf of a minor under

age 14 in loco parentis present a

notarized statement from both parents

or from the parent exercising parental

authority. In instances when only one

parent grants in loco parentis, the same

documentary evidence required when

only one parent executes a passport

application on behalf of a minor under

age 14 to demonstrate that person’s sole

authority should accompany the

application.

60134 Federal Register / Vol. 65, No. 196 / Tuesday, October 10, 2000 / Proposed Rules

Exceptions to the Two Parent Signature

Requirement

The statute provides for two

exceptions to the general requirement:

(1) exigent circumstances involving the

health and welfare of the child; or, (2)

when the Secretary of State determines

that issuance of a passport is warranted

by special family circumstances.

Exigent circumstances are defined as

time-sensitive circumstances when the

inability of the minor to obtain a

passport would jeopardize the health or

welfare of the minor. The requirement

of establishing the second parent’s

consent to issuance of the passport or

formal documentation of the reason for

the absence of the second parent may be

waived in such circumstances.

Examples of exigent circumstances

include, but are not limited to: instances

when the minor must travel to receive

emergency medical treatment; when a

minor’s passport is lost or stolen while

traveling accompanied by only one

parent or traveling unaccompanied with

a school, church or other group; when

the minor needs to travel because of the

serious illness of a person in the minor’s

immediate family, or, when failure to

issue would prevent the child from

returning to the U.S. and there is

insufficient time before travel is

necessary to obtain the normally

required documentation.

Special family circumstances are

defined as circumstances when the

minor’s family situation prevents one or

both of the parents from executing the

passport application. As with the

exigent circumstance exception, the

requirement of establishing the second

parent’s consent or formal

documentation of the reason for the

absence of the second parent is waived.

Examples of special family

circumstances include, but are not

limited to, instances when the second

parent is unable to apply for the

passport in person or to provide a

statement authorizing the application

and issuance of the passport because he

or she has abandoned the family or is

unavailable due to serious health

problems. Individuals claiming a special

family circumstance will be required to

provide a statement, under penalty of

perjury, explaining the special family

circumstance.

Decisions to apply this exception will

be made by the Deputy Assistant

Secretary for Passport Services or a

senior passport adjudicator within the

United States, or by the Deputy

Assistant Secretary for Overseas

Citizens Services or a consular officer if

abroad.

Special Considerations for Passport

Applications Executed Overseas

While the great majority of passports

are issued within the United States, a

significant number are issued annually

to U.S. citizens living and traveling

overseas. We anticipate that parents

overseas generally will comply fully

with the requirements of the law in

much the same manner as parents

applying within the United States.

Nonetheless, in proposing these

regulations, the Department has sought

to take into account, and provide for,

certain differing circumstances that

pertain in much greater measure to the

issuance of U.S. passports overseas. For

example, exigent circumstances would

include instances when a delay in

departure would pose a grave danger for

the minor abroad. Civil unrest, natural

disaster, war, or invasion may make

imperative the urgent travel or

evacuation of U.S. citizens, particularly

minors, from such regions. In less

dramatic fashion, exigent circumstances

could encompass a situation when, for

example, a child traveling with a school

group loses his or her passport and

would need a replacement to remain

with the group in its ongoing travel.

Despite the lack of time to procure

documents or statements relating to

parental consent, it is essential that a

passport be issued quickly in both cases,

and as the exigent circumstances

exception in subsection (b) permits, to

protect the health and welfare of the

minor.

Circumstances overseas can differ in

another respect. Specifically, the U.S.

consular officer may have access to post

registration records that relate to family

situations. Particularly in smaller

countries, an officer may have personal

knowledge of a family situation, e.g.,

that the child is in the care of an

individual in loco parentis or the fact

that a parent is widowed, which would

be relevant in a situation when

documentary evidence was not available

or could not be obtained in a timely

fashion. Accordingly, the proposed rule

will give the Department flexibility to

utilize such information in this and

other instances, consistent with the

consular officer’s exercise of good

judgment, as allowed by the statute’s

reference to special family

circumstances.

Provisions To Harmonize Other Parts of

the Regulations With the Two-Parent

Requirement

Section 51.1 is amended to provide a

definition of ‘‘passport application’’.

Section 51.21 is amended to incorporate

the two-parent signature requirement to

passport renewals by minors under the

age of 14 and to provide for compliance

with the two-parent signature

requirement in mail-in applications

abroad. Section 51.27 is amended to

raise the age after which a minor should

execute his or her own passport

application from 13 to 14. Sections

51.40 and 51.41 are amended to bring

them into conformity with current

passport practice regarding individuals

included in the passport and to comply

with the requirements of the Act. Since

1981, U.S. passports have been issued to

document only the bearer: they do not

include any other person. The

regulation is amended to reflect that

change. Section 51.41 is also amended

to require applicants under the age of

14, whether applying for their first

passport or for a renewal, to present

evidence of parentage in addition to

evidence of nationality. This will assist

in the adjudication not only of the

citizenship of the minor under age 14,

but in the determination of the parent(s)

entitled to obtain a passport on the

minor’s behalf. The document should

include the name, date and place of

birth of the child and the name(s) of the

parent(s).

Regulatory Flexibility Act; Paperwork

Reduction Act; Federalism Assessment;

E.O. 12988

These proposed changes to the

regulations are not expected to have a

significant economic impact on a

substantial number of small entities

under the criteria of the Regulatory

Flexibility Act, 5 U.S.C. 605(b). They

impose certain information collection

requirements under the provisions of

the Paperwork Reduction Act, 44 U.S.C.

Chapter 35. These rules have no

federalism implications warranting the

preparation of a Federalism Assessment

in accordance with E.O. 12988. These

rules are exempt from review under E.O.

12988 but have been reviewed and

found consistent with its objectives.

List of Subjects in 22 CFR Part 51

Administrative practice and

procedure, Passports and visas,

Reporting and recordkeeping

requirements.

Accordingly, for the reasons set forth

in the preamble, 22 CFR Part 51 is

amended as follows:

PART 51—PASSPORTS

1. The authority citation for part 51 is

revised to read as follows:

Authority: 22 U.S.C. 211a; 22 U.S.C. 2651a,

2671(d)(3), 2714 and 3926; 31 U.S.C. 9701;

E.O. 11295, 3 CFR, 1966–1970 Comp., p 570;

Federal Register / Vol. 65, No. 196 / Tuesday, October 10, 2000 / Proposed Rules 60135

sec. 236, Pub. L.106–113, 113 Stat. 1937–422;

18 U.S.C 1621(a)(2).

In § 51.1, redesignate paragraphs (g)

and (h) as paragraphs (h) and (i),

respectively, and add a new paragraph

(g) to read as follows:

* * * * *

§ 51.1 Definitions.

* * * * *

(g) Passport Application means the

passport application form for a United

States passport, filled in, subscribed and

executed as prescribed by the Secretary

pursuant to 22 U.S.C. 213, and all

documents, photos and statements

submitted with the form or thereafter in

support of the application. The

information provided in the passport

application and supporting

submissions, whether provided

contemporaneously with the application

form or at any time thereafter, is subject

to the penalties of perjury under all

applicable criminal statutes.

* * * * *

3. Revise § 51.21(d)(4)(ii) to read as

follows:

§ 51.21 Execution of passport application.

* * * * *

(d) * * *

(4) * * *

(ii) Mail applications abroad on behalf

of minors under the age of 14 comply

must with the requirements of § 51.27.

* * * * *

4. In § 51.27, revise paragraph (b) and

paragraph (d)(1)(i) introductory text to

read as follows:

§ 51.27 Minors.

* * * * *

(b) Execution of the application for

minors.

(1) Minors 14 years of age and above.

A minor aged 14 and above is required

to execute an application on his or her

own behalf unless in the judgment of

the person before whom the application

is executed it is not desirable for the

minor to execute his or her own

application. In such a case, it must be

executed on behalf of the minor aged 14

and above by a parent or guardian of the

minor or by a person in loco parentis.

(2) Minors under the age of 14.

(i) Both parents or each of the child’s

legal guardians, if any, must execute the

application on behalf of a minor under

age 14, under penalty of perjury, and

provide documentary evidence

demonstrating that they are the parents

or guardian, except as specifically

provided in this section.

(ii) A passport application may be

executed on behalf of the minor under

age 14 by just one parent or legal

guardian if such person provides, under

penalty of perjury—

(A) Documentary evidence that such

person has sole custody of the child; or

(B) A written statement of consent

from the non-applying parent or

guardian, if applicable, to the issuance

of the passport.

(iii) An individual may apply in loco

parentis on behalf of a minor under age

14 by submitting a notarized written

statement or an affidavit from both

parents specifically authorizing the

application. If only one parent provides

the written statement or affidavit,

documentary evidence that such parent

has sole custody of the child must be

presented.

(iv) Documentary evidence in support

of an application executed on behalf of

a minor under age 14 by one parent or

person in loco parentis under

paragraphs (b)(2)(ii) and (iii) of this

section may include, but is not limited

to, the following:

(A) A birth certificate providing the

minor’s name, date and place of birth

and the name of the sole parent;

(B) A Consular Report of Birth Abroad

of a Citizen of the United

States of America (FS–240) or a

Certification of Report of Birth of a

United States Citizen (DS–1350)

providing the minor’s name, date and

place of birth and the name of the sole

parent;

(C) An adoption decree showing only

one adopting parent;

(D) An order of a court of competent

jurisdiction granting sole custody to the

applying parent or legal guardian and

containing no travel restrictions

inconsistent with issuance of the

passport;

(E) A judicial declaration of

incompetence of the non-applying

parent;

(F) An order of a court of competent

jurisdiction specifically permitting the

applying parent’s or guardian’s travel

with the child; or

(G) A death certificate for the nonapplying parent,

(v) In instances when a parent

submits a custody decree invoking the

provisions of paragraph (d)(1) of this

section, the judicial limitations on the

minor’s ability to travel contained in the

custody decree will be given effect.

(vi) The requirements of paragraphs

(b)(2)(i), (ii) and (iii) of this section may

be waived in cases of exigent or special

family circumstances, as determined by

a Department official designated under

paragraph (b)(2)(vi)(D) of this section.

(A) Exigent circumstances are defined

as time sensitive circumstances when

the inability of the minor to obtain a

passport would jeopardize the health

and safety, or welfare of the minor or

would result in the child being

separated from the traveling unit.

(B) Special family circumstances are

circumstances when the minor’s family

situation makes it impossible for one or

both of the parents to execute the

passport application.

(C) Any person applying for a

passport for a child under age 14 under

this paragraph must submit with the

application a written statement

subscribed under penalty of perjury

describing the exigent or special family

circumstances to be taken into

consideration in applying an exception.

(D) Determinations under this

paragraph may be made by a senior

passport adjudicator or the Deputy

Assistant Secretary for Passport Services

for an application filed within the

United States. A consular officer or the

Deputy Assistant Secretary for Overseas

Citizens Services may make the

determination for applications filed

abroad.

(vii) Nothing contained in this section

shall prohibit any Department official

adjudicating a passport application on

behalf of a minor from requiring an

applicant to submit other documentary

evidence deemed necessary to establish

the applying adult’s entitlement to

obtain a passport on behalf of a minor

under the age of 14 in accordance with

the provisions of this section.

* * * * *

(d) * * *

(1)(i) When there is a dispute

concerning the custody of a minor

under age 18, a passport may be denied

if the Department has on file, or is

provided in the course of a passport

application executed on behalf of a

minor, a copy of a court order granted

by a court of competent jurisdiction in

the United States or abroad which:

* * * * *

5. Revise § 51.40 to read as follows:

§ 51.40 Burden of proof.

The applicant has the burden of

proving that he or she is a national of

the United States.

6. Revise § 51.41 to read as follows:

§ 51.41 Documentary evidence.

(a) Every application shall be

accompanied by evidence of the U.S.

nationality of the applicant.

(b) Minors under the age of 14,

whether applying for a passport for the

first time or for a renewal, must provide

documentary evidence of U.S.

nationality showing the minor’s name,

date and place of birth, and the names

of the parent or parents.

60136 Federal Register / Vol. 65, No. 196 / Tuesday, October 10, 2000 / Proposed Rules

Dated: September 27, 2000.

George C. Lannon,

Acting Assistant Secretary for Consular

Affairs, U.S. Department of State.

[FR Doc. 00–25782 Filed 10–6–00; 8:45 am]

BILLING CODE 4710–06–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG–105235–99]

RIN 1545–AX28

Exclusion of Gain From Sale or

Exchange of a Principal Residence

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations relating to the

exclusion of gain from the sale or

exchange of a taxpayer’s principal

residence. These proposed regulations

reflect changes to the law made by the

Taxpayer Relief Act of 1997, as

amended by the Internal Revenue

Service Restructuring and Reform Act of

1998. These proposed regulations

generally affect taxpayers who sell or

exchange their principal residences.

DATES: Written or electronically

generated comments must be received

by January 8, 2001. Requests to speak

(with outlines of oral comments) to be

discussed at the public hearing

scheduled for January 23, 2001 at 10

a.m., must be submitted by January 3,

2001.

ADDRESSES: Send submissions to:

CC:M&SP:RU (REG–105235–99), room

5226, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. Submissions may be hand

delivered between the hours of 8 a.m.

and 5 p.m. to: CC:M&SP:RU (REG–

105235–99), Courier’s Desk, Internal

Revenue Service, 1111 Constitution

Ave., NW., Washington, DC.

Alternatively, taxpayers may submit

comments electronically via the Internet

by selecting the ‘‘Tax Regs’’ option on

the IRS Home Page, or by submitting

comments directly to the IRS internet

site at http://www.irs.gov/tax_regs/

regslist.html. The public hearing will be

held in the IRS Auditorium, Seventh

Floor, Internal Revenue Service

Building, 1111 Constitution Avenue,

NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, Sara P.

Shepherd, (202) 622–4910; concerning

submissions of comments, the hearing,

and/or to be placed on the building

access list to attend the hearing, contact

Treena Garrett, (202) 622–7180 (not tollfree numbers).

SUPPLEMENTARY INFORMATION:

Background

1. Section 121 Exclusion

This document contains proposed

amendments to the Income Tax

Regulations (26 CFR part 1) under

section 121 of the Internal Revenue

Code relating to the exclusion of gain

from the sale or exchange of a taxpayer’s

principal residence. These proposed

regulations reflect changes to the law

made by the Taxpayer Relief Act of

1997, Public Law 105–34 (111 Stat. 788

(TRA 1997)), as amended by the Internal

Revenue Service Restructuring and

Reform Act of 1998, Public Law 105–

206 (112 Stat. 805 (RRA 1998)).

Prior to the repeal by TRA 1997,

section 1034 provided that gain from the

sale or exchange of a principal residence

(old residence) was recognized only to

the extent that the taxpayer’s adjusted

sales price of the old residence

exceeded the taxpayer’s cost of

purchasing a new residence within the

replacement period (generally 2 years

before or after the date of sale).

Prior to amendment by TRA 1997,

former section 121 provided that a

taxpayer could make a one-time election

to exclude up to $125,000 of gain from

the sale or exchange of property. To

qualify for the exclusion, the taxpayer

must have: (1) Been age 55 or older on

the date of the sale or exchange; and (2)

owned and used the property as the

taxpayer’s principal residence for at

least 3 years during the 5-year period

ending on the date of the sale or

exchange.

TRA 1997 amended section 121 and

repealed section 1034 for sales and

exchanges of principal residences after

May 6, 1997 (except, at the election of

the taxpayer, to a sale or exchange: (1)

Made on or before August 5, 1997; (2)

made pursuant to a binding contract in

effect on August 5, 1997; or (3) that

would qualify under section 1034 by

reason of a new residence acquired on

or before August 5, 1997 or pursuant to

a binding contract in effect on August 5,

1997). Under section 121 as amended, a

taxpayer generally excludes up to

$250,000 ($500,000 for certain joint

returns) of gain realized on the sale or

exchange of property if the property was

owned and used as the taxpayer’s

principal residence for at least 2 years

during the 5-year period ending on the

date of the sale or exchange. The

exclusion applies regardless of the age

of the taxpayer, and the full exclusion

can be used only once every 2 years. A

taxpayer who fails to meet these

requirements by reason of a change in

place of employment, health, or, to the

extent provided in regulations,

unforeseen circumstances may be

entitled to a reduced exclusion.

RRA 1998 amended TRA 1997 to

clarify that the reduced exclusion

amount under section 121(c) is a portion

of the maximum limitation amount

($250,000 or $500,000 for certain joint

returns), not a portion of the realized

gain. See H.R. Rep. No. 356, 105th

Cong., 1st Sess. 17 (1997); S. Rep. No.

174, 105th Cong., 2d Sess. 150 (1998).

In addition, the amendments provided

that for married taxpayers filing jointly

but failing to meet the ownership, use,

or timing requirements of section

121(b)(2)(A), the maximum limitation

amount will be the sum of each spouse’s

limitation amount determined on a

separate basis as if they had not been

married. S. Rep. No. 174, 105th Cong.,

2d Sess. 151 (1998); H.R. Conf. Rep. No.

599, 105th Cong., 2d Sess. 337 (1998).

Lastly, the amendments clarified that a

taxpayer may elect to apply prior law

under section 1034 or former section

121 to a sale or exchange occurring on

as well as before the date of enactment,

August 5, 1997. H.R. Rep. No. 356,

105th Cong., 1st Sess. 18 (1997); S. Rep.

No. 174, 105th Cong., 2d Sess. 151

(1998).

2. Section 121 Exclusion in

Individuals’ Title 11 Cases

This document also contains

proposed amendments to the Income

Taxation Regulations (26 CFR part 1)

under section 1398 of the Internal

Revenue Code. Under the authority

provided in section 1398(g)(8), the

regulations add the section 121

exclusion to the list of tax attributes of

the debtor that the bankruptcy estate of

an individual in a chapter 7 or 11

bankruptcy case under title 11 of the

United States Code succeeds to and

takes into account in computing the

taxable income of the estate. Although

these regulations are proposed to be

applicable on or after the date they are

published as final regulations in the

Federal Register, in view of the IRS’s

acquiescence in the case of Internal

Revenue Service v. Waldschmidt (In re

Bradley), AOD CC–1999–009 (August

30, 1999), and Chief Counsel Notice

(35)000–162 (August 10, 1999), the IRS

will not challenge the position taken

prior to the effective date of these

regulations that a bankruptcy estate may

use the section 121 exclusion if the