Federal Register / Vol. 63, No. 122 /Thursday, June 25, 1998 / Proposed Rules 34615

(b) Arranged so that no discharged

fluid will cause an additional fire

hazard.

11. In § 27.1305, paragraph (v) is

added to read as follows:

§ 27.1305 Powerplant instruments.

* * * * *

(v) Warning or caution devices to

signal to the flight crew when

ferromagnetic particles are detected by

the chip detector required by

§ 27.1337(e).

12. Section 27.1337(e) is revised to

read as follows:

§ 27.1337 Powerplant instruments.

* * * * *

(e) Rotor drive system transmissions

and gearboxes utilizing ferromagnetic

materials must be equipped with chip

detectors designed to indicate the

presence of ferromagnetic particles

resulting from damage or excessive

wear. Chip detectors must—

(1) Be designed to provide a signal to

the device required by § 27.1305(v); and

be provided with a means to allow

crewmembers to check, in flight, the

function of each detector electrical

circuit and signal.

(2) [Reserved]

Issued in Washington, DC, on June 9, 1998.

Thomas E. McSweeny,

Director, Aircraft Certification Service.

[FR Doc. 98–15961 Filed 6–24–98; 8:45 am]

BILLING CODE 4910–13–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG–116608–97]

RIN 1545–AV61

EIC Eligibility Requirements

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

by cross-reference to temporary

regulations and notice of public hearing.

SUMMARY: In the Rules and Regulations

section of this issue of the Federal

Register, the IRS is issuing temporary

regulations pertaining to the eligibility

requirements for certain taxpayers

denied the earned income credit (EIC) as

a result of the deficiency procedures.

The text of those temporary regulations

also serves as the text of these proposed

regulations. This document also

provides notice of a public hearing on

these proposed regulations.

DATES: Written comments must be

received by September 23, 1998.

Requests to speak (with outlines of oral

comments) at a public hearing

scheduled for Wednesday, October 21,

1998, must be received by September

30, 1998.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–116608–97),

room 5228, 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:DOM:CORP:R (REG–116608–97),

Courier’s Desk, Internal Revenue

Service, 1111 Constitution Avenue,

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.ustreas.gov/prod/

taxlregs/comments.html. The public

hearing will be held in room 2615,

Internal Revenue Building, 1111

Constitution Avenue, NW., Washington,

DC 20224.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, Karin

Loverud, 202–622–6060; concerning

submissions or the hearing, LaNita

VanDyke, 202–622–7190 (not toll-free

numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information

contained in this notice of proposed

rulemaking has been submitted to the

Office of Management and Budget for

review in accordance with the

Paperwork Reduction Act of 1995 (44

U.S.C. 3507(d)). Comments on the

collection of information should be sent

to the Office of Management and

Budget, Attn: Desk Officer for the

Department of the Treasury, Office of

Information and Regulatory Affairs,

Washington, DC 20503, with copies to

the Internal Revenue Service, Attn: IRS

Reports Clearance Officer, T:FP,

Washington, DC 20224. Comments on

the collection of information should be

received by August 24, 1998. Comments

are specifically requested concerning:

Whether the proposed collection of

information is necessary for the proper

performance of the functions of the

Internal Revenue Service, including

whether the information will have

practical utility;

The accuracy of the estimated burden

associated with the proposed collection

of information (see below);

How the quality, utility, and clarity of

the information to be collected may be

enhanced;

How the burden of complying with

the proposed collection of information

may be minimized, including through

the application of automated collection

techniques or other forms of information

technology; and

Estimates of capital or start-up costs

and costs of operation, maintenance,

and purchase of services to provide

information.

The collection of information in this

proposed regulation is in § 1.32–3. This

information is required to conform with

the statute and to permit the taxpayer to

claim the EIC. This information will be

used by the IRS to determine whether

the taxpayer is entitled to claim the EIC.

The collection of information is

mandatory. The likely respondents are

individuals.

The burden is reflected in the burden

of Form 8862.

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 26

U.S.C. 6103.

Background

The temporary regulations published

in the Rules and Regulations section of

this issue of the Federal Register add

§ 1.32–3T to the Income Tax

Regulations.

The text of those temporary

regulations also serves as the text of

these proposed regulations. The

preamble to the temporary regulations

explains the temporary regulations.

Special Analyses

It has been determined that this notice

of proposed rulemaking is not a

significant regulatory action as defined

in EO 12866. 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 these

regulations will not have a significant

economic impact on a substantial

number of small entities. This

certification is based upon the fact that

the underlying statute applies only to

individuals. Therefore, a Regulatory

Flexibility Analysis under the

Regulatory Flexibility Act (5 U.S.C.

chapter 6) is not required.
34616 Federal Register / Vol. 63, No. 122 /Thursday, June 25, 1998 / Proposed Rules

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 and Public Hearing

Before these proposed regulations are

adopted as final regulations,

consideration will be given to any

written comments (a signed original and

eight copies) that are submitted timely

(in the manner described in the

ADDRESSES portion of this preamble) to

the IRS. All comments will be available

for public inspection and copying.

A public hearing has been scheduled

for Wednesday, October 21, 1998, at 10

a.m., in room 2615, Internal Revenue

Building, 1111 Constitution Avenue,

NW., Washington, DC. Because of access

restrictions, visitors will not be

admitted beyond the building lobby

more than 15 minutes before the hearing

starts.

The rules of § 601.601(a)(3) apply to

the hearing.

Persons that have submitted written

comments by September 23, 1998, and

want to present oral comments at the

hearing must submit, not later than

September 30, 1998, an outline of the

topics to be discussed and the time to

be devoted to each topic. A period of 10

minutes will be allotted to each person

for making comments.

An agenda showing the scheduling of

the speakers will be prepared after the

deadline for receiving outlines has

passed. Copies of the agenda will be

available free of charge at the hearing.

Drafting Information

The principal author of these

proposed regulations is Karin Loverud,

Office of the Associate Chief Counsel

(Employee Benefits and Exempt

Organizations), IRS. 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.

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 * * *

Par. 2. Section 1.32–3 is added to read

as follows:

§ 1.32–3 Eligibility requirements.

[The text of this proposed section is

the same as the text of § 1.32–3T

published elsewhere in this issue of the

Federal Register].

Michael P. Dolan,

Deputy Commissioner of Internal Revenue.

[FR Doc. 98–16853 Filed 6–24–98; 8:45 am]

BILLING CODE 4830–01–U

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG–104641–97]

RIN 1545–AV48

Equity Options Without Standard

Terms; Special Rules and Definitions

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations providing

guidance on the application of the rules

governing qualified covered calls. The

new rules address concerns that were

created by the introduction of new

financial instruments after the

enactment of the qualified covered call

rules. The proposed regulations will

provide guidance to taxpayers holding

qualified covered calls. This document

also provides notice of public hearing

on these proposed regulations.

DATES: Written comments must be

received by September 23, 1998.

Requests to speak (with outlines of oral

comments) at the public hearing

scheduled for November 4, 1998, must

be submitted by October 14, 1998.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–104641–97),

room 5228, 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:DOM:CORP:R (REG–104641–97),

Courier’s Desk, Internal Revenue

Service, 1111 Constitution Avenue 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.ustreas.gov/prod/

taxlregs/comments.html. The public

hearing will be held in room 2615,

Internal Revenue Building, 1111

Constitution Avenue, NW., Washington,

DC.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, Pamela

Lew, (202) 622–3950; concerning

submissions and the hearing, Michael L.

Slaughter, Jr., (202) 622–7190, (not tollfree numbers).

SUPPLEMENTARY INFORMATION:

Background

Section 1092(c) defines a straddle as

offsetting positions with respect to

personal property. Under section

1092(d)(3), stock is personal property if

the stock is part of a straddle that

involves an option on that stock or

substantially identical stock or

securities. Under section 1092(c)(4),

however, writing a qualified covered

call option and owning the optioned

stock is not treated as a straddle for

purposes of section 1092.

The special treatment for qualified

covered calls was created because

Congress believed that, in certain

limited circumstances, a taxpayer who

grants a call option does not

substantially reduce his or her risk of

loss with respect to the optioned stock.

Congress established a mechanical test

to determine whether a written call

option could substantially reduce a

taxpayer s risk of loss and, therefore,

should be subject to treatment as one leg

of a straddle. In order to be classified as

a qualified covered call under this test,

a call option must, among other things,

be exchange-traded and not be deep in

the money.

Section 1092(c)(4)(C) defines a deepin-the-money option as an option whose

strike price is lower than an allowed

bench mark. Under section

1092(c)(4)(D), this bench mark is

generally the highest available strike

price for an option that is less than the

applicable stock price, as defined in

section 1092(c)(4)(G). The Internal

Revenue Code provides other bench

marks under specified circumstances.

At the time the qualified covered call

definition was written, listed options

were available only at standardized

maturity dates and strike price intervals.

This fixed-interval system was a basic

assumption of the Congressional plan

for qualified covered calls and, more

specifically, was the foundation for the

definition of a deep-in-the-money

option.

Certain options exchanges have begun

to trade put and call equity options with

flexible terms. The terms that are

flexible include strike price, expiration

date, and exercise style (that is,

American, European, or capped). Except