19188 Federal Register / Vol. 61, No. 85 / Wednesday, May 1, 1996 / Rules and Regulations

addition, if the Department’s

supplemental standards of ethical

conduct regulation takes effect before

the expiration of the grandfather period

on August 7, 1996, the Department will,

upon the effective date of those

regulations, amend 24 CFR part 0 by

removing the grandfathered sections

regarding ‘‘Outside employment and

other activities’’ and ‘‘Financial

interests.’’

Accordingly, FR Doc. 96–8380, a final

rule published in the Federal Register

on April 5, 1996 (61 FR 15350), is

amended by adding the following

provisions in title 24 of the Code of

Federal Regulations:

PART 0—STANDARDS OF CONDUCT

1. The authority citation for part 0

continues to read as follows:

Authority: 5 U.S.C. 7301; 42 U.S.C.

3535(d).

§ 0.735–203 [Redesignated as § 0.2]

2. Section 0.735–203 is redesignated

as § 0.2.

§ 0.735–204 [Redesignated as § 0.3]

3. Section 0.735–204 is redesignated

as § 0.3.

Dated: April 25, 1996.

Camille E. Acevedo,

Assistant General Counsel for Regulations.

[FR Doc. 96–10690 Filed 4–30–96; 8:45 am]

BILLING CODE 4210–32–P

24 CFR Part 290

[Docket No. FR–3715–C–03]

RIN 2502–AG30

Office of the Assistant Secretary for

Housing-Federal Housing

Commissioner; Disposition of

Multifamily Projects and Sale of HUDHeld Multifamily Mortgages; Final

Rule; Correction

AGENCY: Office of the Assistant

Secretary for Housing-Federal Housing

Commissioner, HUD.

ACTION: Final rule; Correction.

SUMMARY: On March 21, 1996 (61 FR

11684), the Department published a

final rule that implemented the

regulatory requirements under the

Multifamily Housing Property

Disposition Reform Act of 1994 that

affected the management and

disposition of HUD-owned properties

and properties with HUD-held

mortgages, and the sale of HUD-held

multifamily mortgages. The purpose of

this correction is to remove duplicate

information contained in § 290.39(c).

EFFECTIVE DATE: April 22, 1996.

FOR FURTHER INFORMATION CONTACT:

Barbara D. Hunter, Director, Program

Management Division, Office of

Multifamily Asset Management and

Disposition, Department of Housing and

Urban Development, Room 6182, 451

7th Street, SW., Washington, DC 20410.

Telephone (202) 708–3944; TTY (202)

708–4594. (These are not toll-free

numbers.)

SUPPLEMENTARY INFORMATION:

Accordingly, FR Doc. 96–6791, a final

rule on Part 290, Multifamily Projects

and Sale of HUD-Held Multifamily

Mortgages, published in the Federal

Register on March 21, 1996 at 61 FR

11684, is corrected as follows:

On page 11690, in the third column,

in § 290.39, paragraph (c) is corrected by

removing the second paragraph (c)(2)

that begins with ‘‘(2) A subsidized

project * * *’’, and by also removing

the undesignated paragraph in the

second paragraph (c)(2) that begins with

‘‘This requirement shall continue

* * *’’.

Dated: April 25, 1996.

Camille E. Acevedo,

Assistant General Counsel for Regulations.

[FR Doc. 96–10794 Filed 4–30–96; 8:45 am]

BILLING CODE 4210–27–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8665]

RIN 1545–AT55

Treatment of Underwriters in Section

351 and Section 721 Transactions

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

regulations concerning transfers of cash

to a corporation or a partnership. The

final regulations will affect taxpayers in

transactions under section 351 or

section 721 when there is an offering of

stock or partnership interests through an

underwriter.

EFFECTIVE DATE: May 1, 1996.

FOR FURTHER INFORMATION CONTACT:

Concerning the regulation under section

351(a), Susan T. Edlavitch, (202) 622–

7750; concerning the regulation under

section 721(a), James A. Quinn, (202)

622–3060 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

This document contains final

regulations under section 351 and

section 721. The final regulations

provide for the treatment of transfers of

cash to a corporation or a partnership

pursuant to an offering of stock or

partnership interests through an

underwriter.

Section 351(a) provides that no gain

or loss is recognized if property is

transferred to a corporation by one or

more persons solely in exchange for

stock in the corporation and

immediately after the exchange the

person or persons are in control (as

defined in section 368(c)) of the

corporation.

Section 721(a) provides that no gain

or loss is recognized to a partnership or

to any of its partners in the case of a

contribution of property to the

partnership in exchange for an interest

in the partnership.

On August 10, 1995, the IRS

published in the Federal Register a

notice of proposed rulemaking (CO–26–

95), adding regulations under section

351 and section 721 of the Internal

Revenue Code relating to transfers of

cash to a corporation or a partnership

(60 FR 40792). The proposed rules were

based on the conclusion that Situation

2 of Rev. Rul. 78–294 (1978–2 C.B. 141)

does not reflect current underwriting

practices. The proposed rules were also

based on the conclusion that

underwritings of partnership interests

should be treated similarly to

underwritings of stock. The rules, under

certain circumstances, disregard

underwriters of stock and partnership

interests for purposes of section 351 and

section 721.

Public Comments and the Final

Regulations

The IRS received few comments from

the public on the proposed regulations.

The comments received were generally

supportive of the proposed regulations

but sought guidance beyond the

intended scope of the rules. No public

hearing was requested and none was

held. After consideration of all the

comments, the regulations proposed by

CO–26–95 are adopted by this Treasury

decision.

In the notice of proposed rulemaking,

the IRS and Treasury invited public

comment with respect to three issues:

(a) Whether the proposed rules should

apply for all tax purposes; (b) whether

the proposed rules should be limited to

underwriters; and (c) whether the

proposed rules should be limited to

cash transactions. After consideration of
Federal Register / Vol. 61, No. 85 / Wednesday, May 1, 1996 / Rules and Regulations 19189

these issues, the regulations proposed

by CO–26–95 are adopted without any

change in language. However, although

the regulations specifically concern

underwriters, it is intended that its

principles could apply equally in

factually analogous situations. For

example, if the ownership by other

intermediaries in the distribution of

stock or partnership interests, such as

broker-dealers, is transitory, that

ownership should also be disregarded.

Effect on Other Documents

The following publication is obsolete

as of May 1, 1996: Rev. Rul. 78–294

(1978–2 C.B. 141).

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 also has

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, the notice of proposed rulemaking

preceding these regulations was

submitted to the Chief Counsel for

Advocacy of the Small Business

Administration for comment on its

impact on small business.

Drafting Information

The principal authors of these

regulations are Susan T. Edlavitch of the

Office of Assistant Chief Counsel

(Corporate) and Brian J. O’Connor,

formerly of the Office of Assistant Chief

Counsel (Passthroughs and Special

Industries). However, other personnel

from the IRS and Treasury 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 is amended by adding entries

in numerical order to read as follows:

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

Section 1.351–1 also issued under 26

U.S.C. 351. * * *

Section 1.721–1 also issued under 26

U.S.C. 721. * * *

Par. 2. In § 1.351–1, paragraph (a)(3)

is added to read as follows:

§ 1.351–1 Transfer to corporation

controlled by transferor.

(a) * * *

(3) Underwritings of stock—(i) In

general. For the purpose of section 351,

if a person acquires stock of a

corporation from an underwriter in

exchange for cash in a qualified

underwriting transaction, the person

who acquires stock from the

underwriter is treated as transferring

cash directly to the corporation in

exchange for stock of the corporation

and the underwriter is disregarded. A

qualified underwriting transaction is a

transaction in which a corporation

issues stock for cash in an underwriting

in which either the underwriter is an

agent of the corporation or the

underwriter’s ownership of the stock is

transitory.

(ii) Effective date. This paragraph

(a)(3) is effective for qualified

underwriting transactions occurring on

or after May 1, 1996.

* * * * *

Par. 3. In § 1.721–1, paragraph (c) is

added to read as follows:

§ 1.721–1 Nonrecognition of gain or loss

on contribution.

* * * * *

(c) Underwritings of partnership

interests—(1) In general. For the

purpose of section 721, if a person

acquires a partnership interest from an

underwriter in exchange for cash in a

qualified underwriting transaction, the

person who acquires the partnership

interest is treated as transferring cash

directly to the partnership in exchange

for the partnership interest and the

underwriter is disregarded. A qualified

underwriting transaction is a transaction

in which a partnership issues

partnership interests for cash in an

underwriting in which either the

underwriter is an agent of the

partnership or the underwriter’s

ownership of the partnership interests is

transitory.

(2) Effective date. This paragraph (c)

is effective for qualified underwriting

transactions occurring on or after May 1,

1996.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: March 26, 1996.

Leslie Samuels,

Assistant Secretary of Treasury.

[FR Doc. 96–10396 Filed 4–30–96; 8:45 am]

BILLING CODE 4830–01–P

26 CFR Parts 1, 301, and 602

[TD 8668]

RIN 1545–AT02

Environmental Settlement Funds—

Classification

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

regulations relating to the classification

of certain organizations as trusts for

federal tax purposes. The final

regulations provide guidance to

taxpayers on the proper classification of

trusts formed to collect and disburse

amounts for environmental remediation

of an existing waste site to discharge

taxpayers’ liability or potential liability

under applicable environmental laws.

DATES: These regulations are effective

May 1, 1996.

For dates of applicability, see

§ 301.7701–4(e)(5).

FOR FURTHER INFORMATION CONTACT:

James A. Quinn, (202) 622–3060 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information

contained in these final regulations has

been reviewed and approved by the

Office of Management and Budget in

accordance with the Paperwork

Reduction Act (44 U.S.C. 3507) under

control number 1545–1465. This

information is required by the IRS to

ensure the proper reporting of items of

income and expense of an

environmental remediation trust in

which a portion of the trust is treated as

owned by a grantor.

An agency may not conduct or

sponsor, and a person is not required to

respond to, a collection of information

unless the collection of information

displays a valid control number.

The estimated annual burden per

respondent is 4 hours.

Comments concerning the accuracy of

this burden estimate and suggestions for

reducing this burden should be sent to

the Internal Revenue Service, Attn: IRS

Reports Clearance Officer, T:FP,

Washington, DC 20224, and 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.

Books or records relating to this

collection of information must be

retained as long as their contents may

become material in the administration