52612 Federal Register / Vol. 86, No. 181 / Wednesday, September 22, 2021 / Rules and Regulations 

not interrupt legitimate trade between 

the two nations or disrupt critical 

supply chains that ensure food, fuel, 

medicine, and other critical materials 

reach individuals on both sides of the 

border. 

For purposes of the temporary 

alteration in certain designated ports of 

entry operations authorized under 19 

U.S.C. 1318(b)(1)(C) and (b)(2), travel 

through the land ports of entry and ferry 

terminals along the United StatesMexico border shall be limited to 

‘‘essential travel,’’ which includes, but 

is not limited to— 

• U.S. citizens and lawful permanent 

residents returning to the United States; 

• Individuals traveling for medical 

purposes (e.g., to receive medical 

treatment in the United States); 

• Individuals traveling to attend 

educational institutions; 

• Individuals traveling to work in the 

United States (e.g., individuals working 

in the farming or agriculture industry 

who must travel between the United 

States and Mexico in furtherance of 

such work); 

• Individuals traveling for emergency 

response and public health purposes 

(e.g., government officials or emergency 

responders entering the United States to 

support federal, state, local, tribal, or 

territorial government efforts to respond 

to COVID–19 or other emergencies); 

• Individuals engaged in lawful crossborder trade (e.g., truck drivers 

supporting the movement of cargo 

between the United States and Mexico); 

• Individuals engaged in official 

government travel or diplomatic travel; 

• Members of the U.S. Armed Forces, 

and the spouses and children of 

members of the U.S. Armed Forces, 

returning to the United States; and 

• Individuals engaged in militaryrelated travel or operations. 

The following travel does not fall 

within the definition of ‘‘essential 

travel’’ for purposes of this 

Notification— 

• Individuals traveling for tourism 

purposes (e.g., sightseeing, recreation, 

gambling, or attending cultural events). 

At this time, this Notification does not 

apply to air, freight rail, or sea travel 

between the United States and Mexico, 

but does apply to passenger rail, 

passenger ferry travel, and pleasure boat 

travel between the United States and 

Mexico. These restrictions are 

temporary in nature and shall remain in 

effect until 11:59 p.m. EDT on October 

21, 2021. This Notification may be 

amended or rescinded prior to that time, 

based on circumstances associated with 

the specific threat. In coordination with 

public health and medical experts, DHS 

continues working closely with its 

partners across the United States and 

internationally to determine how to 

safely and sustainably resume normal 

travel. 

The Commissioner of U.S. Customs 

and Border Protection (CBP) is hereby 

directed to prepare and distribute 

appropriate guidance to CBP personnel 

on the continued implementation of the 

temporary measures set forth in this 

Notification. The CBP Commissioner 

may determine that other forms of 

travel, such as travel in furtherance of 

economic stability or social order, 

constitute ‘‘essential travel’’ under this 

Notification. Further, the CBP 

Commissioner may, on an 

individualized basis and for 

humanitarian reasons or for other 

purposes in the national interest, permit 

the processing of travelers to the United 

States not engaged in ‘‘essential travel.’’ 

Alejandro N. Mayorkas, 

Secretary, U.S. Department of Homeland 

Security. 

[FR Doc. 2021–20344 Filed 9–21–21; 8:45 am] 

BILLING CODE 9112–FP–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9954] 

RIN 1545–BN80 

Treatment of Distributions of Property 

From a Corporation to a Shareholder 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations under section 301 of the 

Internal Revenue Code of 1986 (Code). 

These regulations update existing 

regulations under section 301 to reflect 

statutory changes made by the 

Technical and Miscellaneous Revenue 

Act of 1988, which changes provide that 

the amount of a distribution of property 

made by a corporation to its shareholder 

is the fair market value of the 

distributed property. The regulations 

affect shareholders that receive a 

distribution of property from a 

corporation. 

DATES:

Effective date: These regulations are 

effective on September 22, 2021. 

Applicability date: For dates of 

applicability, see § 1.301–1(f)(3), (m)(4), 

and (n). 

FOR FURTHER INFORMATION CONTACT: Grid 

R. Glyer, (202) 317–6847 (not a toll-free 

number). 

SUPPLEMENTARY INFORMATION: 

Background and Explanation of 

Provisions 

This document contains amendments 

to 26 CFR part 1 under section 301 of 

the Code relating to the treatment of 

distributions of property from a 

corporation to a shareholder. Section 

301 provides rules for the treatment of 

a distribution of property, including 

money, made by a corporation to its 

shareholder with respect to that 

shareholder’s stock ownership in that 

corporation (distribution). 

Section 1006(e)(10) and (e)(11) of the 

Technical and Miscellaneous Revenue 

Act of 1988, Public Law 100–647, 102 

Stat. 3342 (1988) (Act), amended section 

301(b)(1) and (d), respectively (such 

amendments, the 1988 Amendments). 

Section 1019(a) of the Act provided that, 

in general, the 1988 Amendments were 

effective as if included in the Tax 

Reform Act of 1986, Public Law 99–514, 

100 Stat. 2085 (1986). Accordingly, the 

1988 Amendments generally are 

effective for taxable years beginning 

after December 31, 1986. 

As a result of the 1988 Amendments, 

section 301(b)(1) provides that, for 

purposes of section 301, the amount of 

any distribution is the amount of money 

received plus the fair market value of 

the other property received. Section 

301(d) provides that the basis of 

property received in a distribution to 

which section 301(a) applies is the fair 

market value of such property. 

The current regulations issued under 

section 301 reflect the rules of sections 

301(b)(1) and 301(d) as they existed 

prior to the 1988 Amendments. 

Accordingly, to the extent preempted by 

statute, the current regulations have no 

application. 

A notice of proposed rulemaking 

(REG–121694–16) published in the 

Federal Register on March 26, 2019 (84 

FR 11263) proposed to amend § 1.301– 

1 to reflect the 1988 Amendments (2019 

proposed regulations). The scope of the 

2019 proposed regulations was limited 

to (1) deleting provisions made obsolete 

by statutory changes, (2) making minor 

additions and revisions to reflect 

current statutory text, and (3) making 

certain non-substantive changes for 

purposes of clarity and readability, 

including reordering and redesignating 

paragraphs. The 2019 proposed 

regulations also amended crossreferences in §§ 1.356–1(f), 1.368– 

2(m)(3)(iii), 1.902–1(a)(12), and 1.902– 

3(a)(7) to reflect the proposed reordering 

and redesignating of paragraphs in 

§ 1.301–1. For further discussion of the 

changes proposed to be made to 

§ 1.301–1 by the 2019 proposed 

Federal Register / Vol. 86, No. 181 / Wednesday, September 22, 2021 / Rules and Regulations 52613 

regulations, see the Explanation of 

Provisions section in the preamble to 

the 2019 proposed regulations at 84 FR 

11264. 

The Department of the Treasury 

(Treasury Department) and the IRS 

received no comments on the 2019 

proposed regulations, and no public 

hearing was requested or held. This 

document adopts the 2019 proposed 

regulations as final regulations with no 

substantive changes and with certain 

non-substantive changes for purposes of 

clarity and readability. 

Applicability Date 

The final regulations apply to 

distributions made after September 22, 

2021. However, these regulations update 

the previous regulations under section 

301 to reflect statutory changes made by 

the 1988 Amendments, which apply to 

distributions made in taxable years 

beginning after December 31, 1986. 

Special Analyses 

This regulation is not subject to 

review under section 6(b) of Executive 

Order 12866 pursuant to the 

Memorandum of Agreement (April 11, 

2018) between the Treasury Department 

and the Office of Management and 

Budget regarding review of tax 

regulations. 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. chapter 6), it is hereby 

certified that these final regulations will 

not have a significant economic impact 

on a substantial number of small entities 

within the meaning of section 601(6) of 

the Regulatory Flexibility Act. The 

Treasury Department and the IRS have 

determined that no additional burden 

will be associated with these final 

regulations. Therefore, a regulatory 

flexibility analysis is not required. 

Accordingly, the Secretary’s delegate 

certifies that these regulations will not 

have a significant economic impact on 

a substantial number of small entities. 

Pursuant to section 7805(f), the notice 

of proposed rulemaking preceding this 

regulation has been submitted to the 

Chief Counsel for the Office of 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. No comments 

were received from the Chief Counsel 

for the Office of Advocacy of the Small 

Business Administration. 

Drafting Information 

The principal author of these 

regulations is Grid R. Glyer of the Office 

of Associate Chief Counsel (Corporate). 

Other personnel from the Treasury 

Department and the IRS participated in 

developing these regulations. 

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 TAX REGULATIONS 

■ Paragraph 1. The authority citation 

for part 1 continues to read in part as 

follows: 

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

■ Par. 2. Section 1.301–1 is revised to 

read as follows: 

§ 1.301–1 Rules applicable with respect to 

distributions of money and other property. 

(a) General. Section 301 provides the 

general rule for the treatment of 

distributions made in taxable years 

beginning after December 31, 1986, of 

property by a corporation to a 

shareholder with respect to its stock. 

The term property is defined in section 

317(a). Except as otherwise provided in 

chapter 1 of the Internal Revenue Code 

(Code), such distributions are treated as 

provided in section 301(c). Under 

section 301(c), distributions may be 

included in gross income to the extent 

the amount distributed is considered a 

dividend under section 316, applied 

against and reduces the adjusted basis of 

the stock, treated as gain from the sale 

or exchange of property, or exempt from 

Federal income tax in the case of certain 

distributions out of increase in value 

accrued before March 1, 1913. The 

amount of a distribution to which 

section 301 applies is determined in 

accordance with the provisions of 

section 301(b). The basis of property 

received in a distribution to which 

section 301 applies is the fair market 

value of the property, as provided in 

section 301(d). 

(b) Amount of distribution and 

determination of fair market value. The 

amount of a distribution to which 

section 301 applies is the amount of 

money received in the distribution, plus 

the fair market value of other property 

received in the distribution. The fair 

market value of any property distributed 

is determined as of the date of the 

distribution. 

(c) Time of inclusion in gross income 

and time of determination of fair market 

value. A distribution made by a 

corporation to its shareholders is 

included in the gross income of the 

distributees when the cash or other 

property is unqualifiedly made subject 

to their demands, without regard to 

whether such date is the same as that on 

which the corporation made the 

distribution. For example, if a 

corporation distributes a taxable 

dividend in property on December 30, 

2021, that is received by, or 

unqualifiedly made subject to the 

demands of, its shareholders on January 

3, 2022, the amount to be included in 

the gross income of the shareholders 

will be the fair market value of such 

property on December 30, 2021, 

determined under paragraph (b) of this 

section, although such amount will not 

be includible in the gross income of the 

shareholders until January 3, 2022. 

(d) Application of section to 

shareholders. Section 301 is not 

applicable to an amount paid by a 

corporation to a shareholder unless the 

amount is paid to the shareholder in the 

shareholder’s capacity as such. 

(e) Example. Corporation M, formed 

in 1998, has never been an acquiring 

corporation in a transaction to which 

section 381(a) applies. On January 1, 

2021, A, an individual, owned all of the 

stock of Corporation M, consisting of a 

single share with an adjusted basis of 

$2,000. During 2021, A received 

distributions from Corporation M 

totaling $30,000, consisting of $10,000 

in cash and listed securities having a 

basis in the hands of Corporation M and 

a fair market value on the date 

distributed of $20,000. Corporation M’s 

taxable year is the calendar year. As of 

December 31, 2020, Corporation M had 

accumulated earnings and profits in the 

amount of $26,000, and it had no 

earnings and profits and no deficit for 

2021. Of the $30,000 received by A, 

$26,000 is treated as an ordinary 

dividend; of the remaining $4,000, 

$2,000 is applied against and reduces 

the adjusted basis of A’s stock under 

section 301(c)(2), and the $2,000 in 

excess of the adjusted basis of A’s stock 

is treated as gain from the sale or 

exchange of property under section 

301(c)(3)(A). If A immediately sells the 

stock in Corporation M, the basis for 

determining gain or loss on the sale will 

be zero. 

(f) Reduction for liabilities—(1) 

General rule. For purposes of section 

301(b)(2), no reduction in the amount of 

a distribution is made for the amount of 

any liability, except to the extent the 

liability is assumed by the shareholder 

within the meaning of section 357(d). 

(2) No reduction below zero. Any 

reduction pursuant to paragraph (f)(1) of 

this section does not cause the amount 

of the distribution to be reduced below 

zero. 

(3) Applicability dates—(i) In general. 

This paragraph (f) applies to 

distributions occurring after January 4, 

2001. 

52614 Federal Register / Vol. 86, No. 181 / Wednesday, September 22, 2021 / Rules and Regulations 

(ii) Retroactive application. For 

distributions made on or before January 

4, 2001, see § 1.301–1(g) as contained in 

26 CFR part 1 revised April 1, 2021. 

(g) Basis. The basis of property 

received in a distribution to which 

section 301 applies is the fair market 

value of such property. See paragraph 

(b) of this section. 

(h) Transfers for less than fair market 

value. If property is transferred by a 

corporation to a shareholder for an 

amount less than its fair market value in 

a sale or exchange, such shareholder is 

treated as having received a distribution 

to which section 301 applies. In such 

case, the amount of the distribution is 

the excess of the fair market value of the 

property over the amount paid for such 

property at the time of the transfer. For 

example, on January 3, 2021, A, a 

shareholder of Corporation X, 

purchased property from X for $20 

when the fair market value of such 

property was $100. The amount of the 

distribution to A determined under 

section 301(b) is $80. 

(i) [Reserved] 

(j) Transactions treated as 

distributions. A distribution to 

shareholders with respect to their stock 

is within the terms of section 301, 

although it takes place at the same time 

as another transaction, if the 

distribution is in substance a separate 

transaction (whether or not connected 

in a formal sense). This situation is most 

likely to occur in the case of a 

recapitalization, a reincorporation, or a 

merger of a corporation with a newly 

organized corporation having 

substantially no property. For example, 

if a corporation having only common 

stock outstanding exchanges one share 

of newly issued common stock and one 

bond with a principal amount of $10 for 

each share of outstanding common 

stock, the distribution of the bond will 

be a distribution of property (to the 

extent of its fair market value) to which 

section 301 applies, even though the 

exchange of common stock for common 

stock may be pursuant to a plan of 

reorganization under the terms of 

section 368(a)(1)(E) (recapitalization) 

and may result in the shareholder not 

recognizing any gain or loss on the 

exchange by reason of section 354. 

(k) Cancellation of indebtedness. The 

cancellation of indebtedness of a 

shareholder by a corporation is treated 

as a distribution of property. 

(l) Cross-references. For certain rules 

relating to adjustments to earnings and 

profits and for determining the extent to 

which a distribution is a dividend, see 

sections 312 and 316 of the Code and 

the regulations in this part under 

sections 312 and 316. 

(m) Split-dollar and other life 

insurance arrangements—(1) Splitdollar life insurance arrangements—(i) 

Distribution of economic benefits. The 

provision by a corporation to its 

shareholder pursuant to a split-dollar 

life insurance arrangement, as defined 

in § 1.61–22(b)(1) or (2), of economic 

benefits described in § 1.61–22(d), or of 

amounts described in § 1.61–22(e), is 

treated as a distribution of property, the 

amount of which is determined under 

§ 1.61–22(d) and (e), respectively. 

(ii) Distribution of entire contract or 

undivided interest therein. A transfer 

(within the meaning of § 1.61–22(c)(3)) 

of the ownership of a life insurance 

contract (or an undivided interest 

therein) that is part of a split-dollar life 

insurance arrangement is a distribution 

of property, the amount of which is 

determined pursuant to § 1.61–22(g)(1) 

and (2). 

(2) Other life insurance arrangements. 

A payment by a corporation on behalf 

of a shareholder of premiums on a life 

insurance contract or an undivided 

interest therein that is owned by the 

shareholder constitutes a distribution of 

property, even if such payment is not 

part of a split-dollar life insurance 

arrangement under § 1.61–22(b). 

(3) When distribution is made—(i) In 

general. Except as provided in 

paragraph (m)(3)(ii) of this section, 

paragraph (c) of this section applies to 

determine when a distribution 

described in paragraph (m)(1) or (2) of 

this section is taken into account by a 

shareholder. 

(ii) Exception. Notwithstanding 

paragraph (c) of this section, a 

distribution described in paragraph 

(m)(1)(ii) of this section is treated as 

made by a corporation to its shareholder 

at the time that the life insurance 

contract, or an undivided interest 

therein, is transferred (within the 

meaning of § 1.61–22(c)(3)) to the 

shareholder. 

(4) Applicability date—(i) General 

rule. This paragraph (m) applies to splitdollar and other life insurance 

arrangements entered into after 

September 17, 2003. For purposes of 

this paragraph (m)(4), a split-dollar life 

insurance arrangement is entered into as 

determined under § 1.61–22(j)(1)(ii). 

(ii) Modified arrangements treated as 

new arrangements. If a split-dollar life 

insurance arrangement entered into on 

or before September 17, 2003, is 

materially modified (within the 

meaning of § 1.61–22(j)(2)) after 

September 17, 2003, the arrangement is 

treated as a new arrangement entered 

into on the date of the modification. 

(n) Applicability date. Paragraphs (a) 

through (c), (e), (g), and (h) of this 

section apply to distributions under 

section 301 made after September 22, 

2021. 

■ Par. 3. Section 1.356–1 is amended by 

revising paragraph (f) to read as follows: 

§ 1.356–1 Receipt of additional 

consideration in connection with an 

exchange. 

* * * * * 

(f) See § 1.301–1(j) for certain 

transactions that are not within the 

scope of section 356. 

* * * * * 

■ Par. 4. Section 1.368–2 is amended by 

revising the last sentence of paragraph 

(m)(3)(iii) to read as follows: 

§ 1.368–2 Definition of terms. 

* * * * * 

(m) * * * 

(3) * * * 

(iii) * * * See § 1.301–1(j). 

* * * * * 

§ 1.902–1 [Amended] 

■ Par. 5. In § 1.902–1(a)(12), remove the 

language ‘‘§ 1.301–1(b)’’ and add in its 

place ‘‘§ 1.301–1(c)’’. 

§ 1.902–3 [Amended] 

■ Par. 6. In § 1.902–3(a)(7), remove the 

language ‘‘§ 1.301–1(b)’’ and add in its 

place ‘‘§ 1.301–1(c)’’. 

Douglas W. O’Donnell, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: August 18, 2021. 

Mark J. Mazur, 

Acting Assistant Secretary of the Treasury 

(Tax Policy). 

[FR Doc. 2021–19980 Filed 9–21–21; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 71 

RIN 2900–AR28 

Extension of Program of 

Comprehensive Assistance for Family 

Caregivers Eligibility for Legacy 

Participants and Legacy Applicants 

AGENCY: Department of Veterans Affairs. 

ACTION: Interim final rule. 

SUMMARY: The Department of Veterans 

Affairs (VA) is revising its regulations 

that govern VA’s Program of 

Comprehensive Assistance for Family 

Caregivers (PCAFC) by extending 

eligibility for legacy participants, legacy 

applicants, and their Family Caregivers 

and the applicable benefits afforded to 

Family Caregivers, to include the