[Federal Register Volume 63, Number 118 (Friday, June 19, 1998)]
[Proposed Rules]
[Pages 33595-33596]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15453]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-209035-86]
RIN 1545-AI32


Foreign Liquidations and Reorganizations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Amendment to notice of proposed rulemaking.

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SUMMARY: This document removes from an existing (1991) notice of 
proposed rulemaking the special (August 26, 1991) effective date rule 
for the definition of the all earnings and profits amount. The IRS and 
the Treasury Department believe that issues regarding the all earnings 
and profits amount should be studied; thus, when final regulations 
under section 367(b) are issued with respect to the all earnings and 
profits amount, such regulations will have a prospective effective 
date. This modification may affect domestic corporations in connection 
with an acquisition of a foreign corporation in a liquidation described 
in section 332 or in an asset acquisition described in section 
368(a)(1)).

DATES: Written comments must be received by September 17, 1998.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-209035-86), Room 
5228, Internal Revenue Service, POB 7604, Ben Franklin Station, 
Washington, DC 20044. In the alternative, submissions may be hand 
delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R 
(REG-209035-86), Courier's Desk, Internal Revenue Service, 1111 
Constitution Ave. NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Philip L. Tretiak at (202) 622-3860 
(not a toll-free call).

SUPPLEMENTARY INFORMATION:

Background

    Section 367(b) was enacted in its current form by the Tax Reform 
Act of 1976. On December 27, 1977, proposed and temporary regulations 
Secs. 7.367(b)-1 through 7.367(b)-12 were adopted (TD 7530, 1978-1 C.B. 
92). Prior to the issuance of a notice of proposed rulemaking in 1991 
(the 1991 proposed regulations), discussed below, the regulations under 
section 367(b) were amended on several occasions. The 1991 proposed 
regulations, which were published in the Federal Register on August 26, 
1991 (56 FR 41993), propose to completely revise the regulations under 
section 367(b), as well as the rules under section 367(a) with respect 
to certain transfers of stock or securities by U.S. persons to foreign 
corporations.
    Section 1.367(b)-6(a) of the proposed regulations provides that the 
rules contained in the section 367(b) proposed regulations will be 
effective for exchanges that occur on or after the date that is 30 days 
after final regulations are published. However, an exception to the 
general effective date provides that Sec. 1.367(b)-2(d) (relating to 
the definition and computation of the ``all earnings and profits 
amount'') is effective for exchanges that occur on or after August 26, 
1991.
    A package of final regulations, published elsewhere in this issue 
of the Federal Register, contains final rules with respect to the 
section 367(a) portion of the 1991 proposed regulations (to the extent 
that such rules were not previously finalized) and final

[[Page 33596]]

rules with respect to the section 367(b) portion of the 1991 proposed 
regulations, but generally only to the extent that a particular 
transaction is subject to both sections 367(a) and (b). The final 
regulations do not address the all earnings and profits amount.
    The IRS and the Treasury Department believe that issues regarding 
the all earnings and profits amount should be studied before final 
regulations are promulgated. Moreover, the IRS and the Treasury 
Department believe that the final regulations concerning the all 
earnings and profits amount should not be subject to a special 
effective date. Thus, this notice of proposed rulemaking removes from 
the 1991 proposed regulations the special (August 26, 1991) effective 
date rule for the definition of the all earnings and profits amount. 
When final regulations under section 367(b) are issued with respect to 
the all earnings and profits amount, such regulations will have a 
prospective effective date.

Special Analysis

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It has also 
been determined that this regulation does not have a significant impact 
on small entities because this regulation, which only contains a 
limited effective date rule, impacts only U.S. corporations with 
investments in foreign corporations. Thus, the Regulatory Flexibility 
Act (5 U.S.C. chapter 6) does not apply to these regulations, and 
therefore, a Regulatory Flexibility Analysis is not required. Pursuant 
to section 7805(f) of the Internal Revenue Code, this notice of 
proposed rulemaking will be submitted to the Chief Counsel for Advocacy 
of the Small Business Administration for comment on its impact on small 
business.

Comments

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) that are submitted timely to the Internal Revenue 
Service. All comments will be available for public inspection and 
copying.

Drafting Information

    The principal author of these proposed regulations is Philip L. 
Tretiak of the Office of Associate Chief Counsel (International), IRS. 
However, other personnel from the IRS and the Treasury Department 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income tax, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

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

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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


Sec. 1.367(b)-6  [Amended]

    Par. 2. Section 1.367(b)-6, as proposed to be added on Monday, 
August 26, 1991 (56 FR 42015), is amended by removing the last sentence 
of paragraph (a).
Michael P. Dolan,
Deputy Commissioner of Internal Revenue.
[FR Doc. 98-15453 Filed 6-18-98; 8:45 am]
BILLING CODE 4830-01-U