Federal Register / Vol. 73, No. 189 / Monday, September 29, 2008 / Proposed Rules 56535 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–101258–08] 

RIN 1545–BH66 

Guidance Under Sections 642 and 643 

(Income Ordering Rules); Hearing 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Cancellation of notice of public 

hearing on proposed rulemaking. 

SUMMARY: This document cancels a 

public hearing on proposed rulemaking 

providing guidance under Internal 

Revenue Code section 642(c) with 

regard to the Federal tax consequences 

of an ordering provision in a trust, a 

will, or a provision of local law that 

attempts to determine the tax character 

of the amounts paid to a charitable 

beneficiary of the trust or estate. The 

proposed regulations also make 

conforming amendments to the 

regulations under section 643(a)(5). The 

proposed regulations affect estates, 

charitable lead trusts (CLTs) and other 

trusts making payments or permanently 

setting aside amounts for a charitable 

purpose. 

DATES: The public hearing, originally 

scheduled for October 8, 2008, at 10 

a.m., is cancelled. 

FOR FURTHER INFORMATION CONTACT: 

Richard A. Hurst of the Publications and 

Regulations Branch, Legal Processing 

Division, Associate Chief Counsel 

(Procedure and Administration), at 

Richard.A.Hurst@irscounsel.treas.gov. 

SUPPLEMENTARY INFORMATION: A notice 

of public hearing that appeared in the 

Federal Register on Wednesday, June 

18, 2008 (73 FR 34670), announced that 

a public hearing was scheduled for 

October 8, 2008, at 10 a.m., in the 

auditorium, Internal Revenue Building, 

1111 Constitution Avenue, NW., 

Washington, DC. The subject of the 

public hearing is under sections 642 and 

643 of the Internal Revenue Code. 

The public comment period for these 

regulations expired on September 16, 

2008. Outlines of topics to be discussed 

at the hearing were due on September 

18, 2008. The notice of proposed 

rulemaking and notice of public hearing 

instructed those interested in testifying 

at the public hearing to submit an 

outline of the topics to be addressed. As 

of Monday, September 22, 2008, no one 

has requested to speak. Therefore, the 

public hearing scheduled for October 8, 

2008, is cancelled. 

LaNita Van Dyke, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel (Procedure and Administration). 

[FR Doc. E8–22823 Filed 9–26–08; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–143544–04] 

RIN 1545–BD84 

Regulations Enabling Elections for 

Certain Transactions Under Section 

336(e); Correction 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Correction to notice of proposed 

rulemaking. 

SUMMARY: This document contains 

corrections to a notice of proposed 

rulemaking (REG–143544–04) that was 

published in the Federal Register on 

Monday, August 25, 2008 (73 FR 49965) 

under section 336(e) of the Internal 

Revenue Code. The proposed 

regulations, when finalized, would 

permit taxpayers to make an election to 

treat certain sales, exchanges, and 

distributions of another corporation’s 

stock as taxable sales of that 

corporation’s assets. These proposed 

regulations will affect corporations and 

their shareholders. 

FOR FURTHER INFORMATION CONTACT: 

Mark J. Weiss, (202) 622–7750 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

The correction notice that is the 

subject of this document is under 

sections 336 and 338 of the Internal 

Revenue Code. 

Need for Correction 

As published, the notice of proposed 

rulemaking (REG–143544–04) contains 

errors that may prove to be misleading 

and are in need of clarification. 

Correction of Publication 

Accordingly, the publication of the 

notice of proposed rulemaking (REG– 

143544–04), which was the subject of 

FR Doc. E8–19603, is corrected as 

follows: 

1. On page 49967, column 2, in the 

preamble, under the paragraph heading 

‘‘2. Requirements for a Section 336(e) 

Election’’, line 2 from the bottom of the 

column, the language ‘‘1(b)(4)(iii), 

1.336–1(b)(11), and 1.338–’’ is corrected 

to read ‘‘1(b)(4)(iii) and 1.336–1(b)(11), 

and § 1.338–’’. 

§ 1.336–2 [Corrected] 

2. On page 49973, column 3, § 1.336– 

2(b)(1)(i)(B)(3) Example 2.(i), line 5, the 

language ‘‘class of Target Subsidiary 

common stock’’ is corrected to read 

‘‘class of Target Subsidiary stock’’. 

3. On page 49975, column 2, § 1.336– 

2(b)(2)(v), line 10, the language 

‘‘unrelated person and the subsidiary’s’’ 

is corrected to read ‘‘unrelated person 

and the new subsidiary’s’’. 

LaNita Van Dyke, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel (Procedure and Administration). 

[FR Doc. E8–22822 Filed 9–26–08; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–209006–89] 

RIN 1545–AM97 

Transfers by Domestic Corporations 

That Are Subject to Section 367(a)(5); 

Distributions by Domestic 

Corporations That Are Subject to 

Section 1248(f); Correction 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Correction to notice of proposed 

rulemaking. 

SUMMARY: This document contains 

corrections to a notice of proposed 

rulemaking (REG–209006–89) that was 

published in the Federal Register on 

Wednesday, August 20, 2008 (73 FR 

49278) under sections 367(a), 367(a)(5), 

367(b), 1248(a), 1248(e), 1248(f), and 

6038B of the Internal Revenue Code. 

The proposed regulations under 

sections 367(a)(5) and 367(b) apply 

when a domestic corporation transfers 

certain property to a foreign corporation 

in an exchange described in section 

361(a) or (b). The proposed regulations 

under section 1248(e) suspend the 

application of section 1248(e) when 

capital gains are taxed at a rate equal to 

or greater than the rate at which 

ordinary income is taxed. The proposed 

regulations under section 1248(f) apply 

when a domestic corporation distributes 

stock of certain foreign corporations in 

a distribution to which section 337, 355, 

or 361 applies. The proposed 


hsrobinson on PROD1PC76 with PROPOSALS
56536 Federal Register / Vol. 73, No. 189 / Monday, September 29, 2008 / Proposed Rules 

regulations under section 1248(f) 

include regulations described in Notice 

87–64 (1987–2 CB 375). The proposed 

regulations under section 6038B 

establish reporting requirements for 

certain transfers of property by a 

domestic corporation to a foreign 

corporation in certain exchanges 

described in section 361(a) or (b). 

Finally, the proposed regulations under 

section 367(a) include the regulations 

described in Notice 2008–10 (2008–3 

IRB 277). 

The proposed regulations included in 

this document affect domestic 

corporations that transfer property to 

foreign corporations in certain 

transactions, or that distribute the stock 

of certain foreign corporations, and 

certain shareholders of such domestic 

corporations. The proposed regulations 

are necessary, in part, to provide 

guidance on changes to the law made by 

the Technical and Miscellaneous 

Revenue Act of 1988 (Pub. L. 100–647, 

102 Stat. 3342). 

FOR FURTHER INFORMATION CONTACT: 

Daniel McCall, (202) 622–3860 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

The correction notice that is the 

subject of this document is under 

sections 367, 1248, and 6038 of the 

Internal Revenue Code. 

Need for Correction 

As published, the notice of proposed 

rulemaking (REG–209006–89) contains 

errors that may prove to be misleading 

and are in need of clarification. 

Correction of Publication 

Accordingly, the publication of the 

notice of proposed rulemaking (REG– 

209006–89), which was the subject of 

FR Doc. E8–18885, is corrected as 

follows: 

1. On page 49282, column 1, in the 

preamble, under the paragraph heading 

‘‘(iii) Adjustments To Basis of Stock 

Received by Control Group Members’’, 

second paragraph of the column, lines 

17 through 28, the language ‘‘preamble)) 

exceeds the built-in gain in such stock 

(outside gain). The outside gain is the 

amount by which the fair market value 

of such stock exceeds the section 358 

basis of the stock (as determined before 

any required adjustment to such basis 

under the proposed regulations). The 

proposed regulations provide special 

rules that apply if the control group 

member holds more than one block of 

stock received in the transaction.’’ is 

corrected to read ‘‘preamble)) exceeds 

the built-in gain (or loss) in such stock, 

defined as outside gain (or loss) in the 

proposed regulations. The outside gain 

(or loss) is the amount by which the fair 

market value of such stock is greater 

than (or less than) the section 358 basis 

of the stock (as determined before any 

required adjustment to such basis under 

the proposed regulations). The proposed 

regulations provide special rules that 

apply if the control group member holds 

more than one block of stock received 

in the transaction. Comments are 

requested concerning whether, and the 

extent to which, an outside loss should 

limit the reduction to a control group 

member’s section 358 basis in the stock 

received that is attributable to section 

367(a) property. Consistent with the 

legislative history, the IRS and Treasury 

Department believe the basis reduction 

must be sufficient to preserve the 

control group member’s share of inside 

gain (to the extent not otherwise 

recognized by the U.S. transferor) in the 

stock received that is attributable to 

section 367(a) property. The IRS and 

Treasury Department believe this rule to 

be appropriate even if a control group 

member has an outside loss, in part 

because a basis reduction is required 

only if an election is made to apply the 

exception from the general rule of 

section 367(a)(5) provided by the 

proposed regulations.’’. 

§ 1.367(a)–7 [Corrected] 

2. On page 49291, column 2, 

§ 1.367(a)–7(c)(3)(i)(B), the language 

‘‘The control group member’s outside 

gain.’’ is corrected to read ‘‘The control 

group member’s outside gain (or loss).’’. 

3. On page 49293, column 2, 

§ 1.367(a)–7(f)(7), line 1, the language 

‘‘Outside gain is the product of the’’ is 

corrected to read ‘‘Outside gain (or loss) 

is the product of the’’. 

4. On page 49293, column 2, 

§ 1.367(a)–7(f)(7)(i), last line, the 

language ‘‘356; exceeds’’ is corrected to 

read ‘‘356; is greater than (or less 

than),’’. 

5. On page 49293, column 3, 

§ 1.367(a)–7(g) Example 1., line 5, the 

language ‘‘a $80x basis and $100x fair 

market value.’’ is corrected to read ‘‘a 

$120x basis and $100x fair market 

value.’’. 

6. On page 49294, column 1, 

§ 1.367(a)–7(g) Example 1. (ii)(E), the 

language ‘‘Under paragraph (c)(3) of this 

section, DP1’s section 358 basis in the 

FA stock ($80x) received in exchange 

for its DC stock must be reduced by 

$25x, the amount by which DP1’s share 

of inside gain ($45x) exceeds DP1’s $20x 

outside gain. DP1’s share of inside gain 

is determined based on its 50% 

ownership interest (by value) in DC at 

the time of the section 361 exchange. 

Because DC does not recognize gain on 

the section 361 exchange with respect to 

DP1, DP1’s share of inside gain is not 

reduced under paragraph (c)(3)(i)(A) of 

this section. DP1’s $20x outside gain 

equals the product of the section 367(a) 

percentage (100%) and the amount by 

which the fair market value ($100x) of 

the FA stock received by DP1 in 

exchange for its DC stock exceeds the 

section 358 basis of such FA stock 

($80x). As adjusted, DP1’s basis in its 

FA stock is $55x. Similarly, under 

paragraph (c)(3) of this section, DP2’s 

section 358 basis in the FA stock ($50x) 

received in exchange for its DC stock 

must be reduced by $17x, the amount by 

which DP2’s share of inside gain ($27x) 

exceeds DP1’s $10x outside gain. DP2’s 

share of inside gain is determined based 

on its 30% ownership interest (by value) 

in DC at the time of the section 361 

exchange. Because DC does not 

recognize gain on the section 361 

exchange with respect to DP2, DP2’s 

share of inside gain is not reduced 

under paragraph (c)(3)(i)(A) of this 

section. DP2’s $10x outside gain equals 

the product of the section 367(a) 

percentage (100%) and the amount by 

which the fair market value ($60x) of 

the FA stock received by DP2 in 

exchange for its DC stock exceeds the 

section 358 basis of such stock ($50x). 

As adjusted, DP2’s basis in its FA stock 

is $33x.’’ is corrected to read ‘‘Under 

paragraph (c)(3) of this section, DP1’s 

section 358 basis in the FA stock 

($120x) received in exchange for its DC 

stock must be reduced by $65x, the 

amount by which DP1’s share of inside 

gain ($45x) exceeds DP1’s $20x outside 

loss. DP1’s share of inside gain is 

determined based on its 50% ownership 

interest (by value) in DC at the time of 

the section 361 exchange. Because DC 

does not recognize gain on the section 

361 exchange with respect to DP1, DP1’s 

share of inside gain is not reduced 

under paragraph (c)(3)(i)(A) of this 

section. DP1’s $20x outside loss equals 

the product of the section 367(a) 

percentage (100%) and the amount by 

which the fair market value ($100x) of 

the FA stock received by DP1 in 

exchange for its DC stock is less than the 

section 358 basis of such FA stock 

($120x). As adjusted, DP1’s basis in its 

FA stock is $55x. Similarly, under 

paragraph (c)(3) of this section, DP2’s 

section 358 basis in the FA stock ($50x) 

received in exchange for its DC stock 

must be reduced by $17x, the amount by 

which DP2’s share of inside gain ($27x) 

exceeds DP1’s $10x outside gain. DP2’s 

share of inside gain is determined based 

on its 30% ownership interest (by value) 

in DC at the time of the section 361 

exchange. Because DC does not 


hsrobinson on PROD1PC76 with PROPOSALS
Federal Register / Vol. 73, No. 189 / Monday, September 29, 2008 / Proposed Rules 56537 

recognize gain on the section 361 

exchange with respect to DP2, DP2’s 

share of inside gain is not reduced 

under paragraph (c)(3)(i)(A) of this 

section. DP2’s $10x outside gain equals 

the product of the section 367(a) 

percentage (100%) and the amount by 

which the fair market value ($60x) of 

the FA stock received by DP2 in 

exchange for its DC stock is greater than 

the section 358 basis of such stock 

($50x). As adjusted, DP2’s basis in its 

FA stock is $33x.’’. 

7. On page 49294, column 2, 

§ 1.367(a)–7(g) Example 2. (ii)(D), line 3 

from the bottom of the paragraph, the 

language ‘‘FP stock received by DP1 

($180x) exceeds the’’ is corrected to read 

‘‘FP stock received by DP1($180x) is 

greater than the’’. 

8. On page 49294, column 3, 

§ 1.367(a)-7(g) Example 3. (ii)(D), line 2 

from the bottom of the paragraph, the 

language ‘‘by DP1 ($200x) exceeds the 

section 358 basis’’ is corrected to read 

‘‘by DP1 ($200x) is greater than the 

section 358 basis’’. 

§ 1.1248(f)–2 [Corrected] 

9. On page 49301, column 1, 

§ 1.1248(f)–2(d) Example 2. (ii)(E), lines 

11 through 28, the language ‘‘percentage 

(100%) and the excess of the fair market 

value of the FA stock received by DP1 

($200x) over the section 358 basis of 

such stock ($180x). As adjusted, DP1’s 

basis in the FA stock is $30x. Similarly, 

DP2’s section 358 basis ($100x) in the 

FA stock received in the section 361 

distribution is reduced by $82x, the 

amount by which DP2’s 30% share of 

inside gain ($102x) exceeds DP1’s $20x 

outside gain. DP2’s share of inside gain 

is not reduced under § 1.367(a)– 

7(c)(2)(ii) because DC did not recognize 

gain with respect to DP2. DP2’s $20x 

outside gain equals the product of the 

section 367(a) percentage (100%) and 

the excess of the fair market value of the 

FA stock received by DP2 ($120x) over 

the section 358 basis of such stock 

($100x). As adjusted, DP2’s basis in the’’ 

is corrected to read ‘‘percentage (100%) 

and the amount by which the fair 

market value of the FA stock received 

by DP1 ($200x) is greater than the 

section 358 basis of such stock ($180x). 

As adjusted, DP1’s basis in the FA stock 

is $30x. Similarly, DP2’s section 358 

basis ($100x) in the FA stock received 

in the section 361 distribution is 

reduced by $82x, the amount by which 

DP2’s 30% share of inside gain ($102x) 

exceeds DP1’s $20x outside gain. DP2’s 

share of inside gain is not reduced 

under § 1.367(a)–7(c)(2)(ii) because DC 

did not recognize gain with respect to 

DP2. DP2’s $20x outside gain equals the 

product of the section 367(a) percentage 

(100%) and the amount by which the 

fair market value of the FA stock 

received by DP2 ($120x) is greater than 

the section 358 basis of such stock 

($100x). As adjusted, DP2’s basis in 

the’’. 

10. On page 49301, column 2, 

§ 1.1248(f)–2(d) Example 2. (ii)(H), first 

line of the column, the language ‘‘DP1, 

DP2 and FA in the section 361’’ is 

corrected to read ‘‘DP1, DP2 and FP in 

the section 361’’. 

11. On page 49302, column 3, 

§ 1.1248(f)–2(d) Example 4. (ii)(C), line 

6 from the bottom of the paragraph, the 

language ‘‘of CFC1 stock exceeds DP1’s 

section 358’’ is corrected to read ‘‘of 

CFC1 stock is greater than DP1’s section 

358’’. 

LaNita Van Dyke, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel (Procedure and Administration). 

[FR Doc. E8–22820 Filed 9–26–08; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 100 

[Docket No. USCG–2008–0744] 

RIN 1625–AA08 

Special Local Regulations for Marine 

Events; Spa Creek, Annapolis, MD 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

temporarily change the enforcement 

period for special local regulations 

during the ‘‘Tug-of-War’’, a marine 

event held annually on the waters of 

Spa Creek between Eastport and 

Annapolis, Maryland. Special local 

regulations are necessary to provide for 

the safety of life on navigable waters 

during the event. This action is 

intended to restrict vessel traffic in 

portions of Spa Creek during the event. 

DATES: Comments and related material 

must reach the Coast Guard on or before 

October 29, 2008. 

ADDRESSES: You may submit comments 

identified by Coast Guard docket 

number USCG–2008–0744 to the Docket 

Management Facility at the U.S. 

Department of Transportation. To avoid 

duplication, please use only one of the 

following methods: 

(1) Online: http:// 

www.regulations.gov. 

(2) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue, SE., Washington, DC 20590– 

0001. 

(3) Hand delivery: Same as mail 

address above, between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. The telephone number 

is 202–366–9329. 

(4) Fax: 202–493–2251. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this proposed 

rule, call Ronald Houck, Marine 

Information Specialist, Coast Guard 

Sector Baltimore, telephone 410–576– 

2674. If you have questions on viewing 

or submitting material to the docket, call 

Renee V. Wright, Program Manager, 

Docket Operations, telephone 202–366– 

9826. 

SUPPLEMENTARY INFORMATION: 

Public Participation and Request for 

Comments 

We encourage you to participate in 

this rulemaking by submitting 

comments and related materials. All 

comments received will be posted, 

without change, to http:// 

www.regulations.gov and will include 

any personal information you have 

provided. We have an agreement with 

the Department of Transportation to use 

the Docket Management Facility. 

Submitting Comments 

If you submit a comment, please 

include the docket number for this 

rulemaking (USCG–2008–0744), 

indicate the specific section of this 

document to which each comment 

applies, and give the reason for each 

comment. We recommend that you 

include your name and a mailing 

address, an e-mail address, or a phone 

number in the body of your document 

so that we can contact you if we have 

questions regarding your submission. 

You may submit your comments and 

material by electronic means, mail, fax, 

or delivery to the Docket Management 

Facility at the address under ADDRESSES; 

but please submit your comments and 

material by only one means. If you 

submit them by mail or delivery, submit 

them in an unbound format, no larger 

than 81⁄2 by 11 inches, suitable for 

copying and electronic filing. If you 

submit them by mail and would like to 

know that they reached the Facility, 

please enclose a stamped, self-addressed 

postcard or envelope. We will consider 

all comments and material received 

during the comment period. We may 

change this proposed rule in view of 

them. 


hsrobinson on PROD1PC76 with PROPOSALS