Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Rules and Regulations 64911

extremely helpful in evaluating the

effectiveness of this action and

determining whether additional

rulemaking action would be needed.

Comments are specifically invited on

the overall regulatory, economic,

environmental, and energy aspects of

the rule that might suggest a need to

modify the rule. All comments

submitted will be available, both before

and after the closing date for comments,

in the Rules Docket for examination by

interested persons. A report that

summarizes each FAA-public contact

concerned with the substance of this

action will be filed in the Rules Docket.

Commenters wishing the FAA to

acknowledge receipt of their comments

submitted in response to this rule must

submit a self-addressed, stamped

postcard on which the following

statement is made: ‘‘Comments to

Docket No. 01–AWP–23.’’ The postcard

will be date stamped and returned to the

commenter.

Agency Findings

The regulations adopted herein will

not have substantial direct effects on the

States, on the relationship between the

national government and the States, or

on the distribution of power and

responsibilities among the various

levels of government. Therefore, in

accordance with Executive Order 12612,

it is determined that this final rule does

not have sufficient federalism

implications to warrant the preparation

of a Federalism Assessment.

The FAA has determined that this

regulation is noncontroversial and

unlikely to result in adverse or negative

comments. For the reasons discussed in

the preamble, this regulation only

involves an established body of

technical regulations for which frequent

and routine amendments are necessary

to keep them operationally current.

Therefore, this regulation—(1) is not a

‘‘significant regulatory action’’ under

Executive Order 12866; (2) is not a

‘‘significant rule’’ under DOT

Regulatory Policies and Procedures (44

FR 11034; February 26, 1979); and (3)

does not warrant preparation of a

Regulatory Evaluation as the anticipated

impact is so minimal. Since this is a

routine matter that will only affect air

traffic procedures and air navigation, it

is certified that this rule will not have

a significant economic impact on a

substantial number of small entities

under the criteria of the Regulatory

Flexibility Act.

List of Subjects in 14 CFR Part 71

Airspace, Incorporation by reference,

Navigation (air).

Adoption of the Amendment

In consideration of the foregoing, the

Federal Aviation Administration

amends 14 CFR part 71 as follows:

PART 71—DESIGNATION OF CLASS A,

CLASS B, CLASS C, CLASS D, AND

CLASS E AIRSPACE AREAS;

AIRWAYS; ROUTES; AND REPORTING

POINTS

1. The authority citation for 14 CFR

part 71 continues to read as follows:

Authority: 49 U.S.C. 106(g), 40103, 40113,

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–

1963 Comp., p. 389.

§ 71.1 [Amended]

2. The incorporation by reference in

14 CFR 71.1 of the Federal Aviation

Administration Order 7400.9J, Airspace

Designations and Reporting Points,

dated August 31, 2001, and effective

September 16, 2001, is amended as

follows:

* * * * *

Paragraph 6002 Class E Airspace Designated

as a Surface Area for an airport.

* * * * *

AWP CA E2 Lompoc, CA [Removed]

Lompoc Airport, CA

(Lat. 34°39′56′′ N, long. 120°28′00′′ W)

Within a 4.3-mile radius of Lompoc

Airport, excluding that airspace within

Restricted Areas R–2516 and R–2517. This

Class E airspace area is effective during the

specific dates and times established in

advance by a Notice to Airmen. The effective

date and time will thereafter be continuously

published in the Airport/Facility Directory.

* * * * *

Issued in Los Angeles, California, on

November 23, 2001.

Leonard A. Mobley,

Acting Manager, Air Traffic Division,

Western-Pacific Region.

[FR Doc. 01–31000 Filed 12–14–01; 8:45 am]

BILLING CODE 4910–13–M

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 8970]

RIN 1545–AY16

Amendment, Check the Box

Regulations

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

regulations relating to elective changes

in entity classification under section

7701 of the Internal Revenue Code. The

regulations apply to subsidiary

corporations that elect to change their

classification for Federal tax purposes

from a corporation to either a

partnership or disregarded entity.

DATES: Effective Date: These regulations

are effective December 17, 2001.

FOR FURTHER INFORMATION CONTACT:

Beverly Katz, (202)622–3050 (not a tollfree number).

SUPPLEMENTARY INFORMATION:

Background

On November 29, 1999, final

regulations were published in the

Federal Register (TD 8844, 64 FR 66580

(1999–2 C.B. 661)) describing the

transactions that are deemed to occur

when an entity elects to change its

classification for Federal tax purposes.

Those regulations did not address

certain requirements of section 332 as

applied to the deemed liquidation

incident to an association’s election to

be classified as a partnership or to be

disregarded as an entity separate from

its owner. This amendment to the final

regulations addresses those

requirements.

On January 25, 2000, final regulations

were published in the Federal Register

(TD 8869, 65 FR 3843 (2000–6 I.R.B.

498)) relating to qualified subchapter S

subsidiaries (QSub). In order to permit

the deemed transaction resulting from a

QSub election to comply with the

requirement of section 332 that a plan

of liquidation has been adopted at the

time of a liquidating distribution, the

final regulations provide that a plan of

liquidation is deemed adopted

immediately before the deemed

liquidation incident to the QSub

election, unless a formal plan of

liquidation that contemplates the filing

of a QSub election is adopted on an

earlier date. The preamble to the QSub

regulations provides that Treasury and

the IRS intend to amend the section

7701 regulations regarding elective

changes in entity classification to

provide a similar rule concerning the

timing of the plan of liquidation.

Consistent with the commitment in

the preamble to the QSub regulations,

on January 17, 2001, proposed

regulations were published in the

Federal Register (REG–110659–00, 66

FR 3959 (2001–12 I.R.B. 917)) under

section 7701. No comments were

received from the public in response to

the proposed regulations. No public

hearing was requested or held. The

proposed regulations are adopted by

this Treasury decision.

64912 Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / Rules and Regulations

Explanation of Provisions

Section 301.7701–3(g)(1) describes

how elective changes in the

classification of an entity will be treated

for tax purposes. Section 301.7701–

3(g)(1)(ii) provides that an elective

conversion of an association to a

partnership is deemed to have the

following form: the association

distributes all of its assets and liabilities

to its shareholders in liquidation of the

association, and immediately thereafter,

the shareholders contribute all of the

distributed assets and liabilities to a

newly formed partnership. Section

301.7701–3(g)(1)(iii) provides that an

elective conversion of an association to

an entity that is disregarded as an entity

separate from its owner is deemed to

have the following form: the association

distributes all of its assets and liabilities

to its single owner in liquidation of the

association.

Section 332 may be relevant to the

deemed liquidation of an association if

it has a corporate owner. Under section

332, no gain or loss is recognized on the

receipt by a corporation of property

distributed in complete liquidation of

another corporation if the requirements

of section 332(b) are satisfied. Those

requirements include the adoption of a

plan of liquidation at a time when the

corporation receiving the distribution

owns stock of the liquidating

corporation meeting the requirements of

section 1504(a)(2) (i.e., 80 percent of

vote and value). The elective change

from an association to a partnership or

to a disregarded entity results in a

constructive liquidation of the

association for federal tax purposes.

Formally adopting a plan of liquidation

for the entity, however, is potentially

incompatible with an elective change

under section 301.7701–3, which allows

the local law entity to remain in

existence while liquidating only for

federal tax purposes. Accordingly, to

provide tax treatment of an association’s

deemed liquidation that is compatible

with the requirements of section 332,

the regulations state that, for purposes

of satisfying the requirement of

adoption of a plan of liquidation under

section 332(b), a plan of liquidation is

deemed adopted immediately before the

deemed liquidation incident to an

elective change in entity classification,

unless a formal plan of liquidation that

contemplates the filing of the elective

change in entity classification is

adopted on an earlier date.

Effective Date

These regulations apply to elections

filed on or after December 17, 2001;

however, taxpayers may apply the

amendments retroactively if the

corporate owner claiming treatment

under section 332 and its subsidiary

making the election take consistent

positions with respect to the Federal tax

consequences of the election.

Special Analyses

It has been determined that these

regulations are not a significant

regulatory action as defined in

Executive Order 12866. Therefore, a

regulatory assessment is not required. It

also has been determined that section

533(b) of the Administrative Procedures

Act (5 U.S.C. chapter 5) does not apply

to these regulations, and because these

regulations do 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 Internal Revenue

Code, the notice of proposed rulemaking

preceding these regulations was

submitted to the Chief Counsel for

Advocacy of the Small Business

Administration for comment on its

impact on small business.

Drafting Information

The principal authors of these

regulations are Beverly M. Katz of the

Office of Associate Chief Counsel

(Passthroughs & Special Industries) and

David J. Sotos 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 301

Employment taxes, Estate taxes,

Excise taxes, Gift taxes, Income taxes,

Penalties, Reporting and Recordkeeping

requirements.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR part 301 is

amended as follows:

PART 301—PROCEDURE AND

ADMINISTRATION

Paragraph 1. The authority citation

for part 301 continues to read in part as

follows:

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

Par. 2. Section 301.7701–3 is

amended as follows:

1. Redesignating the text of paragraph

(g)(2) as paragraph (g)(2)(i) and adding

a heading for newly designated

paragraph (g)(2)(i).

2. Adding a new paragraph (g)(2)(ii).

3. Revising the first sentence of

paragraph (g)(4).

The additions and revision read as

follows:

§ 301.7701–3 Classification of certain

business entities.

* * * * *

(g) * * *

(2) Effect of elective changes—(i) In

general. ***

(ii) Adoption of plan of liquidation.

For purposes of satisfying the

requirement of adoption of a plan of

liquidation under section 332, unless a

formal plan of liquidation that

contemplates the election to be

classified as a partnership or to be

disregarded as an entity separate from

its owner is adopted on an earlier date,

the making, by an association, of an

election under paragraph (c)(1)(i) of this

section to be classified as a partnership

or to be disregarded as an entity

separate from its owner is considered to

be the adoption of a plan of liquidation

immediately before the deemed

liquidation described in paragraph

(g)(1)(ii) or (iii) of this section. This

paragraph (g)(2)(ii) applies to elections

filed on or after December 17, 2001.

Taxpayers may apply this paragraph

(g)(2)(ii) retroactively to elections filed

before December 17, 2001, if the

corporate owner claiming treatment

under section 332 and its subsidiary

making the election take consistent

positions with respect to the federal tax

consequences of the election.

* * * * *

(4) Effective date. Except as otherwise

provided in paragraph (g)(2)(ii) of this

section, this paragraph (g) applies to

elections that are filed on or after

November 29, 1999. * * *

* * * * *

Approved: December 10, 2001.

Robert E. Wenzel,

Deputy Commissioner of Internal Revenue

Service.

Mark Weinberger,

Assistant Secretary of the Treasury.

[FR Doc. 01–31006 Filed 12–14–01; 8:45 am]

BILLING CODE 4830–01–P

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 165

[COTP Corpus Christi 01–002]

RIN 2115–AA97

Safety Zone; Gulf Intracoastal

Waterway, Port Isabel, TX

AGENCY: Coast Guard, DOT.

ACTION: Temporary final rule; request for

comments.

SUMMARY: The Coast Guard is

establishing a temporary safety zone to