Federal Register / Vol. 61, No. 1 / Tuesday, January 2, 1996 / Proposed Rules 27

applicable contract, inclusive of option

or renewal periods, to represent any

RUS Borrower on the same or other

matters, without the express written

consent of RUS.

(f) Consultant Contracts with all Legal

Consultants, all Financial Consultants

and selected other Consultants shall

provide that such Consultants agree not

to undertake, for a period of not less

than four years from the contract

expiration date, to represent any RUS

Borrower or G&T affiliate thereof,

including a Borrower which may prepay

outstanding RUS indebtedness

subsequent to the Consultant

undertaking to represent RUS, on any

matter in which RUS has a significant

interest in the outcome, where such

Borrower(s) were the subject of

consulting services rendered by that

Consultant during the tenure of the

applicable contract, without the express

written consent of RUS. G&T affiliate in

this context shall refer to all members of

the applicable generation and

transmission cooperative and the

cooperative(s) in which the Borrower

was itself a member. Representation

includes any retainer or advisory

contract and is not limited to

representation relating to negotiations

with or Applications before RUS.

§ 1789.162 Indemnification agreement.

As a condition of approving Borrower

funding, RUS will require the Borrower

to enter into an Indemnification

Agreement, in form and substance

satisfactory to RUS, providing that the

Borrower will indemnify and hold

harmless the government and any

officers, agents or employees of the

government from any and all liability,

including costs, fees, and settlements

arising out of, or in any way connected

with the administration and supervision

of, the contract funded by the Borrower

for consultant services relating to the

Borrower’s Application.

§ 1789.163 Waiver

RUS may waive any requirement or

procedure of this subpart by

determining that its application in a

particular situation would not be in the

government’s interest.

§§ 1789.164–1789.165 [Reserved]

Subpart B—Escrow Account Funding

and Payments

§ 1789.166 Terms and conditions of

funding agreement.

Funding Agreements between the

Borrower and a Consultant shall be in

form and substance satisfactory to RUS

and provide for, among other matters,

the following:

(a) Specific reference by number to

the applicable Consulting Contract

entered into between RUS and the

Consultant;

(b) Specific reference by number to

the applicable Task Order (where

applicable);

(c) A brief description of the

Application;

(d) A requirement that Invoices make

specific reference to:

(1) The applicable contract and Task

Order(s); and

(2) The Escrow Account from which

payment is to be made;

(e) A requirement that the Final

Invoice for a Task Order be clearly

identified as such;

(f) A description of the services to be

provided by the Consultant to RUS and

the applicable time frames for the

provision of such services;

(g) Agreement that the Borrower shall

pay for the Consultant services provided

to RUS under the applicable contract

through an Escrow Account established

pursuant to an Escrow Agreement, the

Consultant shall not provide services to

RUS under the applicable contract

unless there are sufficient funds in the

Escrow Account to pay for such

services, the Consultant shall seek

compensation for services provided

under the applicable contract from, and

only from, funds made available

through the Escrow Account, and the

Consultant must submit all Invoices to

RUS for approval.

(h) A form of Escrow Agreement

satisfactory to the Borrower, Consultant

and the designated Third-party

Commercial Institution;

(i) A schedule setting forth when and

in what amounts the Borrower shall

fund the Escrow Account;

(j) Acknowledgment by the

Consultant of the Indemnification

Agreement provided by the Borrower to

the government; and

(k) The Funding Agreement shall not

be effective unless and until approved

in writing by RUS.

§ 1789.167 Terms and conditions of

escrow agreement.

Escrow Agreements between and

among the Borrower, Consultant and

Third-party Commercial Institution

shall be in form and substance

satisfactory to RUS and provide for,

among other matters, the following:

(a) Specific reference by number to

the applicable contract for services

entered into between RUS and the

Consultant;

(b) Specific reference by number to

the applicable Task Order;

(c) Specific reference by number to

the Escrow Account into which funds

are to be deposited;

(d) Invoices to specifically identify

the applicable contract and Task

Order(s);

(e) Funds to be held in the Escrow

Account by the escrow agent until paid

to the Consultant pursuant to RUS

direction;

(f) The Escrow Account to be closed

and all remaining funds remitted to the

Borrower after payment of the Final

Invoice, or upon notice from RUS to the

escrow agent that RUS is satisfied no

further payments are required under the

Funding Agreement; and

(g) RUS, the Consultant and the

Borrower to have the right to be

informed, in a timely manner and in

such form as they may reasonably

request, as to the status of and activity

in the Escrow Account.

§§ 1789.168–1789.175 [Reserved]

Dated: December 21, 1995.

Jill Long Thompson,

Under Secretary, Rural Economic and

Community Development.

[FR Doc. 95–31452 Filed 12–29–95; 8:45 am]

BILLING CODE 3410–15–P

NUCLEAR REGULATORY

COMMISSION

10 CFR Part 26

Meeting Regarding Onsite Fitness-forDuty Testing

AGENCY: Nuclear Regulatory

Commission.

ACTION: Notice of Open Meeting.

SUMMARY: The Nuclear Regulatory

Commission (NRC) will conduct an

open meeting to discuss regulatory

options under the provisions of 10 CFR

Part 26 for performing onsite screening

tests by the Washington Public Power

Supply System (WPPS) of urine

specimens collected by the Utilities

Service Alliance (USA) members. The

WPPS requested the meeting to discuss

its proposed approach to conduct initial

screening tests of urine specimens sent

to them by USA members to determine

which specimens are negtive and need

no further testing at an HHS-certified

laboratory. A summary of the meeting

will be prepared and will be available

upon request.

DATES: The meeting will be held at 9:30

a.m. on January 11, 1996.

ADDRESSES: The meeting will be in

Room 1–F5 at NRC Headquarters, One

White Flint North, 11555 Rockville

Pike, Rockville, Maryland.

Dated at Rockville, Maryland this 26th day

of December 1995.
28 Federal Register / Vol. 61, No. 1 / Tuesday, January 2, 1996 / Proposed Rules

For the Nuclear Regulatory Commission.

Robert J. Dube,

Deputy Chief, Safeguards Branch, Division

of Reactor Program Management, Office of

Nuclear Reactor Regulation.

[FR Doc. 95–31546 Filed 12–29–95; 8:45 am]

BILLING CODE 7590–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[PS–2–95]

RIN 1545–AT19

Distribution of Marketable Securities

by a Partnership

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations relating to the

treatment of a distribution of marketable

securities by a partnership under

section 731(c) of the Internal Revenue

Code of 1986, as amended (Code). These

proposed regulations provide taxpayers

with guidance needed to comply with

certain changes made by the Uruguay

Round Agreements Act of 1994 (Pub. L.

No. 103–465). This document also

provides notice of a public hearing on

these proposed regulations.

DATES: Written comments and requests

to speak (with outlines of oral

comments) at a public hearing

scheduled for 10 a.m. on Wednesday,

April 3, 1996 must be received by

Wednesday, March 13, 1996.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (PS–2–95), 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 (PS–2–95), Courier’s

Desk, Internal Revenue Service, 1111

Constitution Avenue NW., Washington,

DC. The public hearing will be held in

the IRS Auditorium.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulations, Terri A.

Belanger or William M. Kostak, (202)

622–3080; concerning submissions and

the hearing, Christina Vasquez, (202)

622–7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Introduction

This document proposes to add

§ 1.731–2 to the Income Tax Regulations

(26 CFR part 1) under section 731(c) of

the Code. Section 731(c) was amended

by section 741(a) of the Uruguay Round

Agreements Act of 1994 (Public Law

103–465).

Background

Section 731(a)(1) of the Code provides

that a partner must recognize gain on a

distribution from a partnership to the

extent that any money distributed

exceeds the adjusted basis of the

partner’s interest in the partnership

immediately before the distribution.

Section 737 provides that a partner must

recognize gain on a distribution of

property other than money in an

amount equal to the lesser of (i) the

partner’s net precontribution gain or (ii)

the excess of the fair market value of the

distributed property over the partner’s

basis in the partnership interest.

Section 731(c) provides that the term

money includes marketable securities

for purposes of section 731(a)(1) and

section 737. As discussed in the

legislative history accompanying section

731(c), treating marketable securities as

money for this purpose is appropriate

because marketable securities are

economically equivalent to money.

Section 731(c) affects only the tax

consequences to the distributee partner;

section 731(c) does not require the

partnership or any partner other than

the distributee partner to recognize gain

on a distribution of marketable

securities.

Explanation of Provisions

Marketable Securities Treated as Money

Distributions of marketable securities

are treated as distributions of money

under section 731(c) only for purposes

of sections 731(a)(1) and 737. For

example, a distribution of marketable

securities is not treated as a distribution

of money to the extent it is subject to

section 707 or section 751(b) because

the distribution is not subject to section

731(a)(1) or section 737. In addition,

marketable securities are not treated as

money for purposes of section 731(a)(2),

so that a partner does not recognize a

loss on a distribution of marketable

securities. Finally, marketable securities

contributed by a partner are treated as

property other than money for purposes

of determining the partner’s net

precontribution gain under section

737(b).

Reduction of Amount Treated as Money

Under section 731(c)(3)(B), the

amount of marketable securities that is

treated as money is reduced by the

excess of (i) the partner’s share of the

net gain of the partnership’s securities

of the same class and issuer as the

distributed securities immediately

before the distribution over (ii) the

partner’s share of such net gain

immediately after the distribution. This

provision allows a partner to withdraw

the partner’s share of appreciation in the

partnership’s marketable securities

without recognizing gain on the

distribution. As a result, section 731(c)

generally applies only when a partner

receives a distribution of marketable

securities in exchange for the partner’s

share of appreciated assets other than

marketable securities.

Under the authority of section

731(c)(3)(B), the proposed regulations

provide that all marketable securities

held by a partnership are treated as

marketable securities of the same class

and issuer as the distributed securities.

Treating all marketable securities as a

single asset for this purpose is

consistent with the basic rationale of

section 731(c) that marketable securities

are the economic equivalent of money.

As a result, the amount of the

distribution that is not treated as money

will depend on the partner’s share of the

net appreciation in all partnership

securities, not on the partner’s share of

the appreciation in the type of securities

distributed.

Definition of Marketable Securities

In general, the term marketable

securities includes any financial

instruments—such as stocks, options,

and derivatives—that are actively traded

within the meaning of section

1092(d)(1). In addition, section

731(c)(2)(B)(v) provides that an interest

in an entity is a marketable security if

substantially all of the assets of the

entity consist of marketable securities or

money. The proposed regulations

provide that substantially all of the

assets of an entity consist of marketable

securities or money only if 90 percent

or more of the assets of the entity at the

time of the distribution consist of such

assets.

Section 731(c)(2)(B)(vi) provides that,

to the extent provided in regulations, an

interest in an entity not described in

section 731(c)(2)(B)(v) is a marketable

security to the extent that the value of

such interest is attributable to

marketable securities or money. The

proposed regulations provide that an

interest in an entity is a marketable

security to the extent that the value of

the interest is attributable to marketable

securities or money that constitute less

than 90 percent but 20 percent or more

of the assets of the entity. The 20

percent threshold means that an interest

in an entity holding only a small