Source: https://www.irs.gov/irb/2016-26_IRB/ar15.html
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Internal Revenue Bulletin - June 27, 2016 - REG–126452–15
Internal Revenue Bulletin: 2016-26 June 27, 2016 REG–126452–15
In the Rules and Regulations section of this issue of the Federal Register, the IRS is issuing temporary regulations effecting the repeal of the General Utilities doctrine by the Tax Reform Act of 1986. The text of those regulations also serves as part of the text of these proposed regulations.
These proposed regulations would impose corporate level tax on certain transactions in which property of a C corporation becomes
the property of a REIT. The proposed regulations also make an amendment not addressed in the temporary regulations. The proposed
regulations affect RICs, REITs, C corporations the property of which becomes the property of a RIC or a REIT, and their shareholders.
Send submissions to: CC:PA:LPD:PR (REG–126452–15), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station,
(REG–126452–15), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC, 20224 or sent electronically
via the Federal eRulemaking Portal at http://www.regulations.gov/ (IRS REG–126452–15).
Concerning the proposed regulations, Austin M. Diamond-Jones, (202) 317-5085; concerning the submission of comments or to
request a public hearing, Regina Johnson, (202) 317-6901 (not toll-free numbers).
Temporary regulations in the Rules and Regulations section of this issue of the Bulletin amend the Income Tax Regulations (26 CFR part 1) relating to section 337(d). The temporary regulations impose corporate level
tax on certain transactions in which property of a C corporation becomes the property of a REIT. The text of those regulations
also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the amendments.
The proposed regulations also include a modification to the definition of converted property that is not addressed in the
temporary regulations. This modification treats as converted property any property the basis of which is determined, directly
or indirectly, in whole or in part, by reference to the basis of property owned by a C corporation that becomes the property
of a RIC or a REIT. The Treasury Department and the IRS believe that such property presents similar concerns with regard to
the purposes of General Utilities repeal as other property of a C corporation that becomes the property of a RIC or REIT.
reaffirmed by Executive Order 13653. Therefore, a regulatory impact assessment is not required. Pursuant to the Regulatory
Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these proposed regulations would not have a significant
economic impact on a substantial number of small entities. This certification is based on the fact that these proposed regulations
would primarily affect large corporations with a substantial number of shareholders. Therefore, a regulatory flexibility analysis
is not required. Pursuant to section 7805(f) of the Code, this regulation has been submitted to the Chief Counsel for Advocacy
comments on all aspects of the proposed regulations. In particular, comments are requested regarding the scope of the terms
predecessors and successors. In addition, although related section 355 distributions occurring before or after conversion
transactions involving RICs do not present the same degree of concern regarding the purposes of General Utilities repeal, comments are requested as to whether the proposed regulations regarding related section 355 distributions should,
like the rules of § 1.337(d)–7 generally, apply to both conversion transactions involving RICs and conversion transactions
involving REITs. All comments will be available at www.regulations.gov or upon request. A public hearing will be scheduled
date, time, and place of the public hearing will be published in the Federal Register.
The principal author of these regulations is Austin M. Diamond-Jones of the Office of Associate Chief Counsel (Corporate).
Paragraph 1. The authority citation for part 1 is amended by revising the entry for § 1.337(d)–7 to read in part as follows:
Section 1.337(d)–7 also issued under 26 U.S.C. 337(d) and 355(h).
(a) General rule. (1) [The text of the proposed amendment to § 1.337(d)–7(a)(1) is the same as the text of § 1.337(d)–7T(a)(1) published elsewhere
(vi) [The text of the proposed amendment to § 1.337(d)–7(a)(2)(vi) is the same as the text of § 1.337(d)–7T(a)(2)(vi) published
(vii) Converted property. The term converted property means property owned by a C corporation that becomes the property of a RIC or a REIT and any other property the basis of
which is determined, directly or indirectly, in whole or in part, by reference to the basis of the property owned by a C corporation
that becomes the property of a RIC or a REIT.
(iii) [The text of the proposed amendment to § 1.337(d)–7(b)(2)(iii) is the same as the text of § 1.337(d)–7T(b)(2)(iii) published
(4) [The text of the proposed amendment to § 1.337(d)–7(b)(4) is the same as the text of § 1.337(d)–7T(b)(4) published elsewhere
(c) Election of deemed sale treatment. (1) [The text of the proposed amendment to § 1.337(d)–7(c)(1) is the same as the text of § 1.337(d)–7T(c)(1) published elsewhere
(6) [The text of the proposed amendment to § 1.337(d)–7(c)(6) is the same as the text of § 1.337(d)–7T(c)(6) published elsewhere
(f) [The text of the proposed amendment to § 1.337(d)–7(f) is the same as the text of § 1.337(d)–7T(f) published elsewhere
(ii) Conversion transactions occurring on or after June 7, 2016. Paragraphs (a)(1), (a)(2)(vi), (b)(4), (c)(1), (c)(6), and (f) of this section will apply to conversion transactions occurring
on or after June 7, 2016 and to conversion transactions and related section 355 distributions for which the conversion transaction
occurs before, and the related section 355 distribution occurs on or after, June 7, 2016. For conversion transactions that
occurred on or after January 2, 2002 and before June 7, 2016, see § 1.337(d)–7 as contained in 26 CFR part 1 in effect on
(iii) [The text of the proposed amendment to § 1.337(d)–7(g)(2)(iii) is the same as the text of § 1.337(d)–7T(g)(2)(iii) published
(iv) Converted property. Paragraph (a)(2)(vii) of this section applies to conversion transactions that occur on or after the date these regulations
are published in the Federal Register as final regulations.
for June 8, 2016, 81 F.R. 36816)