66076 Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Rules and Regulations

PART 1208—[AMENDED]

1. The authority citation for Part 1208

continues to read as follows:

Authority: 23 U.S.C. 158; delegation of

authority at 49 CFR 1.48 and 1.50.

2. Section 1208.4 is revised to read as

follows:

§ 1208.4 Adoption of National Minimum

Drinking Age.

The Secretary shall withhold ten

percent of the amount required to be

apportioned to any State under each of

§§ 104(b)(1), 104(b)(2), 104(b)(5) and

104(b)(6) of title 23 U.S.C. on the first

day of each fiscal year in which the

purchase or public possession in such

State of any alcoholic beverage by a

person who is less than twenty-one

years of age is lawful.

3. Section 1208.5 is revised to read as

follows:

§ 1208.5 Unavailability of withheld funds.

Funds withheld under § 1208.4 from

apportionment to any State will not be

available for apportionment to the State.

§§ 1208.6—1208.8 [Removed]

4. Sections 1208.6 through 1208.8 are

removed.

§ 1208.9 [Redesignated as § 1208.6]

5. Section 1208.9 is redesignated as

1208.6.

Issued on: December 18, 1995.

Rodney E. Slater,

Administrator, Federal Highway

Administration.

Ricardo Martinez,

Administrator, National Highway Traffic

Safety Administration

[FR Doc. 95–31118 Filed 12–20–95; 8:45 am]

BILLING CODE 4910–59–P

DEPARTMENT OF TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8647]

RIN 1545–AS51

Withholding of Tax on Dispositions of

U.S. Real Property Interests by Foreign

Persons

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

regulations relating to withholding upon

certain distributions or dispositions of

U.S. real property interests. These

regulations reflect changes to the law

made by the Omnibus Budget

Reconciliation Act of 1993 and affect

withholding agents required to withhold

tax due on certain dispositions and

distributions of U.S. real property

interests.

DATES: These final regulations are

effective January 22, 1996. These

regulations are applicable to

transactions occurring after August 9,

1993.

FOR FURTHER INFORMATION CONTACT:

Gwendolyn A. Stanley (202) 622–3860

(not a toll free-call).

SUPPLEMENTARY INFORMATION:

Background

This document contains final

regulations reflecting changes made by

the Omnibus Budget Reconciliation Act

of 1993 to the withholding rates on

certain distributions and dispositions of

U.S. real property interests. These

regulations were not preceded by a

Notice of Proposed Rulemaking because

the withholding rates were changed by

the Act. This document also updates the

address of the Assistant Commissioner

(International) to whom various forms

must be sent.

Explanation of Provisions

The rate of withholding under section

1445(e) (1) and (2) of the Internal

Revenue Code was increased from 34%

to 35% by the Omnibus Budget

Reconciliation Act of 1993. The existing

regulations reflect the prior 34%

withholding rate. These regulations

reflect the increase in withholding to

35% (or the highest rate specified in

section 1445(e) (1) or (2)) for

dispositions occurring on or after

August 10, 1993.

Special Analyses

It has been determined that this

Treasury decision is not a significant

regulatory action as defined in EO

12866. Therefore, a regulatory

assessment is not required. It has also

been determined that section 553(b) of

the Administrative Procedure Act (5

U.S.C. chapter 5) and the Regulatory

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

not apply to these regulations, and,

therefore, a Regulatory Flexibility

Analysis is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, these final regulations were

submitted to the Small Business

Administration for comment on their

impact on small business.

Drafting Information

The principal author of these

regulations is Gwendolyn Stanley,

Office of Associate Chief Counsel

(International), IRS. However, other

personnel from the IRS and 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 continues to read in part as

follows:

Section 1.1445–5 also issued under 26

U.S.C. 1445(e)(6).

Section 1.1445–8 also issued under 26

U.S.C. 1445(e)(6). * * *

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

Par. 2. In section 1.1445–1, the

section heading and paragraph (g)(10)

are revised to read as follows:

§ 1.1445–1 Withholding on dispositions of

U.S. real property interests by foreign

persons: In general.

* * * * *

(g) * * *

(10) Address of the Assistant

Commissioner International. Any

written communication directed to the

Assistant Commissioner (International)

is to be addressed as follows: Director,

Philadelphia Service Center; 11601

Roosevelt Blvd.; Philadelphia, PA

19255; ATTN: Drop Point 543X.

Par. 3. Section 1.1445–5 is amended

as follows:

1. Paragraph (c)(1)(ii) is revised.

2. The third sentence and the last

sentence of paragraph (c)(1)(iii)(A) are

revised.

3. Paragraph (c)(1)(iii)(B) is removed.

4. Paragraph (c)(1)(iii)(C) is

redesignated as (c)(1)(iii)(B) and revised.

5. Paragraph (c)(1)(iv) is revised.

6. Paragraph (c)(3)(ii) is revised.

7. The first sentence of paragraph

(d)(1) is revised.

8. The second sentence of paragraph

(d)(1) is removed.

The revisions read as follows:

§ 1.1445–5 Special rules concerning

distributions and other transactions by

corporations, partnerships, trusts, and

estates.

* * * * *

(c)(1) * * *

(ii) Disposition by partnership. A

partnership must withhold a tax equal

to 35 percent (or the highest rate

specified in section 1445(e)(1)) of each

foreign partner’s distributive share of

the gain realized by the partnership

upon the disposition of each U.S. real
Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Rules and Regulations 66077

property interest. Such distributive

share of the gain must be determined

pursuant to the principles of section 704

and the regulations thereunder. For the

rules applicable to partnerships,

interests in which are regularly traded

on an established securities market, see

§ 1.1445–8.

(iii) Disposition by trust or estate—(A)

In general. * * * The fiduciary must

withhold 35 percent (or the highest rate

specified in section 1445(e)(1)) of any

distribution to a foreign beneficiary that

is attributable to the balance in the U.S.

real property interest account on the day

of the distribution. * * * For rules

applicable to trusts, interests in which

are regularly traded on an established

securities market and real estate

investment trusts, see § 1.1445–8.

(B) Example. The following example

illustrates the rules of paragraph

(c)(1)(iii)(A) of this section.

On January 1, 1994, A establishes a

domestic trust (which has as its taxable year,

the calendar year) for the benefit of B, a

nonresident alien, and C, a U.S. citizen. The

trust is not a trust subject to sections 671

through 679. Under the terms of the trust, the

trustee, T, is given discretion to distribute

income and corpus of the trust to provide for

the reasonable needs of B and C. During the

trust’s 1994 tax year, T disposes of three

parcels of vacant land located in the United

States. The following chart illustrates the

computation of the amount subject to

withholding under section 1445 with respect

to distributions made by T to B and C during

1994.

Date Parcel sold Gains or (loss)

realized

Distributions to

C

Distributions to

B (before withholding)

Section 1445

withholding

35% rate

U.S. real property interest

account

1/01/94 .............................. ............................................. ........................ ........................ ........................ ........................ ........................

3/01/94 .............................. Parcel 1 .............................. 140,000 ........................ ........................ ........................ 140,000

3/05/94 .............................. ............................................. ........................ 5,000 10,000 3,500 125,000

3/15/94 .............................. ............................................. ........................ 10,000 5,000 1,750 110,000

5/01/94 .............................. Parcel 2 .............................. 300,000 ........................ ........................ ........................ 410,000

5/15/94 .............................. Parcel 3 .............................. (50,000) ........................ ........................ ........................ 360,000

12/01/94 .............................. ............................................. ........................ 170,000 170,000 59,500 20,000

1/01/95 .............................. ............................................. ........................ ........................ ........................ ........................ ........................

(iv) Disposition by grantor trust. The

trustee or equivalent fiduciary of a trust

that is subject to the provisions of

subpart E of part 1 of subchapter J

(sections 671 through 679) must

withhold a tax equal to 35 percent (or

the highest rate specified in section

1445(e)(1)) of the gain realized from

each disposition of a U.S. real property

interest to the extent such gain is

allocable to a portion of the trust treated

as owned by a foreign person under

subpart E of part 1 of subchapter J.

* * * * *

(3) * * *

(ii) Amount to be withheld. A

partnership or trust electing to withhold

under this § 1.1445–5(c)(3) shall

withhold from each distribution to a

foreign person an amount equal to 35

percent (or the highest rate specified in

section 1445(e)(1)) of the amount

attributable to section 1445(e)(1)

transfers.

* * * * *

(d) Distributions of U.S. real property

interests by foreign corporations—(1) In

general. A foreign corporation that

distributes a U.S. real property interest

must deduct and withhold a tax equal

to 35 percent (or the rate specified in

section 1445(e)(2)) of the amount of gain

recognized by the corporation on the

distribution. * * *

* * * * *

Par. 4. Section 1.1445–8(c)(2)(i) is

revised to read as follows:

§ 1.1445–8 Special rules regarding publicly

traded partnerships, publicly traded trusts

and real estate investment trusts (REITS).

* * * * *

(c) * * *

(2) REITS—(i) In general. The amount

to be withheld with respect to a

distribution by a REIT, under this

section shall be equal to 35 percent (or

the highest rate specified in section

1445(e)(1)) of the amount described in

paragraph (c)(2)(ii) of this section.

* * * * *

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: November 28, 1995.

Leslie Samuels,

Assistant Secretary of the Treasury.

[FR Doc. 95–30871 Filed 12–20–95; 8:45 am]

BILLING CODE 4830–01–U

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8648]

RIN 1545–AB21

Controlling corporation’s basis

adjustment in its controlled

corporation’s stock following a

triangular reorganization

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

regulations under sections 358, 1032,

and 1502 of the Internal Revenue Code

of 1986. The final regulations provide

rules for adjusting the basis of a

controlling corporation in the stock of a

controlled corporation as the result of

certain triangular reorganizations

involving the stock of the controlling

corporation. They also generally provide

that the use of the controlling

corporation’s stock provided by the

controlling corporation pursuant to the

plan of reorganization is treated as a

disposition of those shares by the

controlling corporation.

DATES: These regulations are effective

December 21, 1995.

For dates of applicability, see the

‘‘Effective Dates’’ section under the

SUPPLEMENTARY INFORMATION portion of

the preamble and the effective date

provisions of the new or revised

regulations.

FOR FURTHER INFORMATION CONTACT: Curt

Cutting, (202) 622–7550 (not a toll-free

number).

SUPPLEMENTARY INFORMATION:

Background

This document contains final

regulations under sections 358, 1032,

and 1502. The proposed regulations

were published in the Federal Register

on December 23, 1994 (59 FR 66280

[CO–993–71], 1995–4 I.R.B. 59 (January

23, 1995)). The IRS received many

comments on the proposed regulations

and held a public hearing on March 31,

1995.

After consideration of the comments

and the statements made at the hearing,

the proposed regulations are adopted as

revised by this Treasury decision.