12096 Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Rules and Regulations

impose significant costs beyond what

the underlying statute imposes. Thus,

the agency certifies that the final rule

will not have a significant economic

impact on a substantial number of small

entities. Therefore, under the Regulatory

Flexibility Act, no further analysis is

required.

Lists of Subjects in 21 CFR Part 812

Health records, Medical devices,

Medical research, Reporting and

recordkeeping requirements.

Therefore, under the Federal Food,

Drug, and Cosmetic Act and under

authority delegated to the Commissioner

of Food and Drugs, 21 CFR part 812 is

amended as follows:

PART 812—INVESTIGATIONAL

DEVICE EXEMPTIONS

1. The authority citation for 21 CFR

part 812 continues to read as follows:

Authority: Secs. 301, 501, 502, 503, 505,

506, 507, 510, 513–516, 518–520, 701, 702,

704, 721, 801 of the Federal Food, Drug, and

Cosmetic Act (21 U.S.C. 331, 351, 352, 353,

355, 356, 357, 360, 360c–360f, 360h–360j,

371, 372, 374, 379e, 381); secs. 215, 301, 351,

354–360F of the Public Health Service Act

(42 U.S.C. 216, 241, 262, 263b–263n).

2. Section 812.2 is amended by

revising the introductory text of

paragraph (c) to read as follows:

§ 812.2 Applicability.

* * * * *

(c) Exempted investigations. This part,

with the exception of § 812.119, does

not apply to investigations of the

following categories of devices: * * *

* * * * *

3. New § 812.119 is added to subpart

E to read as follows:

§ 812.119 Disqualification of a clinical

investigator.

(a) If FDA has information indicating

that an investigator has repeatedly or

deliberately failed to comply with the

requirements of this part, part 50, or

part 56 of this chapter, or has repeatedly

or deliberately submitted false

information either to the sponsor of the

investigation or in any required report,

the Center for Devices and Radiological

Health will furnish the investigator

written notice of the matter under

complaint and offer the investigator an

opportunity to explain the matter in

writing, or, at the option of the

investigator, in an informal conference.

If an explanation is offered and accepted

by the Center for Devices and

Radiological Health, the disqualification

process will be terminated. If an

explanation is offered but not accepted

by the Center for Devices and

Radiological Health, the investigator

will be given an opportunity for a

regulatory hearing under part 16 of this

chapter on the question of whether the

investigator is entitled to receive

investigational devices.

(b) After evaluating all available

information, including any explanation

presented by the investigator, if the

Commissioner determines that the

investigator has repeatedly or

deliberately failed to comply with the

requirements of this part, part 50, or

part 56 of this chapter, or has

deliberately or repeatedly submitted

false information either to the sponsor

of the investigation or in any required

report, the Commissioner will notify the

investigator, the sponsor of any

investigation in which the investigator

has been named as a participant, and

the reviewing IRB that the investigator

is not entitled to receive investigational

devices. The notification will provide a

statement of basis for such

determination.

(c) Each investigational device

exemption (IDE) and each cleared or

approved application submitted under

this part, subpart E of part 807 of this

chapter, or part 814 of this chapter

containing data reported by an

investigator who has been determined to

be ineligible to receive investigational

devices will be examined to determine

whether the investigator has submitted

unreliable data that are essential to the

continuation of the investigation or

essential to the approval or clearance of

any marketing application.

(d) If the Commissioner determines,

after the unreliable data submitted by

the investigator are eliminated from

consideration, that the data remaining

are inadequate to support a conclusion

that it is reasonably safe to continue the

investigation, the Commissioner will

notify the sponsor who shall have an

opportunity for a regulatory hearing

under part 16 of this chapter. If a danger

to the public health exists, however, the

Commissioner shall terminate the IDE

immediately and notify the sponsor and

the reviewing IRB of the determination.

In such case, the sponsor shall have an

opportunity for a regulatory hearing

before FDA under part 16 of this chapter

on the question of whether the IDE

should be reinstated.

(e) If the Commissioner determines,

after the unreliable data submitted by

the investigator are eliminated from

consideration, that the continued

clearance or approval of the marketing

application for which the data were

submitted cannot be justified, the

Commissioner will proceed to withdraw

approval or rescind clearance of the

medical device in accordance with the

applicable provisions of the act.

(f) An investigator who has been

determined to be ineligible to receive

investigational devices may be

reinstated as eligible when the

Commissioner determines that the

investigator has presented adequate

assurances that the investigator will

employ investigational devices solely in

compliance with the provisions of this

part and of parts 50 and 56 of this

chapter.

Dated: March 3, 1997.

William B. Schultz,

Deputy Commissioner for Policy.

[FR Doc. 97–6475 Filed 3–13–97; 8:45 am]

BILLING CODE 4160–01–F

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8560; TD 8597; TD 8660]

RIN 1545–AQ69; 1545–AT58; 1545–AT51

Consolidated Returns; Consolidated

and Controlled Groups; Correction

AGENCY: Internal Revenue Service,

Treasury.

ACTION: Correcting amendments.

SUMMARY: This document contains

technical corrections to final regulations

[TD 8560; TD 8597; TD 8660] which

were published in the Federal Register

on Monday, August 15, 1994 (59 FR

41666); Tuesday, July 18, 1995 (60 FR

36671); and Thursday, March 14, 1996

(61 FR 10447); respectively. The final

regulations amend the consolidated

return investment adjustment

provisions, intercompany transaction

provisions and the provisions limiting

losses and deductions from transactions

between members of a nonconsolidated

controlled group.

DATES: The correcting amendments

affecting §§ 1.267(f)–1, 1.1502–

13(f)(2)(ii), (g)(5), (l)(1), 1.1502–20,

1.1502–32(b), and 1.1502–80(b) are

effective July 18, 1995. The correcting

amendments affecting §§ 1.1502–11,

1.1502–19, 1.1502–32(f), 1.1502–43,

1.1502–76 and 1.1502–80(d)(1) are

effective January 1, 1995. The correcting

amendments affecting § 1.1502–13(f)(6)

are effective March 14, 1996. For dates

of applicability see §§ 1.267(f)–1(l),

§ 1.1502–11(b)(5), 1.1502–13(l)(1),

1.1502–13(f)(6)(v), 1.1502–19(h),

1.1502–32(h), 1.1502–76(b)(5), 1.1502–

80(d), and other relevant provisions.

FOR FURTHER INFORMATION CONTACT:

William Barry of the Office of Assistant
Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Rules and Regulations 12097

Chief Counsel (Corporate), (202) 622–

7770 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are the

subject of these correcting amendments

are under sections 267 and 1502 of the

Internal Revenue Code.

Need for Correction

As published, the final regulations

contain errors and omissions which may

prove to be misleading and are in need

of clarification.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

Accordingly, 26 CFR Part 1 is

corrected by making the following

correcting amendments:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for Part 1 continues to read in part as

follows:

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

Par. 2. Section 1.267(f)–1 is amended

as follows:

1. In paragraph (c)(1)(iii), the first

sentence is revised.

2. Paragraph (l)(2) is revised.

The revisions read as follows:

§ 1.267(f)–1 Controlled groups.

* * * * *

(c) * * * (1) * * *

(iii) * * * To the extent S’s loss or

deduction from an intercompany sale of

property is taken into account under

this section as a result of B’s transfer of

the property to a nonmember that is a

person related to any member,

immediately after the transfer, under

sections 267(b) or 707(b), or as a result

of S or B becoming a nonmember that

is related to any member under section

267(b), the loss or deduction is taken

into account but allowed only to the

extent of any income or gain taken into

account as a result of the transfer. * * *

* * * * *

(l) * * *

(2) Avoidance transactions. This

paragraph (l)(2) applies if a transaction

is engaged in or structured on or after

April 8, 1994, with a principal purpose

to avoid the rules of this section (and

instead to apply prior law). If this

paragraph (l)(2) applies, appropriate

adjustments must be made in years

beginning on or after July 12, 1995, to

prevent the avoidance, duplication,

omission, or elimination of any item (or

tax liability), or any other inconsistency

with the rules of this section.

* * * * *

Par. 3. Section 1.1502–11 is amended

by revising paragraph (b)(2)(iii),

Example 3. (e) to read as follows:

§ 1.1502–11 Consolidated taxable income.

* * * * *

(b) * * *

(2) * * *

(iii) * * *

Example 3. * * * (e) Under paragraph (b)(2)(ii) of this

section, S’s $30 of loss limited under this

paragraph (b) is treated as a separate net

operating loss.

* * * * *

Par. 4. Section 1.1502–13 is amended

as follows:

1. In paragraph (f)(2)(ii), a sentence is

added before the last sentence of the

paragraph.

2. In paragraph (f)(6) introductory

text, the last sentence is revised.

3. In paragraph (g)(5), Example 5. (c),

the tenth sentence is revised.

4. In paragraph (l)(1) the third, fourth,

and fifth sentences are revised.

The addition and revisions read as

follows:

§ 1.1502–13 Intercompany transactions.

* * * * *

(f) * * *

(2) * * *

(ii) * * * B’s dividend received

deduction under section 243(a)(3) is

determined without regard to any

intercompany distributions under this

paragraph (f)(2) to the extent they are

not included in gross income. * * *

* * * * *

(6) * * * For this purpose, P stock is

any stock of the common parent held

(directly or indirectly) by another

member or any stock of a member (the

issuer) that was the common parent if

the stock was held (directly or

indirectly) by another member while the

issuer was the common parent.

* * * * *

(g) * * *

(5) * * *

Example 5. * * *

(c) * * * Under § 1.446–3(f), the

deemed $100 up front payment by M1

to M2 is taken into account over the

term of the new contract in a manner

reflecting the economic substance of the

contract (for example, allocating the

payment in accordance with the forward

rates of a series of cash-settled forward

contracts that reflect the specified index

and the $1,000 notional principal

amount). * * *

* * * * *

(l) * * * (1) * * * For example, S’s

and B’s items from S’s sale of property

to B which occurs in a consolidated

return year beginning before July 12,

1995, are taken into account under prior

law, even though B may dispose of the

property in a consolidated return year

beginning on or after July 12, 1995.

Similarly, an intercompany distribution

to which a shareholder becomes entitled

in a consolidated return year beginning

before July 12, 1995, but which is

distributed in a consolidated return year

beginning on or after that date is taken

into account under prior law (generally

when distributed), because this section

generally takes dividends into account

when the shareholder becomes entitled

to them but this section does not apply

at that time. If application of prior law

to S’s deferred gain or loss from a

deferred intercompany transaction (as

defined under prior law) occurring in a

consolidated return year beginning prior

to July 12, 1995, would be affected by

an intercompany transaction (as defined

under this section) occurring in a

consolidated return year beginning on

or after July 12, 1995, S’s deferred gain

or loss continues to be taken into

account as provided under prior law,

and the items from the subsequent

intercompany transaction are taken into

account under this section. * * *

* * * * *

Par. 5. Section 1.1502–19 is amended

as follows:

1. In paragraph (c)(1)(iii)(A), the last

sentence is revised.

2. Paragraph (g) is amended by:

a. Revising the first sentence of the

introductory text.

b. Revising the fourth and fifth

sentences in Example 1. (d).

c. Revising the first sentence in

Example 4. (b).

d. Revising the first sentence in

Example 6. (b).

The revisions read as follows:

§ 1.1502–19 Excess loss accounts.

* * * * *

(c) * * *

(1) * * *

(iii) * * *

(A) * * * An asset of S is not

considered to be disposed of or

abandoned to the extent the disposition

is in complete liquidation of S or is in

exchange for consideration (other than

relief from indebtedness);

* * * * *

(g) Examples. For purposes of the

examples in this section, unless

otherwise stated, P owns all 100 shares

of the only class of S’s stock and S owns

all 100 shares of the only class of T’s

stock, the stock is owned for the entire

year, T owns no stock of lower-tier

members, the tax year of all persons is

the calendar year, all persons use the

accrual method of accounting, the facts

set forth the only corporate activity, all
12098 Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Rules and Regulations

transactions are between unrelated

persons, and tax liabilities are

disregarded. * * *

Example 1. * * *

(d) * * * Under section 301(d), P’s basis

in the T stock is $60. Under § 1.1502–13, and

paragraph (b)(2) of this section, S’s $160 gain

from the distribution is deferred and taken

into account in Year 5 as a result of P’s sale

of the T stock. * * *

* * * * *

Example 4. * * *

(b) Analysis. Under paragraph (c)(2) of this

section, S is treated as disposing of each of

its shares of T’s stock immediately before T

becomes a nonmember. * * *

* * * * *

Example 6. * * *

(b) Analysis. Under paragraph (c)(1)(iii)(A)

of this section, P’s excess loss account on

each of its shares of S’s stock ordinarily is

taken into account at the time substantially

all of S’s assets are treated as disposed of,

abandoned, or destroyed for Federal income

tax purposes. * * *

* * * * *

Par. 6. Section 1.1502–20 is amended

as follows:

1. In paragraph (b)(6), Example 5. (iii)

is revised.

2. In paragraph (e)(3), Example 1. (i),

the third sentence is revised.

3. In paragraph (e)(3), Example 1. (ii)

is revised.

The revisions read as follows:

§ 1.1502–20 Disposition or

deconsolidation of subsidiary stock.

* * * * *

(b) * * *

(6) * * *

Example 5. * * *

(iii) T’s issuance of additional shares to the

public results in S’s intercompany loss being

taken into account under the acceleration

rule of § 1.1502–13(d) because there is no

difference between P’s $100 basis in the T

stock and the $100 basis the T stock would

have had if P and S had been divisions of a

single corporation. S’s loss taken into

account is disallowed under paragraph (a)(1)

of this section.

* * * * *

(e) * * *

(3) * * *

Example 1. * * * (i) * * * With the view

described in paragraph (e)(1) of this section,

P transfers land with a value of $100 and a

basis of $100 to T in exchange for preferred

stock with a $200 redemption price and

liquidation preference. * * *

(ii) Under section 305, the redemption

premium is treated as a distribution of

property to which section 301 and § 1.1502–

13(f)(2) apply. Under §§ 1.1502–13 and

1.1502–32, P’s aggregate basis in the

preferred and common stock is unaffected by

the deemed distributions.

* * * * *

Par. 7. Section 1.1502–32 is amended

as follows:

1. In paragraph (b)(3)(ii)(A), the

second sentence is revised.

2. In paragraph (b)(3)(v), the last

sentence is revised.

3. In paragraph (b)(5)(ii), Example 5.

(c), the second sentence is revised.

4. In paragraph (b)(5), Example 6. (b)

is revised.

5. In paragraph (f), a sentence is

added after the second sentence.

The addition and revisions read as

follows:

§ 1.1502–32 Investment adjustments.

* * * * *

(b) * * *

(3) * * *

(ii) * * * (A) * * * For example, S’s

dividend income to which § 1.1502–

13(f)(2)(ii) applies, and its interest

excluded from gross income under

section 103, are treated as tax-exempt

income. * * *

* * * * *

(v) * * * See § 1.1502–13(f)(2)(iv) for

taking into account distributions to

which section 301 applies (but not other

distributions treated as dividends)

under the entitlement rule.

* * * * *

(5) * * *

(ii) * * *

Example 5. * * *

(c) * * * Under § 1.1502–13(f)(2)(iv), S is

treated as making a $70 distribution to P at

the time P becomes entitled to the

distribution. * * *

Example 6. * * *

(b) Analysis. Under section 358, P’s basis

in the S stock is increased by its basis in the

T stock. Under § 1.1502–13(f)(3) the money

received is treated as being taken into

account immediately after the transaction.

Thus, the $10 is treated as a dividend

distribution under section 301 and under

paragraph (b)(3)(v) of this section, the $10 is

a distribution to which paragraph (b)(2)(iv) of

this section applies. Accordingly, P’s basis in

the S stock is $160 immediately after the

merger, which is then decreased by the $10

distribution taken into account immediately

after the transaction, resulting in a basis of

$150.

* * * * *

(f) * * * For example, if T merges

into S, S is treated, as the context may

require, as a successor to T and as

becoming a member of the group. * * *

* * * * *

Par. 8. Section 1.1502–43 is amended

by revising paragraph (a)(3)(iii) to read

as follows:

§ 1.1502–43 Consolidated accumulated

earnings tax.

(a) * * *

(3) * * *

(iii) Earnings and profits resulting

from the disposition of a member’s stock

are determined without regard to the

stock basis adjustments under

§§ 1.1502–32 and 1.1502–33(c)(1).

* * * * *

Par. 9. Section 1.1502–76 is amended

by revising paragraph (b)(4), Example 1.

(a) and the first sentence of Example 1.

(c) to read as follows:

§ 1.1502–76 Taxable year of members of

group.

* * * * *

(b) * * *

(4) * * *

Example 1. Items allocated between

consolidated and separate returns. (a) Facts.

P and S are the only members of the P group.

P sells all of S’s stock to individual A on June

30, and therefore S becomes a nonmember on

July 1 of Year 2.

* * * * *

(c) Acquisition of another subsidiary before

end of tax year. The facts are the same as in

paragraph (a) of this Example 1, except that

on July 31 P acquires all the stock of T

(which filed a separate return for its year

ending on November 30 of Year 1) and T

therefore becomes a member on August 1 of

Year 2. * * *

* * * * *

Par. 10. Section 1.1502–80 is

amended as follows:

1. Paragraph (b) is revised.

2. In paragraph (d)(1), a sentence is

added to the end of the paragraph.

The addition and revision reads as

follows:

§ 1.1502–80 Applicability of other

provisions of law.

* * * * *

(b) Non-applicability of section 304.

Section 304 does not apply to any

acquisition of stock of a corporation in

an intercompany transaction or to any

intercompany item from such

transaction occurring on or after July 24,

1991.

* * * * *

(d) * * * (1) * * * For purposes of

this paragraph (d), any reference to a

transferor or transferee includes, as the

context may require, a reference to a

successor or predecessor.

* * * * *

Cynthia E. Grigsby,

Chief, Regulations Unit, Assistant Chief

Counsel (Corporate).

[FR Doc. 97–6068 Filed 3–13–97; 8:45 am]

BILLING CODE 4830–01–P

PENSION BENEFIT GUARANTY

CORPORATION

29 CFR Part 4044

Allocation of Assets in SingleEmployer Plans; Interest Assumptions

for Valuing Benefits

AGENCY: Pension Benefit Guaranty

Corporation.

ACTION: Final rule.