This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

68763 

Vol. 79, No. 223 

Wednesday, November 19, 2014 

NUCLEAR REGULATORY 

COMMISSION 

10 CFR Part 72 

RIN 3150–AJ42 

[NRC–2014–0120] 

List of Approved Spent Fuel Storage 

Casks: Holtec International HI–STORM 

Underground Maximum Capacity 

Canister Storage System, Certificate of 

Compliance No. 1040 

AGENCY: Nuclear Regulatory 

Commission. 

ACTION: Direct final rule; withdrawal. 

SUMMARY: The U.S. Nuclear Regulatory 

Commission (NRC) is withdrawing a 

direct final rule that would have added 

the Holtec International HI–STORM 

Underground Maximum Capacity 

(UMAX) Canister Storage System, 

Certificate of Compliance (CoC) No. 

1040, to the ‘‘List of approved spent fuel 

storage casks.’’ The NRC is taking this 

action because it has received at least 

one significant adverse comment in 

response to a companion proposed rule 

that was concurrently published with 

the direct final rule. 

DATES: Effective November 19, 2014, the 

NRC withdraws the direct final rule 

published at 79 FR 53281 on September 

9, 2014. 

ADDRESSES: Please refer to Docket ID 

NRC–2014–0120 when contacting the 

NRC about the availability of 

information for this action. You may 

access publicly-available information 

related to this action by any of the 

following methods: 

• Federal Rulemaking Web site: Go to 

http://www.regulations.gov and search 

for Docket ID NRC–2014–0120. Address 

questions about NRC dockets to Carol 

Gallagher; telephone: 301–287–3422; 

email: Carol.Gallagher@nrc.gov. For 

technical questions, contact the 

individual listed in the FOR FURTHER

INFORMATION CONTACT section of this 

document. 

• NRC’s Agencywide Documents 

Access and Management System 

(ADAMS): You may obtain publiclyavailable documents online in the 

ADAMS Public Documents collection at 

http://www.nrc.gov/reading-rm/

adams.html. To begin the search, select 

‘‘ADAMS Public Documents’’ and then 

select ‘‘Begin Web-based ADAMS 

Search.’’ For problems with ADAMS, 

please contact the NRC’s Public 

Document Room (PDR) reference staff at 

1–800–397–4209, 301–415–4737, or by 

email to pdr.resource@nrc.gov. 

• NRC’s PDR: You may examine and 

purchase copies of public documents at 

the NRC’s PDR, Room O1–F21, One 

White Flint North, 11555 Rockville 

Pike, Rockville, Maryland 20852. 

FOR FURTHER INFORMATION CONTACT: 

Gregory R. Trussell, Office of Nuclear 

Material Safety and Safeguards, U.S. 

Nuclear Regulatory Commission, 

Washington, DC 20555–0001; telephone: 

301–415–6445, email: Gregory.Trussell@

nrc.gov. 

SUPPLEMENTARY INFORMATION: On 

September 9, 2014 (79 FR 53281), the 

NRC published in the Federal Register 

a direct final rule amending its 

regulations in part 72 of Title 10 of the 

Code of Federal Regulations to add the 

Holtec International HI–STORM UMAX 

Canister Storage System, CoC No. 1040, 

to the ‘‘List of approved spent fuel 

storage casks.’’ The direct final rule was 

to become effective on November 24, 

2014. The NRC also concurrently 

published a companion proposed rule 

on September 9, 2014 (79 FR 53352). 

In the September 9, 2014, proposed 

rule, the NRC stated that if any 

significant adverse comments were 

received, then the NRC would withdraw 

the direct final rule by publishing a 

notice in the Federal Register. As a 

result, the direct final rule would not 

take effect. The NRC received 10 

comments from private citizens which 

raised issues including inspections; 

seismic concerns; stress corrosion 

cracking; and aging management, among 

others. The comments are available at 

www.regulations.gov by searching on 

Docket ID NRC–2014–0120. The NRC 

determined that at least one of the 

comments is significant and adverse as 

defined in Section I, ‘‘Procedural 

Background,’’ of the direct final rule, 

because the comment raises an issue 

serious enough to warrant a substantive 

response to clarify or complete the 

record. Therefore, the NRC is 

withdrawing the direct final rule. 

As stated in the September 9, 2014, 

proposed rule, the NRC will address the 

comments in a subsequent final rule. 

The NRC will not initiate a second 

comment period on this action. 

Dated at Rockville, Maryland, this 13 day 

of November, 2014. 

For the U.S. Nuclear Regulatory 

Commission. 

Mark A. Satorius, 

Executive Director for Operations. 

[FR Doc. 2014–27398 Filed 11–18–14; 8:45 am] 

BILLING CODE 7590–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9704] 

RIN 1545–BK65 

Failure To File Gain Recognition 

Agreements or Satisfy Other Reporting 

Obligations 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations, temporary 

regulations, and removal of temporary 

regulations. 

SUMMARY: This document contains final 

and temporary regulations relating to 

the consequences to U.S. and foreign 

persons for failing to file gain 

recognition agreements (GRAs) or 

related documents, or to satisfy other 

reporting obligations, associated with 

certain transfers of property to foreign 

corporations in nonrecognition 

exchanges. The regulations are 

necessary to update and clarify the rules 

that apply when a U.S. or foreign person 

fails to file a GRA or related documents 

or to satisfy other reporting obligations. 

These regulations affect U.S. and foreign 

persons that transfer property to foreign 

corporations in nonrecognition 

exchanges. 

DATES: These regulations are effective 

on November 19, 2014. 

Applicability Dates: For dates of 

applicability, see §§ 1.367(a)–2(f)(4), 

1.367(a)–3(g)(1)(x), 1.367(a)–3T(g)(1)(ix), 

1.367(a)–7(j), 1.367(a)–8(r)(1)(i) and 


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68764 Federal Register / Vol. 79, No. 223 / Wednesday, November 19, 2014 / Rules and Regulations 

(r)(3), 1.367(e)–2(g), and 1.6038B– 

1(g)(6). 

FOR FURTHER INFORMATION CONTACT: 

Shane M. McCarrick, (202) 317–6937 

(not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

The collections of information 

contained in the regulations have been 

reviewed and approved by the Office of 

Management and Budget in accordance 

with the Paperwork Reduction Act of 

1995 (44 U.S.C. 3507(d)) under control 

number 1545–1487. 

The collections of information are in 

§§ 1.367(a)–2(f)(2), 1.367(a)–3(f)(2), 

1.367(a)–7(e)(2), 1.367(a)–8(p)(2), 

1.367(e)–2(f)(2), 1.6038B–1(c)(4)(ii), and 

1.6038B–1(e)(4). The collections of 

information are mandatory. The likely 

respondents are domestic corporations. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a valid control 

number. 

Books and records relating to a 

collection of information must be 

retained as long as their contents might 

become material in the administration 

of any internal revenue law. Generally, 

tax returns and tax return information 

are confidential, as required by 26 

U.S.C. 6103. 

Background 

This document contains amendments 

to 26 CFR part 1. On January 31, 2013, 

the IRS and the Department of the 

Treasury (Treasury Department) 

published a notice of proposed 

rulemaking (REG–140649–11) in the 

Federal Register (78 FR 6772–01) under 

sections 367 and 6038B of the Internal 

Revenue Code (Code) (proposed 

regulations) relating to the 

consequences to U.S. and foreign 

persons for failing to file GRAs or 

related documents, or to satisfy other 

reporting obligations, associated with 

certain transfers of property to foreign 

corporations in nonrecognition 

exchanges. No public hearing was 

requested or held. The IRS and the 

Treasury Department received written 

comments on the proposed regulations, 

which are available at 

www.regulations.gov. After 

consideration of all the comments, the 

proposed regulations are adopted as 

amended by this Treasury decision. In 

addition, this Treasury decision amends 

and removes a portion of the temporary 

§§ 1.367(a)–3 and 1.367(a)–7 regulations 

that were published on March 19, 2013 

(T.D. 9615, 2013–1 C.B. 1026). The 

comments and revisions are discussed 

in this preamble. 

Summary of Comments and 

Explanation of Revisions 

1. Satisfaction of Section 6038B 

Reporting if a GRA Is Filed 

The proposed regulations under 

section 6038B require a U.S. person that 

transfers property (U.S. transferor) to 

file a Form 926, Return by a U.S. 

Transferor of Property to a Foreign 

Corporation, with respect to a transfer of 

stock or securities in all cases in which 

a GRA is filed in order to avoid 

penalties under section 6038B. 

However, the proposed regulations do 

not require the U.S. transferor to report 

on the Form 926 any specific 

information regarding the transferred 

stock or securities. The IRS and the 

Treasury Department have determined 

that, similar to the information that 

must be provided for other types of 

transferred property, the U.S. transferor 

should report on the Form 926 the fair 

market value, adjusted tax basis, and 

gain recognized with respect to the 

transferred stock or securities, as well as 

any other information that Form 926, its 

accompanying instructions, or other 

applicable guidance require to be 

submitted with respect to the transfer of 

the stock or securities. Section 1.6038B– 

1(b)(2)(iv) of these final regulations is 

thus modified accordingly. 

2. Application to Previously Filed 

Requests 

The proposed regulations under 

§ 1.367(a)–8(p) only apply to requests 

for relief submitted on or after the date 

the proposed regulations are adopted as 

final regulations. One comment 

requested that these final regulations 

permit U.S. transferors to request relief 

under § 1.367(a)–8(p) of the proposed 

regulations for certain failures to file a 

GRA document or comply with the GRA 

provisions that are the subject of 

requests for relief submitted before the 

date the proposed regulations are 

finalized. According to the 

commentator, not permitting U.S. 

transferors to do so could result in 

disparate treatment for similarly 

situated U.S. transferors. 

The IRS and the Treasury Department 

have determined that it is appropriate to 

provide relief for certain failures to file 

or to comply that were not willful and 

that were the subject of requests for 

relief submitted under § 1.367(a)–8(p) of 

the existing final regulations (or 

submitted under § 1.367(a)–8T(e)(10), as 

contained in 26 CFR part 1 revised as of 

April 1, 2008, or § 1.367(a)–8(c)(2), as 

contained in 26 CFR part 1 revised as of 

April 1, 2006) before November 19, 2014 

(previously filed requests). Accordingly, 

§ 1.367(a)–8(r)(3) of these final 

regulations provides a procedure under 

which U.S. transferors may resubmit 

certain previously filed requests 

(including requests that were denied). 

By submitting a previously filed request 

under this procedure, a U.S. transferor 

agrees that these final regulations under 

§ 1.6038B–1 will apply to any transfer 

that is the subject of the request. This is 

intended to provide parity between 

similarly situated U.S. transferors and 

promote the policies underlying the 

proposed regulations by ensuring that a 

U.S. transferor that establishes its failure 

was not willful under § 1.367(a)–8(p) is 

still subject to penalties under section 

6038B if its failure was not due to 

reasonable cause. 

3. Promptly Filing an Amended Return 

as a Requirement to Seeking Relief 

One comment was received regarding 

the procedures described in § 1.367(a)– 

8(p)(2) of the proposed regulations for 

establishing that failures to file GRA 

documents, or failures to comply, were 

not willful. The comment requested that 

these final regulations excuse 

Coordinated Industry Case (CIC) 

taxpayers from the requirement under 

§ 1.367(a)–8(p)(2) of filing an amended 

return promptly after discovering a 

failure to file or a failure to comply. 

Instead, the commentator suggested that 

these final regulations allow CIC 

taxpayers to submit the materials 

required under § 1.367(a)–8(p)(2) when 

the taxpayers effect a ‘‘qualified 

amended return’’ under Rev. Proc. 94– 

69, 1994–2 CB 804 (generally providing 

special procedures for certain taxpayers 

to show additional tax due or make 

adequate disclosure with respect to an 

item or position on a tax return prior to 

an audit). 

According to the commentator, it is 

possible that an amended return filed to 

correct the failure to file or failure to 

comply will differ from the return that 

is ultimately audited when the taxpayer 

effects a qualified amended return 

under Rev. Proc. 94–69. The 

commentator stated that this could 

result in an inefficient use of resources 

in situations in which a CIC taxpayer, 

when preparing the amended return, 

includes not only adjustments related to 

the failure to file or failure to comply, 

but also all other adjustments as to 

which the taxpayer is aware. 

The IRS and the Treasury Department 

decline to adopt this comment. The 

commentator’s concerns exist in other 

international contexts (for example, 

§ 1.1503(d)–1(c)(2)), and it would be 

inappropriate to create differing 


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Federal Register / Vol. 79, No. 223 / Wednesday, November 19, 2014 / Rules and Regulations 68765 

procedures for requesting relief under 

different provisions. However, the IRS 

and the Treasury Department intend to 

study the issue. 

4. Modifying the Reported Fair Market 

Value of Transferred Stock 

One comment requested that these 

final regulations provide a mechanism 

under which taxpayers may modify the 

fair market value of transferred stock or 

securities reported on a previously filed 

GRA. According to the commentator, 

taxpayers often determine the fair 

market value of stock or securities 

before the date that the stock or 

securities are transferred to a foreign 

corporation; these determinations are 

based on projected financial information 

that may, in some cases, deviate from 

the actual financial information on the 

date of the transfer. 

The IRS and the Treasury Department 

decline to adopt the comment. The IRS 

and the Treasury Department have 

determined that the proposed 

regulations adequately address the 

commentator’s concerns. First, because 

a GRA is filed when a taxpayer files its 

tax return (rather than at the time of an 

outbound transfer of stock or securities), 

a taxpayer has, not including 

extensions, at least two and a half 

months following a transfer to reconcile 

projected financial information with 

actual financial information. 

Furthermore, a taxpayer may file an 

extension if it needs additional time to 

comply with the requirements of 

§ 1.367(a)–8. Finally, a taxpayer that 

fails to materially comply with the 

requirements of § 1.367(a)–8, including 

the requirement to include the fair 

market value of the transferred stock or 

securities in the GRA pursuant to 

§ 1.367(a)–8(c)(3)(i)(B), may be eligible 

to correct the GRA by seeking relief 

based on a claim that the failure was not 

willful. 

5. Extension of Relief for Failures That 

Are Not Willful to Other Section 367(a) 

Reporting Obligations 

The IRS and the Treasury Department 

have determined that it is appropriate to 

extend the relief for failures that are not 

willful to certain other reporting 

obligations under section 367(a) that 

were not covered by the proposed 

regulations. This Treasury decision 

therefore revises § 1.367(a)–2 (providing 

an exception to gain recognition under 

section 367(a)(1) for assets transferred 

outbound for use in the active conduct 

of a trade or business outside of the 

United States) and § 1.367(a)–7 

(regarding application of section 367(a) 

to an outbound transfer of assets by a 

domestic target corporation in an 

exchange described in section 361) so 

that a taxpayer may, solely for purposes 

of section 367(a), be deemed not to have 

failed to comply with reporting 

obligations under §§ 1.367(a)–2 and 

1.367(a)–7 by demonstrating that the 

failure was not willful. The temporary 

§ 1.367(a)–7 regulations regarding 

reasonable cause relief are therefore 

removed. Because the cases in which 

relief is sought under § 1.367(a)–2 and 

many of the cases in which relief is 

sought under § 1.367(a)–7 are also 

subject to reporting under section 6038B 

and the regulations thereunder, the 

penalty imposed under section 6038B 

for failure to satisfy a reporting 

obligation should generally be sufficient 

to encourage proper reporting and 

compliance. 

6. Withdrawal of GRA Directive 

On July 26, 2010, the Deputy 

Commissioner International (LMSB) 

issued directive LMSB–4–0510–017 

(Directive). The Directive permits 

taxpayers to remedy, without having to 

demonstrate reasonable cause, unfiled 

or deficient GRA documents associated 

with a timely filed initial GRA or a 

timely filed document purporting to be 

an initial GRA. The Directive explained 

that the means to best ensure 

compliance with the GRA provisions 

was under study and that, pending the 

study, the Directive would be effective 

‘‘until further notice.’’ Because this 

Treasury decision provides 

comprehensive guidance that is 

designed to ensure compliance with the 

GRA provisions, the Deputy 

Commissioner (International), Large 

Business & International will revoke the 

Directive effective on November 19, 

2014. 

7. Including an Original Form 8838 

With a Request for Relief 

Under § 1.367(a)–8(p)(2)(i) of the 

proposed regulations, a U.S. transferor 

who seeks relief for a failure to file or 

failure to comply with the GRA rules 

must, among other requirements, file an 

original Form 8838, Consent to Extend 

the Time to Assess Tax Under Section 

367—Gain Recognition Agreement, with 

an amended return. The Form 8838 

must, with respect to the gain realized 

but not recognized on the initial 

transfer, extend the period of limitations 

on the assessment of tax to the period 

specified in § 1.367(a)–8(p)(2)(i) of the 

proposed regulations. The IRS and the 

Treasury Department recognize that in 

certain cases (for example, certain cases 

in which a U.S. transferor seeks relief 

for an unfiled annual certification), the 

U.S. transferor will already have filed an 

original Form 8838 that extends the 

period of limitations through the 

required time period. These final 

regulations therefore provide that, in 

these cases, a U.S. transferor need not 

file another Form 8838 with the 

amended return; rather, the U.S. 

transferor must attach a copy of the 

previously filed Form 8838 to the 

amended return. A similar modification 

is made to these final regulations under 

§ 1.367(e)–2 concerning outbound 

liquidations and certain foreign-toforeign liquidations described in section 

332. 

8. Failure To Comply and Extension of 

Period of Limitations 

Section 1.367(a)–8(j)(8) of the existing 

regulations provides that a failure to 

comply with the GRA provisions will 

extend the period of limitations on 

assessment of tax until the close of the 

third full taxable year ending after the 

date on which the Director of Field 

Operations or Area Director receives 

actual notice of the failure to comply 

from the U.S. transferor. The same 

provision is included in the proposed 

regulations. Section 1.367(e)– 

2(e)(4)(ii)(B) of the proposed regulations 

provides a similar rule with respect to 

a liquidation document. 

The IRS and the Treasury Department 

have determined that the running of the 

extended period of limitations arising 

under §§ 1.367(a)–8(j)(8) and 1.367(e)– 

2(e)(4)(ii)(B) should be based on when 

the taxpayer furnishes to the Director of 

Field Operations International, Large 

Business & International (or any 

successor to the roles and 

responsibilities of such person) the 

information that should have been 

provided under the §§ 1.367(a)–8 or 

1.367(e)–2 regulations, as applicable. 

Thus, in these final regulations, 

§§ 1.367(a)–8(j)(8) and 1.367(e)– 

2(e)(4)(ii)(B) are modified accordingly. 

In addition, §§ 1.367(a)&8(c)(2)(iii), 

1.367(e)–2(b)(2)(i)(C)(1), and 1.367(e)– 

2(b)(2)(iii)(D) of these final regulations 

are revised to clarify that when a 

taxpayer files a GRA under § 1.367(a)– 

8 or a liquidation document under 

§ 1.367(e)–2, the taxpayer agrees to 

extend the period of limitations on 

assessment of tax, in the circumstances 

provided in §§ 1.367(a)–8(j)(8) and 

1.367(e)–2(e)(4)(ii)(B), as applicable. 

This agreement is deemed consented to 

and signed by the Secretary for purposes 

of section 6501(c)(4). 

9. Reporting Requirement in § 1.367(a)– 

3(c)(6)(i)(F)(3) 

Section 1.367(a)–3(a) of the existing 

final regulations provides the general 

rule that a U.S. person must recognize 

gain on certain transfers of stock or 


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68766 Federal Register / Vol. 79, No. 223 / Wednesday, November 19, 2014 / Rules and Regulations 

securities to a foreign corporation. In 

relevant part, § 1.367(a)–3(c) of the 

existing final regulations contains an 

exception for certain transfers of stock 

or securities of a domestic corporation. 

Specifically, § 1.367(a)–3(c)(1) provides 

that, except as provided in § 1.367(a)– 

3(e) (providing rules for transfers of 

stock or securities by a domestic 

corporation to a foreign corporation 

pursuant to an exchange described in 

section 361), a transfer of stock or 

securities of a domestic corporation by 

a U.S. person to a foreign corporation 

that would otherwise be subject to gain 

recognition under section 367(a)(1) 

pursuant to § 1.367(a)–3(a) will not be 

subject to section 367(a)(1) if certain 

requirements are satisfied. In particular, 

the domestic corporation the stock or 

securities of which are transferred 

(referred to as the U.S. target company) 

must comply with each of the reporting 

requirements in § 1.367(a)–3(c)(6) and 

each of the four conditions set forth in 

§ 1.367(a)–3(c)(1)(i) through (iv) must be 

satisfied. The condition set forth in 

§ 1.367(a)–3(c)(1)(iv) requires that the 

active trade or business test (as defined 

in § 1.367(a)–3(c)(3)) be satisfied. To 

satisfy the active trade or business test, 

the substantiality test (as defined in 

§ 1.367(a)–3(c)(3)(iii)) must be satisfied 

(among other requirements). The 

substantiality test is satisfied if, at the 

time of the transfer, the fair market 

value of the transferee foreign 

corporation is at least equal to the fair 

market value of the U.S. target company. 

Pursuant to the reporting requirement 

contained in § 1.367(a)–3(c)(6)(i)(F)(3), 

the U.S. target company must submit a 

statement demonstrating that the value 

of the transferee foreign corporation 

exceeds the value of the U.S. target 

company on the acquisition date. The 

standard that applies for purposes of the 

reporting requirement of § 1.367(a)– 

3(c)(6)(i)(F)(3) is intended to be the 

same as the standard that applies for 

purposes of the substantiality test. 

Accordingly, this Treasury decision 

revises § 1.367(a)–3(c)(6)(i)(F)(3) so that 

the U.S. target company must submit a 

statement demonstrating that the value 

of the transferee foreign corporation 

equals or exceeds the value of the U.S. 

target company on the acquisition date. 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866, as 

supplemented by Executive Order 

13563. 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) does not apply to these 

regulations. It is hereby certified that 

these regulations will not have a 

significant impact on a substantial 

number of small entities. This 

certification is based on the fact that 

these regulations merely provide for a 

change in the standard, or clarify or 

provide the standard, that will be used 

to determine whether a taxpayer that 

has failed to file a GRA or satisfy other 

reporting obligations under section 367 

will be entitled to avoid full gain 

recognition under section 367(a)(1) or 

367(e)(2), as applicable. Accordingly a 

Regulatory Flexibility Analysis under 

the Regulatory Flexibility Act (5 U.S.C. 

chapter 6) is not required. Pursuant to 

section 7805(f) of the Code, the notice 

of proposed rulemaking preceding this 

regulation was submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small business, and no 

comments were received. 

Drafting Information 

The principal author of these 

regulations is Shane M. McCarrick of 

the Office of Associate Chief Counsel 

(International). However, other 

personnel from the IRS and the Treasury 

Department participated in their 

development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

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: 

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

■ Par. 2. Section 1.367(a)–2 is amended 

by adding new paragraph (f) to read as 

follows: 

§ 1.367(a)–2 Exception for transfers of 

property for use in the active conduct of a 

trade or business. 

* * * * * 

(f) Failure to comply with reporting 

requirements of section 6038B—(1) 

Failure to comply. For purposes of the 

exception to the application of section 

367(a)(1) provided in paragraph (a) of 

§ 1.367(a)–2T, a failure to comply with 

the reporting requirements of section 

6038B and the regulations thereunder 

(failure to comply) has the meaning set 

forth in § 1.6038B–1(f)(2). 

(2) Relief for certain failures to 

comply that are not willful—(i) In 

general. A failure to comply described 

in paragraph (f)(1) of this section will be 

deemed not to have occurred for 

purposes of satisfying the requirements 

of this section if the taxpayer 

demonstrates that the failure was not 

willful using the procedure set forth in 

this paragraph (f)(2). For this purpose, 

willful is to be interpreted consistent 

with the meaning of that term in the 

context of other civil penalties, which 

would include a failure due to gross 

negligence, reckless disregard, or willful 

neglect. Whether a failure to comply 

was a willful failure will be determined 

by the Director of Field Operations 

International, Large Business & 

International (or any successor to the 

roles and responsibilities of such 

position, as appropriate) (Director) 

based on all the facts and 

circumstances. The taxpayer must 

submit a request for relief and an 

explanation as provided in paragraph 

(f)(2)(ii)(A) of this section. Although a 

taxpayer whose failure to comply is 

determined not to be willful will not be 

subject to gain recognition under this 

section, the taxpayer will be subject to 

a penalty under section 6038B if the 

taxpayer fails to demonstrate that the 

failure was due to reasonable cause and 

not willful neglect. See § 1.6038B– 

1(b)(1) and (f). The determination of 

whether the failure to comply was 

willful under this section has no effect 

on any request for relief made under 

§ 1.6038B–1(f). 

(ii) Procedures for establishing that a 

failure to comply was not willful—(A) 

Time and manner of submission. A 

taxpayer’s statement that the failure to 

comply was not willful will be 

considered only if, promptly after the 

taxpayer becomes aware of the failure, 

an amended return is filed for the 

taxable year to which the failure relates 

that includes the information that 

should have been included with the 

original return for such taxable year or 

that otherwise complies with the rules 

of this section, and that includes a 

written statement explaining the reasons 

for the failure to comply. The amended 

return must be filed with the Internal 

Revenue Service at the location where 

the taxpayer filed its original return. 

The taxpayer may submit a request for 

relief from the penalty under section 

6038B as part of the same submission. 

See § 1.6038B–1(f). 

(B) Notice requirement. In addition to 

the requirements of paragraph 

(f)(2)(ii)(A) of this section, the taxpayer 

must comply with the notice 

requirements of this paragraph 

(f)(2)(ii)(B). If any taxable year of the 

taxpayer is under examination when the 

amended return is filed, a copy of the 


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amended return and any information 

required to be included with such 

return must be delivered to the Internal 

Revenue Service personnel conducting 

the examination. If no taxable year of 

the taxpayer is under examination when 

the amended return is filed, a copy of 

the amended return and any 

information required to be included 

with such return must be delivered to 

the Director. 

(3) For illustrations of the application 

of the willfulness standard of this 

paragraph (f), see the examples in 

§ 1.367(a)–8(p)(3). 

(4) Paragraph (f) applies to requests 

for relief submitted on or after 

November 19, 2014. 

■ Par. 3. Section 1.367(a)–3 is amended: 

■ 1. In paragraphs (c)(6)(i)(F)(3)(i) and 

(c)(6)(i)(F)(3)(ii), by adding the language 

‘‘equals or’’ before the word ‘‘exceeds.’’ 

■ 2. By revising paragraph (c)(6)(ii). 

■ 3. By adding paragraph (f). 

■ 4. By adding paragraph (g)(1)(x). 

The additions and revisions read as 

follows: 

§ 1.367(a)–3 Treatment of transfers of 

stock or securities to foreign corporations. 

* * * * * 

(c) * * * 

(6) * * * 

(ii) Except as provided in paragraph 

(f) of this section, for purposes of this 

paragraph (c)(6), a U.S. income tax 

return will be considered timely filed if 

it is filed on or before the last date 

prescribed for filing (taking into account 

any extensions of time therefor) for the 

taxable year in which the transfer 

occurs. 

* * * * * 

(f) Failure to file statements—(1) 

Failure to file. For purposes of the 

exceptions to the application of section 

367(a)(1) provided in paragraphs (c) and 

(d)(2)(vi)(B) of this section, there is a 

failure to file a statement described in 

paragraph (c)(6), (c)(7), or (d)(2)(vi)(C) of 

this section (failure to file) if the 

statement is not filed with a timely filed 

U.S. income tax return or is not 

completed in all material respects. 

(2) Relief for certain failures to file 

that are not willful—(i) In general. A 

failure to file described in paragraph 

(f)(1) of this section will be deemed not 

to have occurred for purposes of 

satisfying the requirements of the 

applicable regulation if the taxpayer 

demonstrates that the failure was not 

willful using the procedure set forth in 

this paragraph (f)(2). For this purpose, 

willful is to be interpreted consistent 

with the meaning of that term in the 

context of other civil penalties, which 

would include a failure due to gross 

negligence, reckless disregard, or willful 

neglect. Whether a failure to file was a 

willful failure will be determined by the 

Director of Field Operations 

International, Large Business & 

International (or any successor to the 

roles and responsibilities of such 

position, as appropriate) (Director) 

based on all the facts and 

circumstances. The taxpayer must 

submit a request for relief and an 

explanation as provided in paragraph 

(f)(2)(ii)(A) of this section. Although a 

taxpayer whose failure to file is 

determined not to be willful will not be 

subject to gain recognition under this 

section, the taxpayer will be subject to 

a penalty under section 6038B if the 

taxpayer fails to satisfy the reporting 

requirements, if any, under that section 

and does not demonstrate that the 

failure was due to reasonable cause and 

not willful neglect. See § 1.6038B–1(b) 

and (f). The determination of whether 

the failure to file was willful under this 

section has no effect on any request for 

relief made under § 1.6038B–1(f). 

(ii) Procedures for establishing that a 

failure to file was not willful—(A) Time 

and manner of submission. A taxpayer’s 

statement that the failure to file was not 

willful will be considered only if, 

promptly after the taxpayer becomes 

aware of the failure, an amended return 

is filed for the taxable year to which the 

failure relates that includes the 

information that should have been 

included with the original return for 

such taxable year or that otherwise 

complies with the rules of this section, 

and that includes a written statement 

explaining the reasons for the failure to 

file. The amended return must be filed 

with the Internal Revenue Service at the 

location where the taxpayer filed its 

original return. The taxpayer may 

submit a request for relief from the 

penalty under section 6038B as part of 

the same submission. See § 1.6038B– 

1(f). 

(B) Notice requirement. In addition to 

the requirements of paragraph 

(f)(2)(ii)(A) of this section, the taxpayer 

must comply with the notice 

requirements of this paragraph 

(f)(2)(ii)(B). If any taxable year of the 

taxpayer is under examination when the 

amended return is filed, a copy of the 

amended return and any information 

required to be included with such 

return must be delivered to the Internal 

Revenue Service personnel conducting 

the examination. If no taxable year of 

the taxpayer is under examination when 

the amended return is filed, a copy of 

the amended return and any 

information required to be included 

with such return must be delivered to 

the Director. 

(3) For illustrations of the application 

of the willfulness standard of this 

paragraph (f), see the examples in 

§ 1.367(a)–8(p)(3). 

(g) * * * 

(1) * * * 

(x) Paragraphs (c)(6)(ii) and (f) of this 

section apply to statements that are 

required to be filed on or after 

November 19, 2014, as well as to 

requests for relief submitted on or after 

November 19, 2014. 

* * * * * 

■ Par. 4. Section 1.367(a)–3T is 

amended: 

■ 1. In paragraph (d)(2)(vi)(B)(1)(ii), by 

removing the language ‘‘its U.S. income 

tax return’’ and adding the language ‘‘its 

timely filed U.S. income tax return’’ in 

its place. 

■ 2. In the first and second sentences of 

paragraph (g)(1)(ix), by removing the 

language ‘‘(d)(2)(vi)(B)’’ and adding the 

language ‘‘(d)(2)(vi)(B)(1)(i), 

(d)(2)(vi)(B)(1)(iii), and (d)(2)(vi)(B)(2),’’ 

in its place. 

■ 3. By adding two new sentences at the 

end of paragraph (g)(1)(ix). 

The additions read as follows: 

§ 1.367(a)–3T Treatment of transfers of 

stock or securities to foreign corporations 

(temporary). 

* * * * * 

(g) * * * 

(1) * * * 

(ix) * * * Paragraph (d)(2)(vi)(B)(1)(ii) 

of this section applies to statements that 

are required to be filed on or after 

November 19, 2014. See paragraph 

(d)(2)(vi)(B)(1)(ii) of this section, as 

contained in 26 CFR part 1 revised as of 

April 1, 2014, for statements required to 

be filed on or after March 18, 2013, and 

before November 19, 2014. 

* * * * * 

■ Par. 5. Section 1.367(a)–7 is amended: 

■ 1. In paragraph (a), by removing the 

language ‘‘reasonable cause’’ and adding 

the language ‘‘not willful’’ in its place. 

■ 2. By revising paragraph (e)(2). 

■ 3. By revising paragraph (j). 

The revisions read as follows: 

§ 1.367(a)–7 Outbound transfers of 

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

* * * * * 

(e) * * * 

(2) Relief for certain failures to 

comply that are not willful—(i) In 

general. A control group member or U.S. 

transferor’s failure to comply with any 

requirement of this section will be 

deemed not to have occurred for 

purposes of satisfying the requirements 

of this section if the control group 

member or U.S. transferor (or the foreign 

acquiring corporation on behalf of the 

U.S. transferor), as applicable, 


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demonstrates that the failure was not 

willful using the procedure set forth in 

paragraph (e)(2)(ii) of this section. For 

this purpose, willful is to be interpreted 

consistent with the meaning of that term 

in the context of other civil penalties, 

which would include a failure due to 

gross negligence, reckless disregard, or 

willful neglect. Whether the failure to 

comply was a willful failure will be 

determined by the Director of Field 

Operations International, Large Business 

& International (or any successor to the 

roles and responsibilities of such 

person) (Director) based on all the facts 

and circumstances. The control group 

member or U.S. transferor (or the foreign 

acquiring corporation on behalf of the 

U.S. transferor), as applicable, must 

submit a request for relief and an 

explanation as provided in paragraph 

(e)(2)(ii) of this section. Although a U.S 

transferor whose failure to comply is 

determined not to be willful will not be 

subject to gain recognition under this 

section, the U.S. transferor will be 

subject to a penalty under section 6038B 

if the U.S. transferor fails to demonstrate 

that the failure was due to reasonable 

cause and not willful neglect. See 

§ 1.6038B–1(b) and (f). The 

determination of whether the failure to 

comply was willful under this section 

has no effect on any request for relief 

made under § 1.6038B–1(f). 

(ii) Procedures for establishing that a 

failure to comply was not willful—(A) 

Time and manner of submission. A 

control group member or U.S. 

transferor’s statement that the failure to 

comply was not willful will be 

considered only if, promptly after the 

control group member or U.S. transferor, 

as applicable, becomes aware of the 

failure, an amended return is filed for 

the taxable year to which the failure 

relates that includes the information 

that should have been included with the 

original return for such taxable year or 

that otherwise complies with the rules 

of this section, and that includes a 

written statement explaining the reasons 

for the failure to comply. The amended 

return must be filed with the Internal 

Revenue Service at the location where 

the taxpayer filed its original return. 

The U.S. transferor may submit a 

request for relief from the penalty under 

section 6038B as part of the same 

submission. See § 1.6038B–1(f). 

(B) Notice requirement. In addition to 

the requirements of paragraph 

(e)(2)(ii)(A) of this section, a control 

group member or U.S. transferor, as 

applicable, must comply with the notice 

requirements of this paragraph 

(e)(2)(ii)(B). If any taxable year of the 

control group member or U.S. transferor, 

as applicable, is under examination 

when the amended return is filed, a 

copy of the amended return and any 

information required to be included 

with such return must be delivered to 

the Internal Revenue Service personnel 

conducting the examination. If no 

taxable year of the control group 

member or U.S transferor, as applicable, 

is under examination when the 

amended return is filed, a copy of the 

amended return and any information 

required to be included with such 

return must be delivered to the Director. 

(iii) For illustrations of the 

application of the willfulness standard 

of this paragraph (e)(2), see the 

examples in § 1.367(a)–8(p)(3). 

* * * * * 

(j) Effective/applicability dates. 

Except for paragraph (e)(2) of this 

section, this section applies to transfers 

occurring on or after April 18, 2013. 

Paragraph (e)(2) applies to requests for 

relief submitted on or after November 

19, 2014. Paragraph (e)(2) of this section 

also applies to requests for relief 

submitted before November 19, 2014 if 

the statute of limitations on the 

assessment of tax has not expired for 

any year to which the request relates 

and the control group member or U.S. 

transferor, as applicable, resubmits the 

request under paragraph (e)(2) of this 

section and notes, on the request, that 

the request is being submitted pursuant 

to the third sentence of this paragraph 

(j). See paragraph (e)(2) of this section, 

as contained in 26 CFR part 1 revised as 

of April 1, 2014, for requests for relief 

submitted after April 17, 2013, and 

before November 19, 2014, that are not 

resubmitted under paragraph (e)(2) of 

this section. 

§ 1.367(a)–7T [Removed] 

■ Par. 6. Section 1.367(a)–7T is 

removed. 

■ Par. 7. Section 1.367(a)–8 is amended: 

■ 1. By revising the eleventh sentence of 

paragraph (a). 

■ 2. By redesignating paragraphs 

(b)(1)(v) through (xv) as (b)(1)(vii) 

through (xvii), respectively. 

■ 3. By redesignating paragraph 

(b)(1)(iv) as paragraph (b)(1)(v). 

■ 4. By adding new paragraphs (b)(1)(iv) 

and (vi). 

■ 5. By revising redesignated paragraphs 

(b)(1)(xiii), (xiv), and (xv). 

■ 6. By revising paragraph (c)(2)(iii). 

■ 7. By revising paragraph (d)(1). 

■ 8. By revising paragraph (j)(8). 

■ 9. By revising paragraph (p). 

■ 10. By adding a sentence at the end of 

paragraph (r)(1)(i). 

■ 11. By adding paragraph (r)(3). 

The revisions and additions read as 

follows: 

§ 1.367(a)–8 Gain recognition agreement 

requirements. 

(a) Scope.* * * Paragraph (p) of this 

section provides relief for certain 

failures to file an initial gain recognition 

agreement (as defined in paragraph 

(b)(1)(vi) of this section) or to comply 

with the requirements of this section 

with respect to a gain recognition 

agreement (as described in paragraph (c) 

of this section).* * * 

(b) * * * 

(1) * * * 

(iv) A gain recognition agreement 

document means any agreement, 

statement, schedule, or form required to 

be filed under this section, including an 

initial gain recognition agreement (as 

defined in paragraph (b)(1)(vi) of this 

section), a new gain recognition 

agreement described in paragraph (c)(5) 

of this section, a Form 8838 extending 

the period of limitations on assessment 

of tax described in paragraph (f) of this 

section, and an annual certification 

described in paragraph (g) of this 

section. 

* * * * * 

(vi) An initial gain recognition 

agreement means the gain recognition 

agreement entered into under paragraph 

(c) of this section with respect to the 

initial transfer. 

* * * * * 

(xiii) A timely filed return means a 

Federal income tax return filed on or 

before the last date prescribed for filing 

(taking into account any extensions of 

time therefor) such return. 

(xiv) Transferee foreign corporation. 

Except as provided in this paragraph 

(b)(1)(xiv), the transferee foreign 

corporation is the foreign corporation to 

which the transferred stock or securities 

are transferred in an initial transfer. In 

the case of an indirect stock transfer, the 

transferee foreign corporation has the 

meaning set forth in § 1.367(a)– 

3(d)(2)(i). The transferee foreign 

corporation also includes a corporation 

designated as the transferee foreign 

corporation in the case of a new gain 

recognition agreement entered into 

under this section. 

(xv) Transferred corporation. Except 

as provided in this paragraph (b)(1)(xv), 

the transferred corporation is the 

corporation the stock or securities of 

which are transferred in the initial 

transfer. In the case of an indirect stock 

transfer, the transferred corporation has 

the meaning set forth in § 1.367(a)– 

3(d)(2)(ii). The transferred corporation 

also includes a corporation designated 

as the transferred corporation in the 

case of a new gain recognition 


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agreement entered into under this 

section. 

* * * * * 

(c) * * * 

(2) * * * 

(iii) A statement that the U.S. 

transferor agrees to comply with all the 

conditions and requirements of this 

section, including to recognize gain 

under the gain recognition agreement in 

accordance with paragraph (c)(1)(i) of 

this section, to extend the period of 

limitations on assessment of tax as 

provided in paragraph (f) of this section, 

to file the certification described in 

paragraph (g) of this section, and, as 

provided in paragraph (j)(8) of this 

section, to treat a failure to comply (as 

described in paragraph (j)(8) of this 

section) as extending the period of 

limitations on assessment of tax for the 

taxable year in which gain is required to 

be reported. 

* * * * * 

(d) Filing requirements—(1) General 

rule. An initial gain recognition 

agreement must be timely filed in order 

for the U.S. transferor to avoid 

recognizing gain under section 367(a)(1) 

with respect to the transferred stock or 

securities by reason of the applicable 

exceptions provided under § 1.367(a)–3. 

Except as provided in paragraph (p) of 

this section, an initial gain recognition 

agreement is timely filed only if— 

(i) The initial gain recognition 

agreement and any other gain 

recognition agreement document 

required to be filed with the initial gain 

recognition agreement are included with 

a timely filed return of the U.S. 

transferor for the taxable year during 

which the initial transfer occurs; and 

(ii) Each gain recognition agreement 

document identified in paragraph 

(d)(1)(i) of this section is completed in 

all material respects. 

* * * * * 

(j) * * * 

(8) Failure to comply. A U.S. 

transferor fails to comply in any 

material respect with any requirement 

of this section, or the terms of the gain 

recognition agreement as described in 

paragraph (c)(1) of this section. A failure 

to comply under this paragraph (j)(8) 

will extend the period of limitations on 

assessment of tax for the taxable year in 

which gain is required to be reported 

until the close of the third full taxable 

year ending after the date on which the 

U.S. transferor furnishes to the Director 

of Field Operations International, Large 

Business & International (or any 

successor to the roles and 

responsibilities of such person) 

(Director) the information that should 

have been provided under this section. 

Except as provided in paragraph (p) of 

this section, for purposes of this 

paragraph (j)(8), a failure to comply 

includes— 

(i) If there is a gain recognition event 

in a taxable year, a failure to report gain 

or pay any additional tax or interest due 

under the terms of the gain recognition 

agreement; and 

(ii) A failure to file a gain recognition 

agreement document, other than an 

initial gain recognition agreement or a 

document required to be filed with the 

initial gain recognition agreement. For 

this purpose, there is a failure to file a 

gain recognition agreement document 

if— 

(A) The gain recognition agreement 

document is not timely filed as required 

under this section, or 

(B) The gain recognition agreement 

document is not completed in all 

material respects. 

* * * * * 

(p) Relief for certain failures to file or 

failures to comply that are not willful— 

(1) In general. This paragraph (p) 

provides relief if there is a failure to file 

an initial gain recognition agreement as 

required under paragraph (d)(1) of this 

section (failure to file), or a failure to 

comply that is a triggering event under 

paragraph (j)(8) of this section (failure to 

comply). A failure to file or failure to 

comply will be deemed not to have 

occurred for purposes of paragraph 

(d)(1) of this section or paragraph (j)(8) 

of this section if the U.S. transferor 

demonstrates that the failure was not 

willful using the procedure set forth in 

this paragraph (p). For this purpose, 

willful is to be interpreted consistent 

with the meaning of that term in the 

context of other civil penalties, which 

would include a failure due to gross 

negligence, reckless disregard, or willful 

neglect. Whether a failure to file or 

failure to comply was willful will be 

determined by the Director (as described 

in paragraph (j)(8) of this section) based 

on all the facts and circumstances. The 

U.S. transferor must submit a request for 

relief and an explanation as provided in 

paragraph (p)(2)(i) of this section. 

Although a U.S. transferor whose failure 

to file or failure to comply is determined 

not to be willful will not be subject to 

gain recognition under paragraph (b), 

(c), or (e) of § 1.367(a)–3 or paragraph 

(c)(1) of this section, as applicable, the 

U.S. transferor will be subject to a 

penalty under section 6038B if the U.S. 

transferor fails to satisfy the reporting 

requirements under that section and 

does not demonstrate that the failure 

was due to reasonable cause and not 

willful neglect. See § 1.6038B–1(b)(2) 

and (f). The determination of whether 

the failure to file or failure to comply 

was willful under this section has no 

effect on any request for relief made 

under § 1.6038B–1(f). 

(2) Procedures for establishing that a 

failure to file or failure to comply was 

not willful—(i) Time and manner of 

submission. A U.S. transferor’s 

statement that a failure to file or failure 

to comply was not willful will be 

considered only if, promptly after the 

U.S. transferor becomes aware of the 

failure, an amended return is filed for 

the taxable year to which the failure 

relates that includes the information 

that should have been included with the 

original return for such taxable year or 

that otherwise complies with the rules 

of this section, and that includes a 

written statement explaining the reasons 

for the failure to file or failure to 

comply. The U.S. transferor must file, 

with the amended return, a Form 8838 

extending the period of limitations on 

assessment of tax with respect to the 

gain realized but not recognized on the 

initial transfer to the later of: The close 

of the eighth full taxable year following 

the taxable year during which the initial 

transfer occurred (date one); or the close 

of the third full taxable year ending after 

the date on which the required 

information is provided to the Director 

(date two). However, the U.S. transferor 

is not required to file a Form 8838 with 

the amended return if both date one is 

later than date two and a Form 8838 was 

previously filed extending the period of 

limitations on assessment of tax with 

respect to the gain realized but not 

recognized on the initial transfer to date 

one. If a Form 8838 is not required to 

be filed with the amended return 

pursuant to the previous sentence, a 

copy of the previously filed Form 8838 

must be filed with the amended return. 

The amended return and either a Form 

8838 or a copy of the previously filed 

Form 8838, as the case may be, must be 

filed with the Internal Revenue Service 

at the location where the U.S. transferor 

filed its original return. The U.S. 

transferor may submit a request for 

relief from the penalty under section 

6038B as part of the same submission. 

See § 1.6038B–1(f). 

(ii) Notice requirement. In addition to 

the requirements of paragraph (p)(2)(i) 

of this section, the U.S. transferor must 

comply with the notice requirements of 

this paragraph (p)(2)(ii). If any taxable 

year of the U.S. transferor is under 

examination when the amended return 

is filed, a copy of the amended return 

and any information required to be 

included with such return must be 

delivered to the Internal Revenue 

Service personnel conducting the 

examination. If no taxable year of the 


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U.S. transferor is under examination 

when the amended return is filed, a 

copy of the amended return and any 

information required to be included 

with such return must be delivered to 

the Director. 

(3) Examples. The following examples 

illustrate the application of this 

paragraph (p). All of the examples are 

based solely on the following facts and 

any additional facts stated in the 

particular example. DC, a domestic 

corporation, wholly owns FS and FA, 

each a foreign corporation. In Year 1, 

pursuant to a transaction qualifying 

both as an exchange under section 351 

and a reorganization under section 

368(a)(1)(B), DC transferred all the FS 

stock to FA solely in exchange for 

voting stock of FA (FS Transfer). The 

fair market value of the FS stock 

exceeded DC’s tax basis in the stock at 

the time of the FS transfer. Absent the 

application of section 367 to the 

transaction, DC’s exchange of the FS 

stock for the stock of FA qualified as a 

tax-free exchange under sections 351(a) 

and section 354. Immediately after the 

transaction, both FA and FS were 

controlled foreign corporations (as 

defined in section 957). Furthermore, 

DC was a section 1248 shareholder (as 

defined in § 1.367(b)–2(b)) with respect 

to FA and FS, and a 5-percent 

shareholder with respect to FA for 

purposes of § 1.367(a)–3(b)(ii). Thus, DC 

was required to recognize gain under 

section 367(a)(1) by reason of the FS 

Transfer unless DC timely filed an 

initial gain recognition agreement (GRA) 

as required by paragraph (d)(1) of this 

section and complies in all material 

respects with the requirements of this 

section throughout the term of the GRA. 

The application of section 6038B is not 

addressed in these examples. DC may be 

subject to a penalty under section 6038B 

even if DC demonstrates under this 

section that a failure to file or failure to 

comply was not willful. See § 1.6038B– 

1(b) and (f) for the application of section 

6038B. 

Example 1. Taxpayer failed to file a GRA 

due to accidental oversight. (i) Facts. DC filed 

its tax return for the year of the FS Transfer, 

reporting no gain with respect to the 

exchange of the FS stock. DC, through its tax 

department, was aware of the requirement to 

file a GRA in order for DC to avoid 

recognizing gain with respect to the FS 

Transfer under section 367(a)(1), and had the 

experience and competency to properly 

prepare the GRA. DC had filed many GRAs 

over the years and had never failed to timely 

file a GRA. However, although DC prepared 

the GRA with respect to the FS Transfer, it 

was not filed with DC’s tax return for the year 

of the FS Transfer due to an accidental 

oversight. During the preparation of the 

following year’s tax return, DC discovered 

that the GRA was not filed. DC filed an 

amended return to file the GRA and 

complied with the procedures set forth under 

paragraph (p)(2) of this section promptly after 

it became aware of the failure. 

(ii) Result. Because DC failed to file a GRA 

with its timely filed tax return for the year 

of the FS Transfer, there is a failure to timely 

file the GRA as required by paragraph (d)(1) 

of this section. However, based on the facts 

of this Example 1, including that the failure 

to timely file the GRA was an isolated and 

accidental oversight, the failure to timely file 

is not a willful failure to file. Accordingly, 

the timely filed requirement of paragraph 

(d)(1) of this section is considered to be 

satisfied, and DC is not required to recognize 

the gain realized on the FS Transfer under 

section 367(a)(1). 

Example 2. Taxpayer’s course of conduct 

is taken into account in determination. (i) 

Facts. DC filed its tax return for the year of 

the FS Transfer, reporting no gain with 

respect to the exchange of the FS stock, but 

failed to file a GRA. DC, through its tax 

department, was aware of the requirement to 

file a GRA in order for DC to avoid 

recognizing gain with respect to the FS 

Transfer under section 367(a)(1). DC had not 

consistently and in a timely manner filed 

GRAs in the past, and also had an established 

history of failing to timely file other tax and 

information returns for which it was subject 

to penalties. In a year subsequent to Year 1, 

DC transferred stock of another foreign 

subsidiary with respect to which DC had a 

built-in gain (FS2) to FA in a transaction that 

qualified as both a reorganization under 

section 368(a)(1)(B) and an exchange 

described under section 351 (FS2 Transfer). 

DC was required to recognize gain on the FS2 

Transfer under section 367(a)(1) unless DC 

timely filed a GRA as required by paragraph 

(d)(1) of this section and complied with the 

requirements of this section during the term 

of the GRA. DC reported no gain on the FS2 

Transfer on its tax return, but failed to file 

a GRA. At the time of the FS2 Transfer, DC 

was already aware of its failure to file the 

GRA required for the prior FS Transfer, but 

had not implemented any safeguards to 

ensure that it would timely file GRAs for 

future transactions. DC filed an amended 

return to file the GRA for the FS2 Transfer 

and complied with the procedures set forth 

under paragraph (p)(2) of this section 

promptly after it became aware of the failure. 

DC asserts that its failure to timely file a GRA 

with respect to the FS2 Transfer was due to 

an isolated oversight similar to the one that 

occurred with respect to the FS Transfer. At 

issue is DC’s failure to timely file a GRA for 

the FS2 Transfer. 

(ii) Result. Because DC failed to file a GRA 

with its timely filed tax return for the year 

of the FS2 Transfer, there is a failure to 

timely file the GRA as required by paragraph 

(d)(1) of this section. DC’s course of conduct 

is taken into account in determining whether 

its failure to timely file a GRA for the FS2 

Transfer was willful. Based on the facts of 

this Example 2, including DC’s history of 

failing to file required tax and information 

returns in general and GRAs in particular, 

and its failure to implement safeguards to 

ensure that it would timely file GRAs, the 

failure to timely file a GRA with respect to 

the FS2 Transfer rises to the level of a willful 

failure to timely file. Accordingly, DC is 

ineligible for relief under paragraph (p) of 

this section, the GRA is not considered 

timely filed for purposes of paragraph (d)(1) 

of this section, and DC must recognize the 

full amount of the gain realized on the FS2 

Transfer. 

Example 3. GRA not completed in all 

material respects. (i) Facts. DC timely filed 

its tax return for the year of the FS Transfer, 

reporting no gain with respect to the 

exchange of the FS stock. DC was aware of 

the requirement to file a GRA to avoid 

recognizing gain under section 367(a)(1), 

including the requirement to provide the 

basis and fair market value of the transferred 

stock. However, DC filed a purported GRA 

that did not contain the fair market value of 

the FS stock. Instead, the GRA was filed with 

the statement that the fair market value 

information was ‘‘available upon request.’’ 

Other than the omission of the fair market 

value of the FS stock, the GRA contained all 

other information required by this section. 

(ii) Result. Because DC omitted the fair 

market value of the FS stock from the GRA, 

the GRA was not completed in all material 

respects. Accordingly, there is a failure to 

timely file the GRA. Furthermore, because 

DC knowingly omitted such information, 

DC’s omission is a willful failure to timely 

file a GRA. Accordingly, DC is ineligible for 

relief under paragraph (p) of this section, the 

GRA is not considered timely filed for 

purposes of paragraph (d)(1) of this section, 

and DC must recognize the full amount of the 

gain realized on the FS Transfer. The same 

result would arise if DC had included the fair 

market value of the FS stock, but knowingly 

omitted its tax basis from the GRA. 

Example 4. Taxpayer knew of GRA filing 

requirement, but intentionally chose not to 

file. (i) Facts. When DC filed its tax return for 

the tax year of the FS Transfer, it was aware 

of the requirement to file a GRA to avoid 

recognizing gain under section 367(a)(1). 

However, because DC anticipated selling 

Business A in the following tax year, which 

was expected to produce a capital loss that 

could be carried back to fully offset the gain 

recognized on the FS Transfer, DC 

intentionally chose not to file a GRA. DC 

recognized the gain from the FS Transfer 

under section 367(a)(1) and reported the gain 

on its timely filed tax return. At the end of 

the following year, a large class action 

lawsuit was filed against Business A and, 

consequently, DC was unable to sell the 

business. As a result, DC did not realize the 

expected capital loss, and it was not able to 

offset the gain from the FS Transfer. DC now 

seeks to file a GRA for the FS Transfer. 

(ii) Result. Because DC failed to file a GRA 

with its timely filed tax return for the year 

of the FS Transfer, there is a failure to timely 

file the GRA as required by paragraph (d)(1) 

of this section. Furthermore, because DC 

intentionally chose not to file a GRA for the 

FS Transfer, its actions constitute a willful 

failure to timely file a GRA. Accordingly, DC 

is ineligible for relief under paragraph (p) of 

this section, the GRA is not considered 

timely filed for purposes of paragraph (d)(1) 

of this section, and DC must recognize the 


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full amount of the gain realized on the FS 

Transfer in Year 1. 

* * * * * 

(r) Effective/applicability dates—(1) 

* * * (i) * * * The eleventh sentence 

of paragraph (a) and paragraphs 

(b)(1)(iv), (b)(1)(vi), (b)(1)(xiii), (d)(1), 

(j)(8), and (p) of this section will apply 

to gain recognition agreement 

documents that are required to be filed 

on or after November 19, 2014, as well 

as to requests for relief submitted on or 

after November 19, 2014. 

* * * * * 

(3) Applicability to requests for relief 

submitted before November 19, 2014. 

The eleventh sentence of paragraph (a) 

and paragraphs (b)(1)(iv), (b)(1)(vi), 

(b)(1)(xiii), (d)(1), (j)(8), and (p) of this 

section will apply to requests for relief 

submitted before November 19, 2014 

if— 

(i) The statute of limitations on the 

assessment of tax has not expired for 

any year to which the request relates; 

and 

(ii) The U.S. transferor resubmits the 

request under paragraph (p) of this 

section, notes on the request that the 

request is being submitted pursuant to 

this paragraph (r)(3), and acknowledges 

on the request that the last sentence of 

§ 1.6038B–1(g)(6) provides a special rule 

regarding the application of § 1.6038B– 

1 to any transfer that is the subject of the 

request. 

■ Par. 8. Section 1.367(e)–2 is amended: 

■ 1. By revising the ninth sentence and 

adding two new sentences before the 

last sentence of paragraph (a). 

■ 2. By revising paragraph (b)(1)(i). 

■ 3. In paragraph (b)(2)(i)(A)(2), by 

removing the language ‘‘its U.S. income 

tax returns’’ and adding the language 

‘‘its timely filed U.S. income tax 

returns’’ in its place. 

■ 4. In paragraph (b)(2)(i)(A)(3), by 

removing the language ‘‘its U.S. income 

tax return’’ and adding the language ‘‘its 

timely filed U.S. income tax return’’ in 

its place. 

■ 5. By revising paragraph (b)(2)(i)(C)(1). 

■ 6. In the first sentence of paragraph 

(b)(2)(i)(E)(3), by removing the language 

‘‘its U.S. income tax return’’ and adding 

the language ‘‘its timely filed U.S. 

income tax return’’ in its place. 

■ 7. In paragraph (b)(2)(i)(E)(4)(ii), by 

removing the language ‘‘its U.S. income 

tax return’’ and adding the language ‘‘its 

timely filed U.S. income tax return’’ in 

its place. 

■ 8. In paragraph (b)(2)(i)(E)(5)(ii), by 

removing the language ‘‘its U.S. income 

tax return’’ and adding the language ‘‘its 

timely filed U.S. income tax return’’ in 

its place. 

■ 9. In the first sentence of paragraph 

(b)(2)(iii)(A), by removing the language 

‘‘its U.S. income tax return’’ and adding 

the language ‘‘its timely filed U.S. 

income tax return’’ in its place. 

■ 10. By adding a sentence at the end of 

paragraph (b)(2)(iii)(D). 

■ 11. In paragraph (c)(2)(i)(B)(3), by 

removing the language ‘‘their U.S. 

income tax returns’’ and adding the 

language ‘‘their timely filed U.S. income 

tax returns’’ in its place. 

■ 12. By revising paragraph (e). 

■ 13. By adding paragraphs (f) and (g). 

The revisions and additions read as 

follows: 

§ 1.367(e)–2 Distributions described in 

section 367(e)(2). 

(a) Purpose and scope—(1) In general. 

* * * Paragraph (e) of this section 

provides rules regarding failures to file 

statements or other documents required 

under this section or failures to comply 

with the requirements of this section. 

Paragraph (f) of this section provides 

relief for certain failures to file or 

comply. Finally, paragraph (g) of this 

section specifies the effective/

applicability dates for the rules of this 

section. * * * 

* * * * * 

(b) Distribution by a domestic 

corporation—(1) General rule—(i) 

Recognition of gain and loss. If a 

domestic corporation (domestic 

liquidating corporation) makes a 

distribution of property in complete 

liquidation under section 332 to a 

foreign corporation (foreign distributee 

corporation) that meets the stock 

ownership requirements of section 

332(b) with respect to stock in the 

domestic liquidating corporation, 

then— 

(A) Section 337(a) and (b)(1) will not 

apply; and 

(B) The domestic liquidating 

corporation will recognize gain or loss 

on the distribution of property to the 

foreign distributee corporation, except 

as provided in paragraph (b)(2) of this 

section. 

* * * * * 

(2) * * * 

(i) * * * 

(C) * * * 

(1) A declaration that the distribution 

to the foreign distributee corporation is 

one to which the rules of this paragraph 

(b)(2)(i) apply and a certification that 

the domestic liquidating corporation 

and the foreign distributee corporation 

agree to comply with all the conditions 

and requirements of this section, 

including, as provided in paragraph 

(e)(4)(ii)(B) of this section, to treat a 

failure to comply (as described in 

paragraph (e)(4)(i) of this section) as 

extending the period of limitations on 

assessment of tax for the taxable year in 

which gain is required to be reported. 

* * * * * 

(iii) * * * 

(D) * * * The required statement 

shall also state that the domestic 

liquidating corporation agrees, as 

provided in paragraph (e)(4)(ii)(B) of 

this section, to treat a failure to comply 

(as described in paragraph (e)(4)(i) of 

this section) as extending the period of 

limitations on assessment of tax for the 

taxable year in which gain is required to 

be reported. 

* * * * * 

(e) Failures to file or failures to 

comply—(1) Scope. This paragraph (e) 

provides rules regarding a failure to file 

an initial liquidation document with 

respect to one or more liquidating 

distributions by a domestic liquidating 

corporation that, absent such failure, 

would qualify for nonrecognition 

treatment under paragraph (b)(2)(i) or 

(iii) of this section, or with respect to 

one or more liquidating distributions by 

a foreign liquidating corporation that, 

absent such failure, would qualify for 

nonrecognition treatment under 

paragraph (c)(2)(i)(B) of this section 

(failure to file). This paragraph (e) also 

provides rules regarding failures to 

comply in all material respects with the 

terms of this section with respect to one 

or more liquidating distributions for 

which nonrecognition treatment was 

initially claimed under paragraph 

(b)(2)(i), (b)(2)(iii), or (c)(2)(i)(B) of this 

section, as applicable (failure to 

comply). 

(2) Definitions. The following 

definitions apply for purposes of this 

section. 

(i) An initial liquidation document 

means any statement, schedule, or form 

required to be filed under this section in 

order for the domestic liquidating 

corporation or foreign liquidating 

corporation, as applicable, to initially 

qualify to claim nonrecognition 

treatment with respect to one or more 

liquidating distributions described in 

this section, including— 

(A) The statement and attachments 

described in paragraph (b)(2)(i)(C) of 

this section; 

(B) The statement described in 

paragraph (b)(2)(iii)(D) of this section; 

and 

(C) The statement and attachments 

described in paragraph (c)(2)(i)(C) of 

this section. 

(ii) A subsequent liquidation 

document means any statement, 

schedule, or form (other than an initial 

liquidation document) required to be 

filed under this section in order for the 

domestic liquidating corporation or 


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68772 Federal Register / Vol. 79, No. 223 / Wednesday, November 19, 2014 / Rules and Regulations 

foreign liquidating corporation, as 

applicable, to continue to qualify for 

nonrecognition treatment with respect 

to one or more liquidating distributions 

described in this section, including— 

(A) The schedule described in 

paragraph (b)(2)(i)(E)(3) of this section; 

(B) The schedule described in 

paragraph (b)(2)(i)(E)(4)(ii) of this 

section; and 

(C) The statement and attachments 

described in paragraph (b)(2)(i)(E)(5) of 

this section. 

(iii) A timely filed U.S. income tax 

return means a Federal income tax 

return filed on or before the last date 

prescribed for filing (taking into account 

any extensions of time therefor) such 

return. 

(3) Failure to file—(i) General rule. 

For purposes of this section and except 

as provided in paragraph (b)(2)(i)(D) or 

(f) of this section, there is a failure to file 

an initial liquidation document if— 

(A) An initial liquidation document is 

not filed with the timely filed U.S. 

income tax return specified under this 

section, or 

(B) An initial liquidation document is 

not completed in all material respects. 

(ii) Consequences of a failure to file. 

If there is a failure to file an initial 

liquidation document, then 

nonrecognition treatment under 

paragraph (b)(2)(i), (b)(2)(iii), or 

(c)(2)(i)(B) of this section (as 

appropriate) will not apply. 

(4) Failure to comply—(i) General 

rule. For purpose of this section and 

except as provided in paragraph 

(b)(2)(i)(D) or (f) of this section, a failure 

to comply includes— 

(A) A failure to report gain, or pay any 

additional tax or interest due, in 

accordance with the requirements under 

this section; and 

(B) A failure to file a subsequent 

liquidation document, as determined by 

applying paragraph (e)(3)(i) of this 

section, but replacing the term ‘‘initial 

liquidation document’’ with the term 

‘‘subsequent liquidation document.’’ 

(ii) Consequences of a failure to 

comply. If there is a failure to comply 

in any material respect with the terms 

of paragraph (b)(2)(i), (b)(2)(iii), or 

(c)(2)(i) of this section, as applicable, 

then— 

(A) Any gain (but not loss) that was 

not previously recognized by the 

domestic liquidating corporation or 

foreign liquidating corporation, as 

applicable, under paragraph (b)(2)(i), 

(b)(2)(iii), or (c)(2)(i)(B) of this section 

must be recognized; and 

(B) The period of limitations on 

assessment of tax for the taxable year in 

which gain is required to be reported 

will be extended until the close of the 

third full taxable year ending after the 

date on which the domestic liquidating 

corporation, foreign distributee 

corporation, or foreign liquidating 

corporation, as applicable, furnishes to 

the Director of Field Operations 

International, Large Business & 

International (or any successor to the 

roles and responsibilities of such 

position, as appropriate) (Director) the 

information that should have been 

provided under this section. 

(f) Relief for certain failures to file or 

failures to comply that are not willful— 

(1) In general. This paragraph (f) 

provides relief if there is a failure to file 

an initial liquidation document as 

described in paragraph (e)(3)(i) of this 

section (failure to file), or a failure to 

comply in any material respect with the 

terms of this section as described in 

paragraph (e)(4)(i) of this section (failure 

to comply). A failure to file or a failure 

to comply will be deemed not to have 

occurred for purposes of paragraph 

(e)(3)(ii) or (e)(4)(ii) of this section if the 

taxpayer demonstrates that the failure 

was not willful using the procedure set 

forth in this paragraph (f). For this 

purpose, willful is to be interpreted 

consistent with the meaning of that term 

in the context of other civil penalties, 

which would include a failure due to 

gross negligence, reckless disregard, or 

willful neglect. Whether a failure to file 

or failure to comply was willful will be 

determined by the Director (as described 

in paragraph (e)(4)(ii)(B) of this section) 

based on all the facts and 

circumstances. The taxpayer must 

submit a request for relief and an 

explanation as provided in paragraph 

(f)(2)(i) of this section. Although a 

taxpayer whose failure to file or failure 

to comply is determined not to be 

willful will not be subject to gain or loss 

recognition under this section, the 

taxpayer will be subject to a penalty 

under section 6038B if the taxpayer fails 

to satisfy the reporting requirements, if 

any, under that section and does not 

demonstrate that the failure was due to 

reasonable cause and not willful 

neglect. See § 1.6038B–1(e)(4) and (f). 

The determination of whether the 

failure to file or failure to comply was 

willful under this section has no effect 

on any request for relief made under 

§ 1.6038B–1(f). 

(2) Procedures for establishing that a 

failure to file or failure to comply was 

not willful—(i) Time and manner of 

submission. A taxpayer’s statement that 

a failure to file or failure to comply was 

not willful will be considered only if, 

promptly after the taxpayer becomes 

aware of the failure, an amended return 

is filed for the taxable year to which the 

failure relates that includes the 

information that should have been 

included with the original return for 

such taxable year or that otherwise 

complies with the rules of this section, 

and that includes a written statement 

explaining the reasons for the failure. In 

the case of a liquidating distribution 

described in paragraph (b)(2)(iii) of this 

section, the taxpayer must file, with the 

amended return, a Form 8838 extending 

the period of limitations on assessment 

of tax with respect to the gain realized 

but not recognized with respect to the 

liquidating distribution to the close of 

the third full taxable year ending after 

the date on which the required 

information is provided to the Director. 

In the case of a liquidating distribution 

described in paragraph (b)(2)(i) or 

(c)(2)(i)(B) of this section, the taxpayer 

must file, with the amended return, a 

Form 8838 extending the period of 

limitations on the assessment of tax 

with respect to the gain realized but not 

recognized with respect to the 

liquidating distribution to the later of: 

the date provided in paragraph 

(b)(2)(i)(C)(5), taking into account 

paragraph (c)(2)(i)(C) and (D), as 

applicable (date one); or, the close of the 

third full taxable year ending after the 

date on which the required information 

is provided to the Director (date two). 

However, the taxpayer is not required to 

file a Form 8838 with the amended 

return if both date one is later than date 

two and a Form 8838 was previously 

filed extending the period of limitations 

on assessment of tax with respect to the 

gain realized but not recognized with 

respect to the liquidating distribution to 

date one. If a Form 8838 is not required 

to be filed pursuant to the previous 

sentence, a copy of the previously filed 

Form 8838 must be filed with the 

amended return. The amended return 

and either a Form 8838 or a copy of the 

previously filed Form 8838, as the case 

may be, must be filed with the Internal 

Revenue Service at the location where 

the taxpayer filed its original return. 

The taxpayer may submit a request for 

relief from the penalty under section 

6038B as part of the same submission. 

See § 1.6038B–1(f). 

(ii) Notice requirement. In addition to 

the requirements of paragraph (f)(2)(i) of 

this section, the taxpayer must comply 

with the notice requirements of this 

paragraph (f)(2)(ii). If any taxable year of 

the taxpayer is under examination when 

the amended return is filed, a copy of 

the amended return and any 

information required to be included 

with such return must be delivered to 

the Internal Revenue Service personnel 

conducting the examination. If no 

taxable year of the taxpayer is under 


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Federal Register / Vol. 79, No. 223 / Wednesday, November 19, 2014 / Rules and Regulations 68773 

examination when the amended return 

is filed, a copy of the amended return 

and any information required to be 

included with such return must be 

delivered to the Director. 

(3) For illustrations of the application 

of the willfulness standard of this 

paragraph (f), see the examples in 

§ 1.367(a)–8(p)(3). 

(g) Effective/applicability dates. 

Except as otherwise provided, this 

section applies to distributions 

occurring on or after September 7, 1999 

or, if the taxpayer so elects, to 

distributions in taxable years ending 

after August 8, 1999. The ninth, tenth, 

and eleventh sentences of paragraph (a) 

of this section, and paragraphs (b)(1)(i), 

(b)(2)(i)(A)(2), (b)(2)(i)(A)(3), 

(b)(2)(i)(E)(3), (b)(2)(i)(E)(4)(ii), 

(b)(2)(i)(E)(5)(ii), (b)(2)(iii)(A), 

(c)(2)(i)(B)(3), (e), and (f) of this section 

will apply to liquidation documents that 

are required to be filed on or after 

November 19, 2014, as well as to 

requests for relief submitted on or after 

November 19, 2014. 

■ Par. 9. Section 1.6038B–1 is amended: 

■ 1. By adding a sentence after the first 

sentence in paragraph (b)(1)(i). 

■ 2. By revising paragraph (b)(2)(i)(B)(1). 

■ 3. By adding paragraph (b)(2)(iii). 

■ 4. By adding paragraph (b)(2)(iv). 

■ 5. By revising paragraphs (c)(1) 

through (c)(5). 

■ 6. By revising paragraph (e)(4). 

■ 7. By removing paragraph (f)(1)(i). 

■ 8. By redesignating paragraphs 

(f)(1)(ii) and (f)(1)(iii) as paragraphs 

(f)(1)(i) and (f)(1)(ii), respectively. 

■ 9. By adding paragraph (f)(2)(iii). 

■ 10. By adding paragraph (f)(2)(iv). 

■ 11. In paragraph (g)(1), by removing 

the language ‘‘(g)(5)’’ and adding the 

language ‘‘(g)(6)’’ in its place. 

■ 12. By adding paragraph (g)(6). 

The revisions and additions read as 

follows: 

§ 1.6038B–1 Reporting of certain transfers 

to foreign corporations. 

* * * * * 

(b) * * * (1) * * * -(i) * * * In 

addition, if the U.S. person files a 

statement under § 1.367(a)– 

3(d)(2)(vi)(C), a gain recognition 

agreement under § 1.367(a)–8, or a 

liquidation document under § 1.367(e)– 

2(b), such person must comply in all 

material respects with the requirements 

of such section pursuant to the terms of 

the statement, gain recognition 

agreement, or liquidation document, as 

applicable, in order to satisfy a reporting 

obligation under section 6038B. * * * 

* * * * * 

(2) * * * 

(i) * * * 

(B) * * * 

(1) Except as provided in paragraph 

(b)(2)(iii) of this section, the U.S. 

transferor (or one or more successors) 

filed an initial gain recognition 

agreement under § 1.367(a)–8, and filed 

Form 926 in accordance with paragraph 

(b)(2)(iv) of this section; or 

* * * * * 

(ii) * * * 

(iii) Timely filed initial gain 

recognition agreement. Paragraph 

(b)(2)(i)(B)(1) of this section will not 

apply unless the initial gain recognition 

agreement is timely filed as determined 

under § 1.367(a)–8(d)(1), but for 

purposes of this section, determined 

without regard to § 1.367(a)–8(p). 

However, see paragraph (f)(3) of this 

section for certain relief that may be 

available. 

(iv) Satisfaction of section 6038B 

reporting if a gain recognition 

agreement is timely filed. If the U.S. 

transferor is described in paragraph 

(b)(2)(i)(B)(1) of this section and is not 

otherwise required to file a Form 926 

with respect to a transfer of assets other 

than the stock or securities to the 

transferee foreign corporation, the 

requirements of this section are satisfied 

with respect to the transfer of the stock 

or securities by completing Part I and 

Part II of Form 926, noting on the Form 

926 that a gain recognition agreement is 

being filed pursuant to § 1.367(a)–8; 

reporting on the Form 926 the fair 

market value, adjusted tax basis, and 

gain recognized with respect to the 

transferred stock or securities; 

submitting on the Form 926 any other 

information that Form 926, its 

accompanying instructions, or other 

applicable guidance require to be 

submitted with respect to the transfer of 

the stock or securities; and attaching a 

signed copy of the Form 926 to its 

timely filed U.S. income tax return 

(including extensions) for the year of the 

transfer. If the U.S. transferor is required 

to file Form 926 with respect to a 

transfer of assets in addition to the stock 

or securities, the requirements of this 

section are satisfied with respect to the 

transfer of the stock or securities by 

noting on the Form 926 that a gain 

recognition agreement is being filed 

pursuant to § 1.367(a)–8; reporting on 

the Form 926 the fair market value, 

adjusted tax basis, and gain recognized 

with respect to the transferred stock or 

securities; and submitting on the Form 

926 any other information that Form 

926, its accompanying instructions, or 

other applicable guidance require to be 

submitted with respect to the transfer of 

the stock or securities. 

* * * * * 

(c) * * * 

(1) through (4)(i) [Reserved]. For 

further guidance, see § 1.6038B–1T(c)(1) 

through (4)(i). 

(ii) Stock or securities. Describe any 

stock or securities that are transferred, 

including the adjusted tax basis and fair 

market value of the stock or securities, 

the class or type, amount, and 

characteristics of the stock or securities, 

and the name, address, place of 

incorporation, and general description 

of the corporation issuing the stock or 

securities. In addition, if any provision 

of § 1.367(a)–3 or § 1.367(a)–3T applies 

to except the transfer of the stock or 

securities from section 367(a)(1), 

provide information supporting the 

claimed application of such provision. 

However, see paragraph (b)(2) of this 

section for certain exceptions and 

special rules for reporting transfers of 

stock or securities under section 367(a). 

(iii) through (5) [Reserved]. For 

further guidance, see § 1.6038B– 

1T(c)(4)(iii) through (5). 

* * * * * 

(e) * * * 

(4) Reporting rules for section 

367(e)(2) distributions by domestic 

liquidating corporations—(i) General 

rule. Except as provided in paragraph 

(e)(4)(ii) of this section, if the 

distributing corporation makes a 

distribution of property in complete 

liquidation under section 332 to a 

foreign distributee corporation that 

meets the stock ownership requirements 

of section 332(b) with respect to the 

stock of the distributing corporation, 

then the distributing corporation must 

complete a Form 926 and attach a 

signed copy of such form to its timely 

filed U.S. income tax return (including 

extensions) for the taxable years that 

include one or more liquidating 

distributions. The property description 

contained in Part III of the Form 926 

must contain a description, including 

the adjusted tax basis and fair market 

value, of all property distributed by the 

distributing corporation (regardless of 

whether the distribution of the property 

qualifies for nonrecognition treatment). 

The description must also identify the 

items of property for which 

nonrecognition treatment is claimed 

under § 1.367(e)–2(b)(2)(ii) or (iii), as 

applicable. 

(ii) Special rule. Except as provided in 

paragraph (e)(4)(iii) of this section, if the 

distributing corporation distributes 

items of property that will be used by 

the foreign distributee corporation in 

the conduct of a trade or business in the 

United States and the distributing 

corporation does not recognize gain or 

loss on such distribution under 


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68774 Federal Register / Vol. 79, No. 223 / Wednesday, November 19, 2014 / Rules and Regulations 

§ 1.367(e)–2(b)(2)(i) with respect to such 

property, then the distributing 

corporation may satisfy the 

requirements of this section by 

completing Part I and Part II of Form 

926, noting in Part III that the 

information required by Form 926 is 

contained in a statement required by 

§ 1.367(e)–2(b)(2)(i)(C)(2), and attaching 

a signed copy of Form 926 to its timely 

filed U.S. income tax return (including 

extensions) for each taxable year that 

includes one or more distributions in 

liquidation. In addition, if the 

distributing corporation distributes 

stock of a domestic subsidiary 

corporation and does not recognize gain 

or loss on such distribution under 

§ 1.367(e)–2(b)(2)(iii) with respect to 

such stock, then the distributing 

corporation may satisfy the 

requirements of this section by 

completing Part I and Part II of Form 

926, noting in Part III that the 

information required by Form 926 is 

contained in a statement required by 

§ 1.367(e)–2(b)(2)(iii)(D), and attaching a 

signed copy of Form 926 to its timely 

filed U.S. income tax return (including 

extensions) for the taxable years that 

include one or more distributions of 

domestic subsidiary stock. 

(iii) Properly filed statement. 

Paragraph (e)(4)(ii) will not apply if 

there is a failure to file an initial 

liquidation document as determined 

under § 1.367(e)–2(e)(3)(i), but for 

purposes of this section, determined 

without regard to § 1.367(e)–2(f). 

However, see paragraph (f)(3) of this 

section for certain relief that may be 

available. 

(f) * * * 

(2) * * * 

(iii) With respect to an initial gain 

recognition agreement filed under 

§ 1.367(a)–8, a failure to comply as 

determined under § 1.367(a)–8(j)(8), but 

for purposes of this section, determined 

without regard to the application of 

§ 1.367(a)–8(p). 

(iv) With respect to an initial 

liquidation document filed under 

§ 1.367(e)–2(b)(2), a failure to comply as 

determined under § 1.367(e)–2(e)(4)(i), 

but for purposes of this section, 

determined without regard to the 

application of § 1.367(e)–2(f). 

* * * * * 

(g) * * * 

(6) The second sentence of paragraph 

(b)(1)(i) and paragraphs (b)(2)(i)(B)(1), 

(b)(2)(iii), (b)(2)(iv), (c), (e)(4), (f)(2)(iii), 

and (f)(2)(iv) of this section will apply 

to documents required to be filed on or 

after November 19, 2014, as well as to 

requests for relief submitted on or after 

November 19, 2014. The second 

sentence of paragraph (b)(1)(i) and 

paragraphs (b)(2)(i)(B)(1), (b)(2)(iii), 

(b)(2)(iv), (c), and (f)(2)(iii) of this 

section will also apply to any transfer 

that is the subject of a request for relief 

submitted pursuant to § 1.367(a)–8(r)(3). 

John Dalrymple, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: October 31, 2014. 

Mark J. Mazur, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2014–27365 Filed 11–18–14; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 117 

[Docket No. USCG–2014–0367] 

RIN 1625–AA09 

Drawbridge Operation Regulation; 

Darby Creek, Essington, PA 

AGENCY: Coast Guard, DHS. 

ACTION: Final rule. 

SUMMARY: The Coast Guard is changing 

the operating regulation that governs the 

Conrail railroad bridge over Darby Creek 

at mile marker 0.25 in Essington, PA. 

The bridge owner, Conrail, is modifying 

the existing remote operating system 

which controls the bridge operations. 

Cameras will be installed and the 

remote operating site will move from its 

current location in Delair, NJ to Mt. 

Laurel, NJ. The train crew is no longer 

required to stop and check the waterway 

for approaching vessel traffic prior to 

initiating a bridge closure and mariners 

requesting an opening for the bridge 

will have to contact the new remote 

location. 

DATES: This rule is effective December 

19, 2014. 

ADDRESSES: Documents mentioned in 

this preamble are part of docket USCG– 

2014–0367. To view documents 

mentioned in this preamble as being 

available in the docket, go to http:// 

www.regulations.gov, type the docket 

number in the ‘‘SEARCH’’ box and click 

‘‘SEARCH.’’ Click on Open Docket 

Folder on the line associated with this 

rulemaking. You may also visit the 

Docket Management Facility in Room 

W12–140 on the ground floor of the 

Department of Transportation West 

Building, 1200 New Jersey Avenue SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this rule, call or 

email Mrs. Jessica Shea, Fifth Coast 

Guard District Bridge Administration 

Division, Coast Guard; telephone 757– 

398–6422, email 

jessica.c.shea2@uscg.mil. If you have 

questions on viewing the docket, call 

Cheryl Collins, Program Manager, 

Docket Operations, telephone 202–366– 

9826. 

SUPPLEMENTARY INFORMATION: 

Table of Acronyms 

CFR Code of Federal Regulations 

Conrail Consolidated Rail Corporation 

DHS Department of Homeland Security 

FR Federal Register 

NPRM Notice of Proposed Rulemaking 

§ Section Symbol 

U.S.C. United States Code 

A. Regulatory History and Information 

On August 1, 2014, we published a 

notice of proposed rulemaking (NPRM) 

entitled Drawbridge Operation 

Regulation; Darby Creek, Essington, PA 

in the Federal Register (79 FR 44724). 

We received no comments on the 

proposed rule. No public meeting was 

requested, and none was held. 

B. Basis and Purpose 

The bridge owner, Conrail, requested 

a change to 33 CFR 117.903 because 

they modified the sensor and visual 

equipment on site at their bridge across 

Darby Creek. They also relocated the 

remote operation station to a new 

location. The regulation is changing two 

aspects of the bridge operation. 

Specifically, the location of the remote 

operator and the installation of cameras 

to verify whether any vessels are 

transiting the waterway before a bridge 

closure is initiated. This rule does not 

change the operating schedule of the 

bridge. 

The scope of the waterway inspection 

is different between the current on-site 

train crewmember inspection process 

and the range of the proposed camera 

installation. There is also a difference in 

the time it takes between the inspection 

and the initiation of the bridge closure 

operations. Currently, the regulation 

requires an on-site train crewmember to 

conduct an inspection of the waterway 

for vessels by stopping the train 

approximately 200 feet north of the 

bridge site when approached from the 

north and 300 feet south of the bridge 

site when approached from the south. 

Once the train is stopped, the train 

crewmember walks to the bridge site 

and physically looks up and down the 

channel. The time it takes to stop the 


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