Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations 13233 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9713] 

RIN 1545–BL46; 1545–BM60 

Reporting for Premium; Basis 

Reporting by Securities Brokers and 

Basis Determination for Debt 

Instruments and Options 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final and temporary 

regulations. 

SUMMARY: This document contains final 

regulations relating to information 

reporting by brokers for bond premium 

and acquisition premium. This 

document also contains final and 

temporary regulations relating to 

information reporting by brokers for 

transactions involving debt instruments 

and options, including the reporting of 

original issue discount (OID) on taxexempt obligations, the treatment of 

certain holder elections for reporting a 

taxpayer’s adjusted basis in a debt 

instrument, and transfer reporting for 

section 1256 options and debt 

instruments. The regulations in this 

document provide guidance to brokers 

and payors and to their customers. The 

text of the temporary regulations in this 

document also serves as the text of the 

proposed regulations (REG–143040–14) 

set forth in the Proposed Rules section 

in this issue of the Federal Register. 

DATES: Effective date: These regulations 

are effective on March 13, 2015. 

Applicability dates: For the dates of 

applicability, see §§ 1.6045– 

1(m)(2)(ii)(B), 1.6045–1T(n)(11)(i)(A), 

1.6045–1T(n)(11)(i)(B), 1.6045A– 

1T(e)(1), 1.6045A–1T(f), 1.6049–9(a), 

and 1.6049–10T(c). 

FOR FURTHER INFORMATION CONTACT: 

Pamela Lew of the Office of the 

Associate Chief Counsel (Financial 

Institutions and Products) at (202) 317– 

7053 (not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

Section 1.6049–9 of the final 

regulations in this document requires a 

payor to report amortizable bond 

premium on taxable and tax-exempt 

debt instruments acquired on or after 

January 1, 2014, and acquisition 

premium on taxable debt instruments 

acquired on or after January 1, 2014. 

This information is required to enable 

the IRS to verify that a taxpayer is 

reporting the correct amount of interest 

(including OID) each year. In addition, 

because this information is used to 

report a taxpayer’s adjusted basis in a 

debt instrument under section 6045(g), 

this information is required to enable 

the IRS to verify that a taxpayer is 

reporting the correct amount of gain or 

loss upon the sale of a debt instrument. 

The burden for the collection of 

information contained in § 1.6049–9 

will be reflected in the burdens on Form 

1099–INT (OMB control number 1545– 

0112) and Form 1099–OID (OMB 

control number 1545–0117) when 

revised to request the additional 

information in the regulations. 

Section 1.6049–10T of the temporary 

regulations in this document requires a 

payor to report OID and acquisition 

premium on tax-exempt obligations 

acquired on or after January 1, 2017. 

This information is required to enable 

the IRS to verify that a taxpayer is 

reporting the correct amount of taxexempt interest each year for alternative 

minimum tax and other purposes. In 

addition, because this information is 

used to report a taxpayer’s adjusted 

basis in a debt instrument under section 

6045(g), this information is required to 

enable the IRS to verify that a taxpayer 

is reporting the correct amount of gain 

or loss upon the sale of a tax-exempt 

obligation. The burden for the collection 

of information contained in § 1.6049– 

10T will be reflected in the burden on 

Form 1099–OID (OMB control number 

1545–0117) when revised to request the 

additional information in the 

regulations. 

Upon the transfer of a covered 

security, section 6045A and § 1.6045A– 

1 require the transferring broker to 

provide to the transferee broker a 

transfer statement containing certain 

information relating to the security. This 

transfer statement generally provides 

the transferee broker the information 

needed to determine a customer’s 

adjusted basis and whether any gain or 

loss with respect to the security is longterm, short-term, or ordinary as required 

by section 6045(g). Prior to the issuance 

of § 1.6045A–1T in this document, a 

broker did not have to provide a transfer 

statement for a section 1256 option. In 

addition, a broker did not have to 

provide the last date on or before the 

transfer date that the broker made an 

adjustment for a particular item relating 

to a debt instrument. Section 1.6045A– 

1T, however, now requires a broker to 

transfer this information for a section 

1256 option transferred on or after 

January 1, 2016, and for a debt 

instrument transferred on or after June 

30, 2015. 

The collection of information 

contained in § 1.6045A–1 relating to the 

furnishing of information in connection 

with the transfer of securities has been 

reviewed and approved by the Office of 

Management and Budget in accordance 

with the Paperwork Reduction Act of 

1995 (44 U.S.C. 3507(d)) under control 

number 1545–2186. The collection of 

information in § 1.6045A–1T and the 

cross-reference notice of proposed 

rulemaking under § 1.6045A–1 is 

necessary to allow brokers that effect 

sales of transferred section 1256 options 

and debt instruments that are covered 

securities to determine and report the 

adjusted basis of these securities in 

compliance with section 6045(g). This 

collection of information is required to 

comply with the provisions of section 

403 of the Energy Improvement and 

Extension Act of 2008, Division B of 

Public Law 110–343 (122 Stat. 3765, 

3854 (2008)) (the Act). The collection of 

information contained in § 1.6045A–1T 

and the cross-reference notice of 

proposed rulemaking under § 1.6045A– 

1 is an increase in the total annual 

burden under control number 1545– 

2186. The likely respondents are brokers 

transferring section 1256 options and 

debt instruments that are covered 

securities. 

Estimated total annual reporting 

burden is 3,333 hours. 

Estimated average annual burden per 

respondent is 2 hours. 

Estimated average burden per 

response is 4 minutes. 

Estimated number of respondents is 

7,500. 

Estimated total frequency of responses 

is 200,000. 

The collection of information is 

required to comply with the provisions 

of section 403 of the Act. 

The holder of a debt instrument is 

permitted to make a number of elections 

that affect how basis is computed. To 

minimize the need for reconciliation 

between information reported by a 

broker to both a customer and the IRS 

and the amounts reported on the 

customer’s tax return, a broker is 

required to take into account certain 

specified elections, including the 

election under § 1.1272–3 to treat all 

interest as OID and the election under 

section 1276(b)(2) to accrue market 

discount on a constant yield method, in 

reporting information to the customer. A 

customer, therefore, must provide 

certain information concerning an 

election to the broker in a written 

notification. A written notification 

includes a writing in electronic format. 

See § 1.6045–1(n)(5). 

The collection of information 

contained in § 1.6045–1(n)(5) relating to 

the furnishing of information by a 


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13234 Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations 

customer to a broker in connection with 

the sale or transfer of a debt instrument 

that is a covered security has been 

reviewed and approved by the Office of 

Management and Budget in accordance 

with the Paperwork Reduction Act of 

1995 (44 U.S.C. 3507(d)) under control 

number 1545–2186. Under § 1.6045– 

1T(n)(11)(i)(A) of the temporary 

regulations in this document, unlike the 

rule in current § 1.6045–1(n)(5) adopted 

in 2013, a broker must not take into 

account the election under § 1.1272–3 in 

reporting a customer’s adjusted basis in 

a debt instrument. Therefore, a customer 

is no longer required to notify the broker 

that the customer has made or revoked 

an election under § 1.1272–3. This 

change represents a decrease in the total 

annual burden under OMB control 

number 1545–2186. In addition, under 

§ 1.6045–1T(n)(11)(i)(B), a broker must 

take into account the election under 

section 1276(b)(2) unless the customer 

timely notifies the broker that the 

customer has not make the election. The 

temporary regulations reverse the 

assumption in current § 1.6045–1(n)(5) 

adopted in 2013. Because the section 

1276(b)(2) election results in a more 

taxpayer-favorable result than the 

default ratable method for accruing 

market discount in most cases, it is 

anticipated that more customers will 

want to use this method and these 

customers will no longer need to notify 

their brokers that they have made the 

election. As a result, this change 

represents a decrease in the total annual 

burden under OMB control number 

1545–2186. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a valid control 

number assigned by the Office of 

Management and Budget. 

Books or records relating to a 

collection of information must be 

retained as long as their contents may 

become material in the administration 

of any internal revenue law. Generally, 

tax returns and tax return information 

are confidential, as required by section 

6103. 

Background 

Section 6045 of the Internal Revenue 

Code (Code) generally requires a broker 

to report gross proceeds upon the sale 

of a security. Section 6045 was amended 

by section 403 of the Act to require the 

reporting of adjusted basis for a covered 

security and whether any gain or loss 

upon the sale of the security is longterm or short-term. In addition, the Act 

added section 6045A of the Code, which 

requires certain information to be 

reported in connection with a transfer of 

a covered security to another broker, 

and section 6045B of the Code, which 

requires an issuer of a specified security 

to file a return relating to certain actions 

that affect the basis of the security. 

Section 6049 of the Code requires the 

reporting of interest payments 

(including accruals of OID treated as 

payments). 

On November 25, 2011, the Treasury 

Department and the IRS published in 

the Federal Register (76 FR 72652) 

proposed regulations (REG–102988–11) 

relating to information reporting by 

brokers, transferors, and issuers of 

securities under sections 6045, 6045A, 

and 6045B for debt instruments, 

options, and securities futures contracts 

(the 2011 proposed basis reporting 

regulations). On April 18, 2013, the 

Treasury Department and the IRS 

published in the Federal Register (TD 

9616 at 78 FR 23116) final regulations 

under sections 6045, 6045A, and 6045B 

(the 2013 final basis reporting 

regulations). A number of commenters 

on the 2011 proposed basis reporting 

regulations requested that the rules for 

reporting interest income associated 

with a debt instrument acquired at a 

premium be conformed to the rules 

regarding basis reporting for these debt 

instruments. Accordingly, TD 9616 also 

contained temporary regulations 

relating to information reporting for 

bond premium and acquisition 

premium under section 6049 (the 2013 

temporary interest reporting 

regulations). A notice of proposed 

rulemaking cross-referencing the 2013 

temporary interest reporting regulations 

also was published in the Federal 

Register on April 18, 2013 (REG– 

154563–12 at 78 FR 23183) (the 2013 

proposed interest reporting regulations). 

No written comments were received 

on the 2013 proposed interest reporting 

regulations. No public hearing was 

requested or held. These final 

regulations adopt the provisions of the 

2013 proposed interest reporting 

regulations with certain clarifications 

and one conforming change for 

acquisition premium. These final 

regulations also remove the 

corresponding 2013 temporary interest 

reporting regulations. 

After the publication of the 2013 final 

basis reporting regulations in the 

Federal Register, the Treasury 

Department and the IRS received 

written comments on certain provisions 

of the 2013 final basis reporting 

regulations. In response to these written 

comments, this document contains final 

and temporary regulations under 

sections 6045 and 6045A relating to 

certain aspects of the 2013 final basis 

reporting regulations, as discussed in 

this preamble. 

Explanation of Provisions 

A. Final Regulations for Reporting Bond 

Premium and Acquisition Premium 

Under section 171, a taxpayer may 

elect to amortize bond premium on a 

taxable debt instrument and must 

amortize bond premium on a taxexempt debt instrument. In general, a 

taxpayer amortizes bond premium by 

offsetting the qualified stated interest 

allocable to an accrual period by the 

amount of the bond premium allocable 

to the accrual period. This offset occurs 

when the taxpayer takes the qualified 

stated interest into account under the 

taxpayer’s regular method of 

accounting. For example, the offset 

occurs when a cash method taxpayer 

receives a payment of qualified stated 

interest. See section 171(e) and § 1.171– 

2. As a result, only the portion of 

qualified stated interest that is not offset 

by the amortized bond premium is 

treated as interest for federal income tax 

purposes. A taxpayer’s basis in a debt 

instrument acquired with bond 

premium is reduced by amortized bond 

premium. For purposes of section 6045, 

a broker is required to report the 

adjusted basis of a taxable debt 

instrument that is a covered security 

and that is acquired with bond premium 

by presuming that the taxpayer has 

elected to amortize bond premium 

unless the taxpayer notifies the broker 

in writing that the taxpayer does not 

want to amortize bond premium. See 

§ 1.6045–1(n)(5) of the 2013 final basis 

reporting regulations. 

Under section 1272(a)(7) and 

§ 1.1272–2, a taxpayer who purchases a 

debt instrument with acquisition 

premium is required to reduce the 

amount of OID includible in income 

each year by the amount of acquisition 

premium allocable to the taxable year. 

In general, the amount of acquisition 

premium allocable to a taxable year is 

determined using a ratable method, 

although a taxpayer may elect under 

§ 1.1272–3 to determine the amount of 

acquisition premium allocable to a 

taxable year based on a constant yield 

method. See § 1.1272–2(b)(5). A 

taxpayer’s basis in a taxable debt 

instrument purchased with acquisition 

premium is increased by the amount of 

OID included in income by the 

taxpayer. A taxpayer’s basis in a taxexempt debt instrument purchased with 

acquisition premium is increased by the 

amount of OID that accrues in 

accordance with section 1272(a), 

including section 1272(a)(7). For 

purposes of section 6045, a broker 


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Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations 13235 

currently is required to report the 

adjusted basis of a debt instrument that 

is a covered security using the ratable 

method for acquisition premium, unless 

the taxpayer notifies the broker in 

writing that the taxpayer has elected to 

determine the amount of acquisition 

premium allocable to a taxable year 

based on a constant yield method. See 

§ 1.6045–1(n)(5) of the 2013 final basis 

reporting regulations. However, as 

explained in Part B.2.a in this preamble, 

under these final regulations, for a debt 

instrument acquired on or after January 

1, 2015, a broker must use the ratable 

method to determine the amount of 

acquisition premium allocable to a 

taxable year for purposes of basis 

reporting under section 6045, regardless 

of any election under § 1.1272–3. 

Under section 6049(a), the Secretary 

may prescribe regulations to implement 

the reporting of interest payments, 

which includes the determination of the 

amount of a payment that is reportable 

interest. Similarly, under section 

6049(a) the Secretary may prescribe by 

regulations how to determine the 

amount reportable as OID. 

Section 1.6049–9T of the 2013 

temporary interest reporting regulations 

was issued by the Treasury Department 

and the IRS in response to comments 

suggesting that the rules under section 

6049 for reporting interest income 

associated with a debt instrument 

acquired at a premium be conformed to 

the rules under section 6045 for basis 

reporting for these debt instruments. 

Section 6045 generally requires a broker 

to report on an information return, such 

as a Form 1099–B, the adjusted basis of 

a debt instrument that is a covered 

security, including basis adjustments 

attributable to amortized bond premium 

or acquisition premium. See § 1.6045– 

1(n) of the 2013 final basis reporting 

regulations. However, prior to the 

issuance of § 1.6049–9T, interest income 

(including OID) on a debt instrument 

acquired at a premium was reported 

under section 6049 without adjustment 

for amortized bond premium or 

acquisition premium. Consequently, a 

customer generally could not reconcile 

the interest income reported to the 

customer on Form 1099–INT or Form 

1099–OID, whichever was applicable, 

with the adjusted basis reported to the 

customer on Form 1099–B upon the sale 

of the debt instrument. The Treasury 

Department and the IRS issued the 2013 

temporary interest reporting regulations 

to coordinate the information reporting 

for income and basis. Under section 

1.6049–9T of the 2013 temporary 

interest reporting regulations, a broker 

generally is required to report to a 

customer any amortized bond premium 

and acquisition premium on a debt 

instrument that is a covered security. 

The amount reported may either be a 

gross number for both stated interest 

and amortized bond premium (or OID 

and amortized acquisition premium) or 

a net number that reflects the offset of 

the stated interest (or OID) by the 

amortized bond premium (or amortized 

acquisition premium). 

No comments were received on the 

2013 proposed interest reporting 

regulations and the final regulations in 

this document generally adopt the 

provisions of the 2013 temporary 

interest reporting regulations. However, 

as explained in the final paragraph of 

this Part A in this preamble, the final 

regulations contain a change for the 

reporting of acquisition premium for a 

debt instrument acquired on or after 

January 1, 2015, to conform to the 

change in this document for reporting 

basis adjustments for acquisition 

premium under section 6045. 

Under these final regulations, for 

purposes of section 6049, a broker is 

required to presume that a customer has 

elected to amortize bond premium on 

taxable debt instruments unless the 

broker has been notified that the 

customer does not want the broker to 

take into account the election or has 

revoked the election. This presumption 

applies only to the information reported 

by the broker to its customer. Thus, a 

customer that chooses not to make the 

section 171 election may report interest 

on the customer’s income tax return 

unadjusted for bond premium because 

the information reporting rules do not 

change the substantive rules affecting 

amortizable bond premium (or any of 

the other rules pertaining to OID or 

acquisition premium). If a broker is 

required to report amounts reflecting 

amortization of bond premium, the final 

regulations allow a broker to report 

either a gross amount for both stated 

interest and amortized bond premium or 

a net amount of stated interest that 

reflects the offset of the stated interest 

payment by the amount of amortized 

bond premium allocable to the payment. 

In addition, under these final 

regulations, unlike the 2013 temporary 

interest reporting regulations, a broker 

must report OID adjusted for acquisition 

premium based on the ratable method. 

Under these final regulations, for a debt 

instrument acquired on or after January 

1, 2015, even if a customer has made an 

election to amortize acquisition 

premium based on a constant yield 

under § 1.1272–3, a broker must not take 

the election into account for reporting 

acquisition premium. This change 

conforms the rules for reporting OID 

with the rules for reporting adjustments 

to basis attributable to acquisition 

premium described in section B.2.a of 

this preamble. See § 1.6045– 

1T(n)(11)(i)(A). As in the 2013 

temporary interest reporting regulations, 

the final regulations allow a broker to 

report either a gross amount for both 

OID and acquisition premium, or a net 

amount of OID that reflects the offset of 

the OID by the amount of amortized 

acquisition premium allocable to the 

OID. 

B. Final and Temporary Regulations 

Relating to Basis and Transfer Reporting 

After the publication of the 2013 final 

basis reporting regulations, commenters 

recommended a number of changes to 

the 2013 final basis reporting 

regulations. Upon consideration of these 

comments, the Treasury Department 

and the IRS have decided to make the 

following changes to the 2013 final basis 

reporting regulations and to add broker 

reporting for OID on tax-exempt 

obligations under section 6049. 

1. Request for Delayed Effective Date for 

Options on Certain Foreign Debt 

Instruments 

Under the 2013 final basis reporting 

regulations, if a debt instrument 

requires a payment of either interest or 

principal in a currency other than the 

U.S. dollar or if the debt instrument is 

issued by a non-U.S. issuer, a broker is 

required to report the debt instrument’s 

basis only if the instrument is acquired 

on or after January 1, 2016. See 

§ 1.6045–1(n)(2)(ii)(D) and (G). The 2013 

final basis reporting regulations delayed 

the applicability date for these types of 

debt instruments to address 

commenters’ concerns that it would take 

extra time to build the systems to 

account for the complexity of these debt 

instruments (for example, brokers 

would be required to track and retain on 

a daily basis foreign exchange rates for 

translation purposes) and, in some 

cases, a lack of publicly available 

information. 

Under the 2013 final basis reporting 

regulations, a broker is required to 

report gross proceeds and basis for 

certain options on a debt instrument 

granted or acquired on or after January 

1, 2014. See § 1.6045–1(m). The 2013 

final basis reporting regulations apply to 

an option on a debt instrument that 

requires a payment of either interest or 

principal in a currency other than the 

U.S. dollar or an option on a debt 

instrument issued by a non-U.S. issuer. 

Because a broker is not required to 

report basis for these types of debt 

instruments until January 1, 2016, one 

commenter requested a delay in the 

applicability date for reporting gross 


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13236 Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations 

proceeds and basis for these types of 

options. The commenter stated that the 

data collection and computation 

difficulties related to the underlying 

debt instruments also exist for options 

on these types of debt instruments. 

Responding to this comment, the final 

regulations in this document delay until 

January 1, 2016, the applicability date 

for reporting gross proceeds and basis 

for options on debt instruments that 

provide for one or more payments 

denominated in a foreign currency and 

options on debt instruments issued by 

non-U.S. issuers. 

2. Certain Debt Elections Relating to 

Broker Basis Reporting 

Under the 2013 final basis reporting 

regulations, for purposes of reporting 

adjusted basis to a customer, a broker 

must take into account only the debtrelated elections specified in § 1.6045– 

1(n)(4). If an election is not specified in 

§ 1.6045–1(n)(4), a broker may not take 

the election into account for reporting 

adjusted basis to a customer. In general, 

a broker must take into account a 

specified election if a customer timely 

notifies the broker that the customer has 

made the election. Two of the specified 

elections are the election to treat all 

interest as OID under § 1.1272–3 and the 

election to accrue market discount 

based on a constant yield under section 

1276(b)(2). 

a. Election To Treat All Interest as OID 

Under § 1.1272–3, a customer may 

elect to treat all interest on a debt 

instrument, adjusted by any amortizable 

bond premium or acquisition premium, 

as OID. If this election is made, the 

amount of interest (including any 

adjustment) that accrues during a period 

is based on a constant yield. This 

election is made on a debt instrument 

by debt instrument basis; however, if 

made, the election may affect other debt 

instruments with amortizable bond 

premium or market discount held by the 

customer even if the debt instrument is 

held in a separate account with the 

broker or any other broker. 

One commenter on the 2013 final 

basis reporting regulations indicated 

that it was extremely difficult to 

program the election given its effects on 

other debt instruments. Another 

commenter argued that the results of the 

election could mostly be achieved by a 

combination of other debt elections that 

the brokers also must support. Also, 

according to the commenters, the types 

of customers who receive Forms 1099– 

B, such as individuals, partnerships, or 

S corporations, rarely make the election 

to treat all interest as OID. 

In consideration of the comments 

received and the burden that the rule in 

the 2013 final basis reporting 

regulations would impose, these 

temporary and proposed regulations 

provide that a broker may not take into 

account the election under § 1.1272–3 

when computing basis. The temporary 

and proposed regulations supersede the 

2013 final basis reporting regulations 

relating to the broker’s treatment of the 

election under § 1.1272–3. 

In general, the amount of acquisition 

premium allocable to a taxable year is 

determined using a ratable method, 

unless the taxpayer elects under 

§ 1.1272–3 to determine the amount of 

acquisition premium allocable to a 

taxable year based on a constant yield 

method. See § 1.1272–2(b)(4) and (5). As 

noted in the final paragraph in Part A 

in this preamble, to conform the rules 

for reporting OID with the rules for 

reporting adjustments to basis 

attributable to acquisition premium, a 

broker must report acquisition premium 

for purposes of section 6049 on the 

ratable method even if a customer has 

made the election under § 1.1272–3 to 

use a constant yield method. 

The temporary regulations apply to a 

debt instrument acquired on or after 

January 1, 2015. A broker may, however, 

rely on the temporary regulations for a 

debt instrument acquired on or after 

January 1, 2014, and before January 1, 

2015. 

b. Constant Yield Election for Market 

Discount 

Under section 1276(b)(2), a customer 

may elect to accrue market discount on 

a constant yield method rather than a 

ratable method. The election may be 

made on a debt instrument by debt 

instrument basis and must be made for 

the earliest taxable year for which the 

customer is required to determine 

accrued market discount. The election 

may not be revoked once it has been 

made. 

The 2011 proposed basis reporting 

regulations attempted to simplify broker 

reporting by requiring brokers to 

compute accrued market discount by 

assuming that a customer had made an 

election under section 1276(b)(2) to use 

a constant yield method. The use of a 

constant yield method to determine 

accruals of market discount backloads 

market discount and is therefore more 

taxpayer favorable than the use of a 

ratable method in most cases. A number 

of commenters to the 2011 proposed 

basis reporting regulations indicated a 

desire by brokers to support debt 

instrument election choices made by 

their customers rather than rely on 

assumptions provided in the 

regulations. In response to these 

comments, the 2013 final basis reporting 

regulations instructed brokers to assume 

that a customer did not make an 

election to determine accrued market 

discount using a constant yield method 

unless the broker received timely 

notification from the customer that the 

election had been or would be made. 

After the 2013 final basis reporting 

regulations were published, the majority 

of commenters reconsidered their initial 

objections to the 2011 proposed basis 

reporting regulations requirement to use 

a constant yield method to determine 

accrued market discount. These 

commenters indicated that the use of 

the constant yield method would 

generally result in a more favorable tax 

result for most Form 1099–B recipients. 

The commenters therefore requested 

that the broker assumption for 

calculating accrued market discount be 

changed so that brokers will assume that 

a customer has made the election unless 

the customer timely notifies the broker 

otherwise. The Treasury Department 

and the IRS agree with the 

recommendation that brokers should 

assume the constant yield method for 

accruing market discount. Accordingly, 

the temporary regulations supersede the 

assumption in the 2013 final debt 

reporting regulations and provide that 

for a debt instrument acquired on or 

after January 1, 2015, brokers are 

required to assume that a customer has 

elected to determine accrued market 

discount using a constant yield method 

unless the customer notifies the broker 

otherwise. A customer that does not 

want to use a constant yield method to 

determine accrued market discount 

must, by the end of the calendar year in 

which the customer acquired the debt 

instrument in an account with the 

broker, notify the customer’s broker in 

writing that the customer wants the 

broker to use the ratable method to 

determine accrued market discount. 

3. Transfer Reporting 

a. Section 1256 Options 

Under § 1.6045A–1(a)(1)(vi) of the 

2013 final basis reporting regulations, a 

transferring broker is not required to 

provide a transfer statement for the 

transfer of a section 1256 option. In 

response to the 2013 final basis 

reporting regulations, a number of 

commenters stated that brokers often 

treat the transfer of a section 1256 

option in the same manner as transfers 

of equities or debt instruments and do 

not treat the transferred section 1256 

option contract as being novated. Thus, 

commenters stated that a transfer 

statement, as provided for by section 


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Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations 13237 

6045A, is necessary to ensure that a 

receiving broker has all relevant data 

required to properly report information 

for section 1256 options. 

In response to these comments, these 

temporary and proposed regulations 

supersede the exception for section 

1256 options in the 2013 final basis 

reporting regulations and extend 

transfer reporting to section 1256 

options. Because the 2013 final basis 

reporting regulations explicitly instruct 

brokers not to send transfer statements 

for section 1256 options, it is 

understood that brokers may need some 

additional time to modify their systems 

to generate the required transfer 

statements. The temporary regulations 

therefore provide that a transfer 

statement is required for the transfer of 

a section 1256 option that occurs on or 

after January 1, 2016. The temporary 

regulations also list the data specific to 

section 1256 options that must be 

provided in addition to the data 

required for the transfer of a non-section 

1256 option. 

b. Debt Instruments 

Under § 1.6045A–1 of the 2013 final 

basis reporting regulations, brokers are 

required to provide to a receiving broker 

certain information relating to a transfer 

of a debt instrument that is a covered 

security. The preamble to the 2013 final 

basis reporting regulations indicated 

that the information required to be 

provided included the date through 

which the transferor broker made 

adjustments. However, several 

commenters on the 2013 final basis 

reporting regulations noted that this 

item of information was not included in 

the list of information required to be 

provided in the 2013 final basis 

reporting regulations. The temporary 

and proposed regulations correct this 

omission by adding the date through 

which the transferring broker made 

adjustments to the list of information 

required to be provided upon the 

transfer of a debt instrument that is a 

covered security. This change applies to 

a transfer that occurs on or after June 30, 

2015. 

4. Reporting of OID on a Tax-Exempt 

Obligation 

The 2013 final basis reporting 

regulations require a broker to report the 

adjusted basis for a debt instrument that 

is a covered security, including a taxexempt obligation. However, under 

Notice 2006–93 (2006–2 CB 798), for 

purposes of section 6049, a broker is not 

required to report OID on tax-exempt 

obligations until further guidance is 

issued. 

Several commenters on the 2013 final 

basis reporting regulations pointed out 

that the section 6045 rules now require 

a broker to compute the OID on a taxexempt obligation to properly report 

adjusted basis at the time of a transfer, 

sale, or other disposition of a taxexempt obligation. These commenters 

requested that, similar to what was done 

in § 1.6049–9T for amortizable bond 

premium and acquisition premium on a 

debt instrument that is a covered 

security, reporting of OID under section 

6049 be coordinated with reporting of 

basis for tax-exempt obligations. 

To align the rules and improve 

consistency between OID reporting and 

basis reporting, § 1.6049–10T of the 

temporary regulations in this document 

provides that a payor must report under 

section 6049 the daily portions of OID 

on a tax-exempt obligation. The daily 

portions of OID are determined as if 

section 1272 and § 1.1272–1 applied to 

a tax-exempt obligation. A payor must 

determine whether a tax-exempt 

obligation was issued with OID and the 

amount that accrues for each relevant 

period. In addition, OID on a tax-exempt 

obligation is determined without regard 

to the de minimis rule in section 

1273(a)(3) and § 1.1273–1(d). Because 

the temporary regulations require the 

reporting of OID, payors also must 

report amortized acquisition premium 

(which offsets OID) on a tax-exempt 

obligation. A broker may report either a 

gross amount for both OID and 

amortized acquisition premium, or a net 

amount of OID that reflects the offset of 

the OID by the amount of amortized 

acquisition premium allocable to the 

OID. To provide payors with time to 

adapt their systems to report this 

information, the temporary regulations 

apply to a tax-exempt obligation 

acquired on or after January 1, 2017. 

Applicability Dates 

The final regulations under section 

6049 apply to a debt instrument that is 

a covered security (that is, a debt 

instrument described in § 1.6045– 

1(a)(15)(i)(C) acquired on or after 

January 1, 2014, or a debt instrument 

described in § 1.6045–1(a)(15)(i)(D) 

acquired on or after January 1, 2016). 

The temporary regulations under 

section 6049 apply to a tax-exempt 

obligation acquired on or after January 

1, 2017. The temporary regulations 

under section 6045A apply to a transfer 

of a section 1256 option that occurs on 

or after January 1, 2016, and to a transfer 

of a debt instrument that occurs on or 

after June 30, 2015. The temporary 

regulations under section 6045 apply to 

a debt instrument acquired on or after 

January 1, 2015. The final regulations 

under section 6045 apply to an option 

on a debt instrument that provides for 

one or more payments denominated in 

a foreign currency or a debt instrument 

issued by a non-U.S. issuer if the option 

is granted or acquired on or after 

January 1, 2016. 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866, as 

supplemented by Executive Order 

13563. Therefore, a regulatory 

assessment is not required. It also has 

been determined that section 553(b) of 

the Administrative Procedure Act (5 

U.S.C. chapter 5) does not apply to these 

regulations. 

It is hereby certified that the final 

regulations in this document will not 

have a significant economic impact on 

a substantial number of small entities. 

Therefore, a Regulatory Flexibility 

Analysis under the Regulatory 

Flexibility Act (5 U.S.C. chapter 6) is 

not required. It is anticipated that the 

requirements in the final regulations in 

this document will fall only on financial 

services firms with annual receipts 

greater than the $38.5 million threshold 

and, therefore, on no small entities. 

In addition, any economic impact is 

expected to be minimal because a broker 

already is required to determine the 

amortization of bond premium and 

acquisition premium for purposes of 

determining and reporting a customer’s 

adjusted basis on Form 1099–B under 

section 6045. The information provided 

to a customer on Form 1099–INT or 

Form 1099–OID, whichever is 

applicable, generally will allow a 

customer to reconcile the interest 

information reported to the customer 

with the adjusted basis information 

reported to the customer on Form 1099– 

B. Moreover, any effect on small entities 

by the rules in the final regulations 

flows from section 6049 of the Code and 

section 403 of the Act. 

Therefore, because the final 

regulations in this document will not 

have a significant economic impact on 

a substantial number of small entities, a 

regulatory flexibility analysis is not 

required. 

For the applicability of the Regulatory 

Flexibility Act to the other regulations 

in this document, please refer to the 

cross-reference notice of proposed 

rulemaking published elsewhere in this 

issue of the Federal Register. 

Pursuant to section 7805(f) of the 

Internal Revenue Code, the proposed 

regulations preceding the final 

regulations in this document were 

submitted to the Chief Counsel for 


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13238 Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations 

Advocacy of the Small Business 

Administration for comment on their 

impact on small businesses. No 

comments were received. In addition, 

the proposed regulations accompanying 

the temporary regulations in this 

document have been 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 Pamela Lew, Office of 

Associate Chief Counsel (Financial 

Institutions and Products). 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 is amended by removing the 

entry for § 1.6049–9T and adding entries 

for §§ 1.6045–1T, 1.6045A–1T, 1.6049– 

9, and 1.6049–10T in numerical order to 

read in part as follows: 

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

Section 1.6045–1T also issued under 

26 U.S.C. 6045(g). * * * 

Section 1.6045A–1T also issued under 

26 U.S.C. 6045A(a). * * * 

Section 1.6049–9 also issued under 26 

U.S.C. 6049(a). * * * 

Section 1.6049–10T also issued under 

26 U.S.C. 6049(a). * * * 

■ Par. 2. Section 1.6045–1 is amended 

by: 

■ 1. Revising paragraph (m)(2)(ii). 

■ 2. Adding a sentence at the end of 

paragraph (n)(4)(iv). 

■ 3. Adding a sentence at the end of 

paragraph (n)(5)(i). 

■ 4. Adding paragraph (n)(11). 

The revision and additions read as 

follows: 

§ 1.6045–1 Returns of information of 

brokers and barter exchanges. 

* * * * * 

(m) * * * 

(2) * * * 

(ii) Delayed effective date for certain 

options—(A) Notwithstanding 

paragraph (m)(2)(i) of this section, if an 

option, stock right, or warrant is issued 

as part of an investment unit described 

in § 1.1273–2(h), paragraph (m) of this 

section applies to the option, stock 

right, or warrant if it is acquired on or 

after January 1, 2016. 

(B) Notwithstanding paragraph 

(m)(2)(i) of this section, if the property 

referenced by an option (that is, the 

property underlying the option) is a 

debt instrument that is issued by a nonU.S. person or that provides for one or 

more payments denominated in, or 

determined by reference to, a currency 

other than the U.S. dollar, paragraph (m) 

of this section applies to the option if it 

is granted or acquired on or after 

January 1, 2016. 

* * * * * 

(n) * * * 

(4) * * * 

(iv) * * * However, see § 1.6045– 

1T(n)(11)(i)(A) for a debt instrument 

acquired on or after January 1, 2014. 

* * * * * 

(5) * * * 

(i) * * * However, see § 1.6045– 

1T(n)(11) for the treatment of an 

election described in paragraph 

(n)(4)(iii) of this section (election to 

accrue market discount based on a 

constant yield) and an election 

described in paragraph (n)(4)(iv) of this 

section (election to treat all interest as 

OID). 

* * * * * 

(11) [Reserved]. For further guidance, 

see § 1.6045–1T(n)(11). 

* * * * * 

■ Par. 3. Section 1.6045–1T is amended 

by revising paragraphs (h) through (p) to 

read as follows: 

§ 1.6045–1T Returns of information of 

brokers and barter exchanges (temporary). 

* * * * * 

(h) through (n)(10) [Reserved]. For 

further guidance, see § 1.6045–1(h) 

through (n)(10). 

(11) Additional rules for certain 

holder elections—(i) In general. For 

purposes of § 1.6045–1, the rules in this 

paragraph (n)(11) apply notwithstanding 

any other rule in § 1.6045–1(n). 

(A) Election to treat all interest as 

OID. A broker must report the 

information required under § 1.6045– 

1(d) without taking into account any 

election described in § 1.6045– 

1(n)(4)(iv) (the election to treat all 

interest as OID in § 1.1272–3). As a 

result, for example, a broker must 

determine the amount of any acquisition 

premium taken into account each year 

for purposes of § 1.6045–1 in 

accordance with § 1.1272–2(b)(4). This 

paragraph (n)(11)(i)(A) applies to a debt 

instrument acquired on or after January 

1, 2015. A broker may, however, rely on 

this paragraph (n)(11)(i)(A) for a debt 

instrument acquired on or after January 

1, 2014, and before January 1, 2015. 

(B) Election to accrue market discount 

based on a constant yield. A broker 

must report the information required 

under § 1.6045–1(d) by assuming that a 

customer has made the election 

described in § 1.6045–1(n)(4)(iii) (the 

election to accrue market discount 

based on a constant yield). However, if 

a customer notifies a broker in writing 

that the customer does not want the 

broker to take into account this election, 

the broker must report the information 

required under § 1.6045–1(d) without 

taking into account this election. The 

customer must provide this notification 

to the broker by the end of the calendar 

year in which the customer acquired the 

debt instrument in an account with the 

broker. This paragraph (n)(11)(i)(B) 

applies to a debt instrument acquired on 

or after January 1, 2015. 

(ii) Expiration date. The applicability 

of this paragraph (n)(11) expires on or 

before March 12, 2018. 

(o) through (p) [Reserved]. For further 

guidance, see § 1.6045–1(o) through (p). 

* * * * * 

■ Par. 4. Section 1.6045A–1 is amended 

by removing paragraph (a)(1)(vi) and 

adding paragraphs (e) and (f) to read as 

follows: 

§ 1.6045A–1 Statements of information 

required in connection with transfers of 

securities. 

* * * * * 

(e) Section 1256 options. [Reserved.] 

For further guidance, see § 1.6045A– 

1T(e). 

(f) Additional information required 

for a debt instrument. [Reserved.] For 

further guidance, see § 1.6045A–1T(f). 

■ Par. 5. Section 1.6045A–1T is added 

to read as follows: 

§ 1.6045A–1T Statements of information 

required in connection with transfers of 

securities (temporary). 

(a) through (d) [Reserved.] For further 

guidance, see § 1.6045A–1(a) through 

(d). 

(e) Section 1256 options—(1) In 

general. A transferor of an option 

described in § 1.6045–1(m)(3) (section 

1256 option) is required to furnish to 

the receiving broker a transfer statement 

for a transfer that occurs on or after 

January 1, 2016. The transfer statement 

must include the information described 

in § 1.6045A–1(b) and paragraph (e)(2) 

of this section for a section 1256 option 

that is a covered security or in 

§ 1.6045A–1(b) for a section 1256 option 

that is a noncovered security. 

(2) Additional information required 

for a section 1256 option. In addition to 

the information required in § 1.6045A– 

1(b), the following information is 


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Federal Register / Vol. 80, No. 49 / Friday, March 13, 2015 / Rules and Regulations 13239 

required for a transfer of a section 1256 

option that is a covered security: 

(i) The original basis of the option; 

and 

(ii) The fair market value of the option 

as of the end of the prior calendar year. 

(f) Additional information required 

for a debt instrument. In addition to the 

information required in § 1.6045A– 

1(b)(3) for a transfer of a debt instrument 

that is a covered security, the transferor 

must provide the last date on or before 

the transfer date that the transferor 

made an adjustment for a particular 

item (for example, the last date on or 

before the transfer date that bond 

premium was amortized). This 

paragraph (f) applies to a transfer that 

occurs on or after June 30, 2015. 

(g) Expiration date. The applicability 

of this section expires on or before 

March 12, 2018. 

■ Par. 6. Section 1.6049–5 is amended 

by adding a sentence after the third 

sentence in paragraph (f) to read as 

follows: 

§ 1.6049–5 Interest and original issue 

discount subject to reporting after 

December 31, 1982. 

* * * * * 

(f) * * * However, see § 1.6049–9 for 

the reporting of premium for a debt 

instrument acquired on or after January 

1, 2014. * * * 

* * * * * 

■ Par. 7. Section 1.6049–9 is added to 

read as follows: 

§ 1.6049–9 Premium subject to reporting 

for a debt instrument acquired on or after 

January 1, 2014. 

(a) General rule. Notwithstanding 

§ 1.6049–5(f), for a debt instrument 

acquired on or after January 1, 2014, if 

a broker (as defined in § 1.6045–1(a)(1)) 

is required to file a statement for the 

debt instrument under § 1.6049–6, the 

broker generally must report any bond 

premium (as defined in § 1.171–1(d)) or 

acquisition premium (as defined in 

§ 1.1272–2(b)(3)) for the calendar year. 

This section, however, only applies to a 

debt instrument that is a covered 

security as defined in § 1.6045–1(a)(15). 

(b) Reporting of bond premium 

amortization. Unless a broker has been 

notified in writing in accordance with 

§ 1.6045–1(n)(5) that a customer does 

not want to amortize bond premium 

under section 171, the broker must 

report the amount of any amortizable 

bond premium allocable to a stated 

interest payment made to the customer 

during the calendar year. See §§ 1.171– 

2 and 1.171–3 to determine the amount 

of amortizable bond premium allocable 

to a stated interest payment. Instead of 

reporting a gross amount for both stated 

interest and amortizable bond premium, 

a broker may report a net amount of 

stated interest that reflects the offset of 

the stated interest payment by the 

amount of amortizable bond premium 

allocable to the payment. In this case, 

the broker must not report the 

amortizable bond premium as a separate 

item. This paragraph (b) also applies to 

amortizable bond premium on a taxexempt obligation, which is required to 

be amortized under section 171. 

(c) Reporting of acquisition premium 

amortization. A broker must report the 

amount of any acquisition premium 

amortization that reduces the amount of 

original issue discount includible in 

income by the customer during a 

calendar year. For a debt instrument 

acquired on or after January 1, 2015, a 

broker must use the rules in § 1.1272– 

2(b)(4) to determine the amount of 

acquisition premium amortization. 

However, for a debt instrument acquired 

on or after January 1, 2014, and before 

January 1, 2015, if a customer timely 

notifies the broker in accordance with 

§ 1.6045–1(n)(5), a broker may use the 

rules in § 1.1272–3 to determine the 

amount of acquisition premium 

amortization. Instead of reporting a 

gross amount for both original issue 

discount and acquisition premium 

amortization, a broker may report a net 

amount of original issue discount that 

reflects the offset of the original issue 

discount includible in income by the 

customer for the calendar year by the 

amount of acquisition premium 

allocable to the original issue discount. 

In this case, the broker must not report 

the acquisition premium amortization as 

a separate item. See § 1.6049–10T for 

the reporting of acquisition premium on 

a tax-exempt obligation. 

§ 1.6049–9T [Removed] 

■ Par. 8. Section 1.6049–9T is removed. 

■ Par. 9. Section 1.6049–10T is added to 

read as follows: 

§ 1.6049–10T Reporting of original issue 

discount on a tax-exempt obligation 

(temporary). 

(a) In general. For purposes of section 

6049, a payor (as defined in § 1.6049– 

4(a)(2)) of original issue discount (OID) 

on a tax-exempt obligation (as defined 

in section 1288(b)(2)) is required to 

report the daily portions of OID on the 

obligation as if the daily portions of OID 

that accrued during a calendar year 

were paid to the holder (or holders) of 

the obligation in the calendar year. The 

amount of the daily portions of OID that 

accrues during a calendar year is 

determined as if section 1272 and 

§ 1.1272–1 applied to a tax-exempt 

obligation. Notwithstanding any other 

rule in section 6049 and the regulations 

thereunder, a payor must determine 

whether a tax-exempt obligation was 

issued with OID and the amount of OID 

that accrues for each relevant period. As 

prescribed by section 1288(b)(1), OID on 

a tax-exempt obligation is determined 

without regard to the de minimis rules 

in section 1273(a)(3) and § 1.1273–1(d). 

(b) Acquisition premium. A payor is 

required to report acquisition premium 

amortization on a tax-exempt obligation 

in accordance with the rules in 

§ 1.6049–9(c) as if section 1272 applied 

to a tax-exempt obligation. See 

paragraph (a) of this section to 

determine the amount of OID allocable 

to an accrual period. 

(c) Effective/applicability date. This 

section applies to a tax-exempt 

obligation acquired on or after January 

1, 2017. 

(d) Expiration date. The applicability 

of this section expires on or before 

March 12, 2018. 

John Dalrymple, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: February 19, 2015. 

Mark J. Mazur, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2015–05648 Filed 3–12–15; 8:45 am] 

BILLING CODE 4830–01–P 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Parts 4022 and 4044 

Allocation of Assets in SingleEmployer Plans; Benefits Payable in 

Terminated Single-Employer Plans; 

Interest Assumptions for Valuing and 

Paying Benefits 

AGENCY: Pension Benefit Guaranty 

Corporation. 

ACTION: Final rule. 

SUMMARY: This final rule amends the 

Pension Benefit Guaranty Corporation’s 

regulations on Benefits Payable in 

Terminated Single-Employer Plans and 

Allocation of Assets in Single-Employer 

Plans to prescribe interest assumptions 

under the benefit payments regulation 

for valuation dates in April 2015 and 

interest assumptions under the asset 

allocation regulation for valuation dates 

in the second quarter of 2015. The 

interest assumptions are used for 

valuing and paying benefits under 

terminating single-employer plans 

covered by the pension insurance 

system administered by PBGC. 

DATES: Effective April 1, 2015. 


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