76928 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

1As of December 10, 2014, the Agency has 

received over 560 comment letters on the proposed 

rule. 

VA 22102–5090, (703) 883–4020, TTY 

(703) 883–4020. 

SUPPLEMENTARY INFORMATION: On 

September 4, 2014, the FCA published 

a proposed rule in the Federal Register 

seeking public comment on proposed 

changes to our capital regulations. See 

79 FR 52814. The comment period is 

scheduled to close on January 2, 2015. 

The FCA received several letters in 

response to the proposed rule requesting 

we extend the comment period by 90 

days. The requesters asserted that the 

proposed rule would have the most 

impact of any rule the FCA has ever 

adopted and is the longest and most 

complex proposal in the System’s 

history. In addition, they noted that its 

comment period overlapped with the 

comment periods of several other 

important regulations and also with 

year-end business planning. They 

would like additional time to evaluate 

the impact of the rule. 

The FCA supports public involvement 

and participation in its regulatory 

process and invites all interested parties 

to review and comment on our proposed 

rule. We balanced the reasons provided 

with the request for more time against 

the substantial time period the 

requesters have had to consider and 

provide comments on the rule.1 As a 

result, we are extending the comment 

period 45 days instead of the requested 

90 days. 

Dated: December 17, 2014. 

Mary Alice Donner, 

Acting Secretary, Farm Credit Administration 

Board. 

[FR Doc. 2014–30061 Filed 12–22–14; 8:45 am] 

BILLING CODE 6705–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–109187–11] 

RIN 1545–BK15 

Nonrecognition of Gain or Loss on 

Certain Dispositions of Installment 

Obligations 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations relating to the 

nonrecognition of gain or loss on certain 

dispositions of an installment 

obligation. In general, under the 

proposed regulations a transferor does 

not recognize gain or loss on certain 

dispositions of an installment obligation 

if gain or loss is not recognized on the 

disposition under another provision of 

the Internal Revenue Code. The 

proposed regulations also provide that 

this general rule does not apply to the 

satisfaction of an installment obligation. 

For example, an installment obligation 

of an issuer, such as a corporation or 

partnership, is satisfied when the holder 

transfers the obligation to the issuer for 

an equity interest in the issuer. 

DATES: Comments or a request for a 

public hearing must be received by 

March 23, 2015. 

ADDRESSES: Send submissions to 

CC:PA:LPD:PR (REG–109187–11), room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand delivered Monday through 

Friday between the hours of 8 a.m. and 

4 p.m. to CC:PA:LPD:PR (REG–109187– 

11), Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue NW., 

Washington, DC, or sent electronically 

via the Federal eRulemaking Portal at 

www.regulations.gov (IRS REG–109187– 

11). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Arvind Ravichandran, (202) 317–4718; 

concerning the submission of comments 

and/or requests for a public hearing, 

Olawafunmilayo (Funmi) Taylor at (202) 

317–6901 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains proposed 

amendments to the regulations in 26 

CFR part 1 under section 453B of the 

Internal Revenue Code (Code) relating to 

gain or loss on the disposition of 

installment obligations. Section 453B 

was added to the Code by the 

Installment Sales Revision Act of 1980, 

Public Law 96–471 (94 Stat. 2252 

(1980)). 

Section 453B replaces and provides 

generally the same rules as former 

section 453(d). In general, under section 

453B(a) gain or loss is recognized upon 

the satisfaction of an installment 

obligation at other than its face value, or 

upon the distribution, transmission, 

sale, or other disposition of the 

installment obligation. Section 1.453– 

9(c)(2) of the Income Tax Regulations, 

issued under former section 453(d), 

provides an exception to the general 

rule. Under § 1.453–9(c)(2), if the Code 

provides an exception to the recognition 

of gain or loss for certain dispositions, 

then gain or loss is not recognized under 

former section 453(d) on the disposition 

of an installment obligation within that 

exception. The exceptions identified in 

§ 1.453–9(c)(2) include certain transfers 

to corporations under sections 351 and 

361, contributions to partnerships under 

section 721, and distributions by 

partnerships to partners under section 

731 (except as provided by section 736 

and section 751). 

Under Rev. Rul. 73–423, 1973–2 CB 

161, the exceptions in § 1.453–9(c)(2) to 

recognition of gain or loss under the 

installment sale rules do not apply to 

the transfer of an installment obligation 

that results in a satisfaction of the 

obligation. Thus, the revenue ruling 

holds that the transfer of a corporation’s 

installment obligation to the issuing 

corporation in exchange for stock of the 

issuing corporation results in a 

satisfaction of the obligation. In that 

case, the transferor must recognize gain 

or loss on the satisfaction of the 

obligation to the extent of the difference 

between the transferor’s basis in the 

obligation and the fair market value of 

the stock received, even though gain or 

loss generally is not recognized on 

section 351 transfers. 

Explanation of Provisions 

These proposed regulations republish 

in § 1.453B–1(c) the general rule in 

§ 1.453–9(c)(2) under which gain or loss 

is not recognized upon certain 

dispositions. In addition, the proposed 

regulations incorporate and expand the 

holding of Rev. Rul. 73–423 to provide 

that a transferor recognizes gain or loss 

under section 453B(a) when the 

transferor disposes of an installment 

obligation in a transaction that results in 

the satisfaction of the installment 

obligation, including, for example, 

when an installment obligation of a 

corporation or partnership is 

contributed to the corporation or 

partnership in exchange for an equity 

interest in the corporation or 

partnership. Finally, the proposed 

regulations amend the regulations under 

sections 351, 361, and 721 to include a 

cross-reference to the regulations under 

section 453B regarding recognition of 

any gain or loss upon the satisfaction of 

an installment obligation. The IRS and 

the Treasury Department anticipate 

publishing regulations addressing the 

general rule under section 453B(a) and 

the basis of an obligation under section 

453B(b) in the future. Therefore, 

regulations under § 1.453B–1(a) and (b) 

are reserved. 

Proposed Effective/Applicability Date 

These regulations are proposed to 

apply to satisfactions, distributions, 

transmissions, sales, or other 


tkelley on DSK3SPTVN1PROD with PROPOSALS
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 76929 

dispositions of installment obligations 

after the date these regulations are 

published as final regulations in the 

Federal Register. 

Special Analyses 

This notice of proposed rulemaking 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, and because the regulation 

does not impose a collection of 

information on small entities, the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) does not apply. Pursuant to 

section 7805(f) of the Code, this notice 

of proposed rulemaking has been 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 

Comments and Requests for a Public 

Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written comments that are submitted 

timely to the IRS as prescribed in this 

preamble under the ‘‘Addresses’’ 

heading. The Treasury Department and 

the IRS invite comments on all aspects 

of the proposed rules. In particular, the 

Treasury Department and the IRS 

request comments on how a 

partnership’s distribution of a partner’s 

installment obligation to the obligor 

partner should be treated under section 

453B, and whether there are 

circumstances in which such a 

distribution should not result in gain or 

loss recognition by the partnership. All 

comments will be available for public 

inspection and copying at 

www.regulations.gov or upon request. A 

public hearing will be scheduled if 

requested in writing by any person who 

timely submits written comments. If a 

public hearing is scheduled, notice of 

the date, time and place for the hearing 

will be published in the Federal 

Register. 

Drafting Information 

The principal author of these 

regulations is Arvind Ravichandran, 

Office of the Associate Chief Counsel 

(Income Tax and Accounting). 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 record 

keeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR part 1 is 

proposed to be 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 1.351–1(a)(1) is 

amended by adding a heading and new 

second and third sentences to read as 

follows: 

§ 1.351–1 Transfer to corporation 

controlled by transferor. 

(a)(1) In general. * * * See § 1.453B– 

1(c) for rules requiring a transferor to 

recognize gain or loss upon the 

satisfaction of an installment obligation 

of a corporation when the obligation is 

exchanged for stock in that corporation. 

The preceding sentence applies to 

satisfactions of installment obligations 

after the date these regulations are 

published as final regulations in the 

Federal Register.* * * 

* * * * * 

■ Par. 3. Section 1.361–1 is amended by 

adding new second and third sentences 

to read as follows: 

§ 1.361–1 Nonrecognition of gain or loss 

to corporations. 

* * * See § 1.453B–1(c) for rules 

requiring a corporation transferring an 

installment obligation to the acquiring 

corporation (as that term is used in 

§ 1.368–1) to recognize gain or loss upon 

the receipt of stock of the acquiring 

corporation or another party to the 

reorganization (as defined in § 1.368– 

2(f)) in satisfaction of that installment 

obligation. The preceding sentence 

applies to satisfactions of installment 

obligations after the date these 

regulations are published as final 

regulations in the Federal 

Register.* * * 

■ Par. 4. Section 1.453B–1 is added to 

read as follows: 

§ 1.453B–1 Gain or loss on disposition of 

installment obligations. 

(a) General rule. [Reserved]. 

(b) Basis of obligation. [Reserved]. 

(c) Dispositions on which no gain or 

loss is recognized. 

(1) Certain nonrecognition 

transactions—(i) In general. If the 

Internal Revenue Code provides an 

exception to the recognition of gain or 

loss for certain dispositions, no gain or 

loss shall be recognized under section 

453B on the disposition of an 

installment obligation within that 

exception. These exceptions include— 

(A) Certain transfers to corporations 

under sections 351 and 361; 

(B) Contributions to a partnership 

under section 721; and 

(C) Distributions by a partnership to a 

partner under section 731 (except as 

provided by sections 704(c)(1)(B), 736, 

737, and 751(b)). 

(ii) Transactions resulting in a 

satisfaction of installment obligations. 

Paragraph (c)(1)(i) of this section does 

not apply to a disposition that results in 

a satisfaction of an installment 

obligation, regardless of whether the 

disposition occurs as part of a 

transaction for which the Internal 

Revenue Code provides an exception to 

the recognition of gain or loss. These 

dispositions include, but are not limited 

to— 

(A) The receipt of stock of a 

corporation from the corporation in 

satisfaction of an installment obligation 

of the corporation; and 

(B) The receipt of an interest in a 

partnership from the partnership in 

satisfaction of an installment obligation 

of the partnership. 

(2) Effective/applicability date. This 

paragraph (c) applies to satisfactions, 

distributions, transmissions, sales, or 

other dispositions of installment 

obligations after the date these 

regulations are published as final 

regulations in the Federal Register. 

■ Par. 5. Section 1.721–1(a) is amended 

by adding new ninth and tenth 

sentences to read as follows: 

§ 1.721–1 Nonrecognition of gain or loss 

on contribution. 

(a) * * * For rules in determining a 

partner’s gain or loss when an 

installment obligation of a partnership 

is contributed to the partnership, see 

section 453B and § 1.453B–1(c). The 

preceding sentence applies to 

satisfactions of installment obligations 

after the date these regulations are 

published as final regulations in the 

Federal Register. 

* * * * * 

John Dalrymple, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2014–30103 Filed 12–22–14; 8:45 am] 

BILLING CODE 4830–01–P 


tkelley on DSK3SPTVN1PROD with PROPOSALS