81_FR_40931 81 FR 40810 - Inversions and Related Transactions; Correction

81 FR 40810 - Inversions and Related Transactions; Correction

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 81, Issue 121 (June 23, 2016)

Page Range40810-40812
FR Document2016-14649

This document contains corrections to final and temporary regulations (TD 9761) that were published in the Federal Register on April 8, 2016 (81 FR 20858). The temporary regulations address transactions that are structured to avoid the purposes of sections 7874 and 367 of the Internal Revenue Code and certain post-inversion tax avoidance transactions.

Federal Register, Volume 81 Issue 121 (Thursday, June 23, 2016) 
[Federal Register Volume 81, Number 121 (Thursday, June 23, 2016)]
[Rules and Regulations]
[Pages 40810-40812]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-14649]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9761]
RIN 1545-BM88


Inversions and Related Transactions; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations; correcting amendment.

-----------------------------------------------------------------------

SUMMARY: This document contains corrections to final and temporary 
regulations (TD 9761) that were published in the Federal Register on 
April 8, 2016 (81 FR 20858). The temporary regulations address 
transactions that are structured to avoid the purposes of sections 7874 
and 367 of the Internal Revenue Code and certain post-inversion tax 
avoidance transactions.

DATES: This correction is effective on June 23, 2016 and applicable on 
April 8, 2016.

FOR FURTHER INFORMATION CONTACT: Rose E. Jenkins at (202) 317-6934 (not 
a toll free number).

SUPPLEMENTARY INFORMATION: 

Background

    The final and temporary regulations (TD 9761) that are the subject 
of this correction are under sections 304, 367, 956, 7701(l), and 7874 
of the Internal Revenue Code.

Need for Correction

    As published, the final and temporary regulations (TD 9761) contain 
errors that may prove to be misleading and are in need of 
clarification.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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

0
Par. 2. Section 1.304-7T is amended by revising paragraph (f) to read 
as follows:


Sec.  1.304-7T  Certain acquisitions by foreign acquiring corporations 
(temporary).

* * * * *
    (f) Expiration date. This section expires on or before April 4, 
2019.
0
Par. 3. Section 1.367(a)-3T is amended by revising paragraph (k) to 
read as follows:


Sec.  1.367(a)-3T  Treatment of transfers of stock or securities to 
foreign corporations (temporary).

* * * * *

[[Page 40811]]

    (k) Expiration date. Paragraph (c)(3)(iii)(C) of this section 
expires on or before April 4, 2019.


Sec.  1.367(b)-4  [Amended]

0
Par. 4. For each entry in Sec.  1.367(b)-4 in the ``Paragraph'' column 
remove the language in the ``Remove'' column and add in its place the 
language in the ``Add'' column as set forth below:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                Paragraph                                         Remove                                                    Add
--------------------------------------------------------------------------------------------------------------------------------------------------------
(b)(1)(i)(B)(2).........................  foreign acquiring corporation.........................  transferee foreign corporation.
(b)(1)(ii)(A), first sentence...........  foreign acquiring corporation.........................  transferee foreign corporation.
(b)(2)(i)(A)............................  foreign acquiring corporations........................  transferee foreign corporation.
(b)(2)(i)(B)............................  foreign acquiring corporation.........................  transferee foreign corporation.
(b)(2)(i)(C)............................  foreign acquiring corporation.........................  transferee foreign corporation.
(b)(3)(i)...............................  foreign acquiring corporation.........................  transferee foreign corporation.
(d)(2), Example, heading................  foreign acquiring corporation.........................  transferee foreign corporation.
--------------------------------------------------------------------------------------------------------------------------------------------------------

Sec.  1.367(b)-4T  [Amended]

0
Par. 5. Section 1.367(b)-4T(d)(1) is amended by removing the language 
``Sec.  1.367(b)-(3)'' and adding in its place the language ``Sec.  
1.367(b)-3''.
0
Par. 6. Section 1.956-2T is amended by revising the first sentence of 
paragraph (a)(4)(iii) Example 3.(A), the second sentence of paragraph 
(a)(4)(iii) Example 3.(B), and the third sentence of paragraph 
(a)(4)(iii) Example 4.(B) to read as follows:


Sec.  1.956-2T  Definition of United States property (temporary).

* * * * *
    (a) * * *
    (4) * * *
    (iii) * * *

    Example 3.  (A) Facts. Before the inversion transaction, FA also 
wholly owns USP, a domestic corporation, which, in turn, wholly 
owns, LFS, a foreign corporation that is a controlled foreign 
corporation. * * *
    (B) * * * Because LFS was a controlled foreign corporation and a 
member of the EAG with respect to the inversion transaction on the 
completion date, and DT was not a United States shareholder with 
respect to LFS on or before the completion date, LFS is excluded 
from the definition of expatriated foreign subsidiary pursuant to 
Sec.  1.7874-12T(a)(9)(ii). * * *
    Example 4.  * * *
    (B) * * * Because LFSS was not a member of the EAG with respect 
to the inversion transaction on the completion date, LFSS is not 
excluded from the definition of expatriated foreign subsidiary 
pursuant to Sec.  1.7874-12T(a)(9)(ii). * * *
* * * * *
0
Par. 7. Section 1.7701(l)-4T is amended by revising the ninth sentence 
of paragraph (a), the fourth sentence of paragraph (g) Example 
3.(ii)(B), and the third sentence of paragraph (g) Example 11.(ii) to 
read as follows:


Sec.  1.7701(l)-4T  Rules regarding inversion transactions (temporary).

    (a) * * * See Sec.  1.367(b)-4T(e) and (f) for rules concerning 
certain other exchanges after an inversion transaction. * * *
* * * * *
    (g) * * *

    Example 3.  * * *
    (ii) * * *
    (B) * * * Although FA (a non-CFC foreign related person) 
indirectly owns $4x of FT stock both immediately before and after 
the specified transaction and any related transaction, all of that 
stock is directly owned by DT (a domestic corporation), and as a 
result, under paragraph (f)(4) of this section, none of that stock 
is treated as directly or indirectly owned by FP for purposes of 
calculating the pre-transaction ownership percentage and the post-
transaction ownership percentage with respect to FT. * * *
* * * * *
    Example 11.  * * *
    (ii) * * * However, after the April 30, 2016 transfer, because 
FS ceases to be a foreign related person, it ceases to be a 
specified related person. * * *
* * * * *

0
Par. 8. Section 1.7874-1T is amended by revising paragraph (i) to read 
as follows:


Sec.  1.7874-1T  Disregard of affiliate-owned stock (temporary).

* * * * *
    (i) Expiration date. This section expires on or before April 4, 
2019.
0
Par. 9. Section 1.7874-2T is amended by revising paragraphs (c)(4)(iii) 
and (m) to read as follows:


Sec.  1.7874-2T  Surrogate foreign corporation (temporary).

* * * * *
    (c) * * *
    (4) * * *
    (iii) Additional related transactions. If, pursuant to the same 
plan (or a series of related transactions), a foreign corporation 
directly or indirectly acquires (under the principles of paragraph 
(c)(4)(ii) of this section) substantially all of the properties 
directly or indirectly held by a subsequent acquiring corporation in a 
transaction occurring after the subsequent acquisition, then the 
principles of paragraph (c)(4)(i) of this section apply to such 
transaction (and any subsequent transaction or transactions occurring 
pursuant to the plan (or the series of related transactions)).
* * * * *
    (m) Expiration date. This section expires on or before April 4, 
2019.
0
Par. 10. Section 1.7874-3T is amended by revising paragraph (g) to read 
as follows:


Sec.  1.7874-3T  Substantial business activities (temporary).

* * * * *
    (g) Expiration date. The applicability of paragraphs (b)(4) and 
(d)(10) of this section expires on or before April 4, 2019.
0
Par. 11. Section 1.7874-6T is amended by revising paragraphs (f)(3) and 
(i) to read as follows:


Sec.  1.7874-6T  Stock transferred by members of the EAG (temporary).

* * * * *
    (f) * * *
    (3) A transferring corporation means a corporation that is a former 
domestic entity shareholder or former domestic entity partner.
* * * * *
    (i) Expiration date. This section expires on or before April 4, 
2019.

0
Par. 12. Section 1.7874-7T is amended by revising the first sentence of 
paragraph (g) Example 2.(ii) and paragraph (i) to read as follows:


Sec.  1.7874-7T  Disregard of certain stock attributable to passive 
assets (temporary).

* * * * *
    (g) * * *

    Example 2.  * * *
    (ii) Analysis. Without regard to the application of Sec. Sec.  
1.7874-4T(b) and 1.7874-10T(b) and paragraph (b) of this section, 
the ownership percentage described in section 7874(a)(2)(B)(ii) 
would be less than 5 (by vote and value), or 4 (4/100, or 4 shares 
of FA stock held by Individual B by reason of owning the DT stock, 
determined under Sec.  1.7874-2(f)(2), over 100 shares of FA stock 
outstanding after the DT acquisition).
* * * * *
    (i) Expiration date. The applicability of this section expires on 
or before April 4, 2019.

[[Page 40812]]

0
Par. 13. Section 1.7874-8T is amended by revising the third sentence of 
paragraph (h) Example 1.(ii), the fifth sentence of paragraph (h) 
Example 2.(ii), the ninth sentence of paragraph (h) Example 3.(ii), and 
paragraph (j) to read as follows:


Sec.  1.7874-8T  Disregard of certain stock attributable to multiple 
domestic entity acquisitions (temporary).

* * * * *
    (h) * * *

    Example 1.  * * *
    (ii) * * * As a result, and because there were no redemptions of 
FA stock, the excluded amount is $150x (calculated as 100, the total 
number of prior acquisition shares, multiplied by $1.50x, the fair 
market value of a single share of FA stock on the completion date 
with respect to the DT2 acquisition). * * *
* * * * *
    Example 2.  * * *
    (ii) * * * As a result, the excluded amount is $112.50x, 
calculated as 75 (100, the total number of prior acquisition shares, 
less 25, the allocable redeemed shares) multiplied by $1.50x (the 
fair market value of a single share of FA stock on the completion 
date with respect to the DT2 acquisition). * * *
* * * * *
    Example 3.  * * *
    (ii) * * * Accordingly, the excluded amount is $112.50x, 
calculated as 150 (200, the total number of prior acquisition 
shares, less 50, the allocable redeemed shares) multiplied by $0.75x 
(the fair market value of a single class of FA stock on the 
completion date with respect to the DT2 acquisition). * * *
* * * * *
    (j) Expiration date. The applicability of this section expires on 
or before April 4, 2019.
0
Par. 14. Section 1.7874-9T is amended by revising paragraph (e)(1), the 
first sentence of paragraph (f) Example.(ii)(A), the seventh sentence 
of paragraph (f) Example.(iv) and paragraph (h) to read as follows:


Sec.  1.7874-9T  Disregard of certain stock in third-country 
transactions (temporary).

* * * * *
    (e) * * *
    (1) Acquisition of multiple foreign corporations that are tax 
residents of the same foreign country. When multiple foreign 
acquisitions occur pursuant to the same plan (or a series of related 
transactions) and two or more of the acquired foreign corporations were 
subject to tax as a resident of the same foreign country before the 
foreign acquisitions and all related transactions, then those foreign 
acquisitions are treated as a single foreign acquisition and those 
acquired foreign corporations are treated as a single acquired foreign 
corporation for purposes of this section.
* * * * *
    (f) * * *

    Example.  * * *
    (ii) * * *
    (A) The FT acquisition is a foreign acquisition because, 
pursuant to the FT acquisition, FA (a foreign acquiring corporation) 
acquires 100 percent of the stock of FT and is thus treated as 
indirectly acquiring 100 percent of the properties held by FT (an 
acquired foreign corporation). * * *
* * * * *
    (iv) * * * FA's indirect acquisition of FT's properties is a 
covered foreign acquisition because 35 shares of FA stock (the 
shares received by Individual B) are held by reason of holding stock 
in FT; thus, the foreign ownership percentage is 100 percent (35/
35). * * *
* * * * *
    (h) Expiration date. The applicability of this section expires on 
or before April 4, 2019.
0
Par. 15. Section 1.7874-10T is amended by revising paragraphs (d)(2) 
and (j) to read as follows:


Sec.  1.7874-10T  Disregard of certain distributions (temporary).

* * * * *
    (d) * * *
    (2) On the completion date, former domestic entity shareholders or 
former domestic entity partners, as applicable, in the aggregate, own 
(applying the attribution rules of section 318(a) with the 
modifications described in section 304(c)(3)(B)) less than five percent 
(by vote and value) of the stock of (or a partnership interest in) each 
member of the expanded affiliated group.
* * * * *
    (j) Expiration date. This section expires on or before April 4, 
2019.
0
Par. 16. Section 1.7874-11T is amended by revising paragraphs (b)(1) 
and (2), and (g) to read as follows:


Sec.  1.7874-11T  Rules regarding inversion gain (temporary).

* * * * *
    (b) * * * (1) General rule. Except as provided in paragraphs (b)(2) 
and (3) of this section, inversion gain includes income (including an 
amount treated as a dividend under section 78) or gain recognized by an 
expatriated entity for any taxable year that includes any portion of 
the applicable period by reason of a direct or indirect transfer of 
stock or other properties or license of any property either as part of 
the domestic entity acquisition, or after such acquisition if the 
transfer or license is to a specified related person.
    (2) Exception for property described in section 1221(a)(1). 
Inversion gain does not include income or gain recognized by reason of 
the transfer or license, after the domestic entity acquisition, of 
property that is described in section 1221(a)(1) in the hands of the 
transferor or licensor.
* * * * *
    (g) Expiration date. This section expires on or before April 4, 
2019.
0
Par. 17. Section 1.7874-12T is amended by revising paragraph (c) to 
read as follows:


Sec.  1.7874-12T  Definitions (temporary).

* * * * *
    (c) Expiration date. This section expires on or before April 4, 
2019.

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2016-14649 Filed 6-22-16; 8:45 am]
 BILLING CODE 4830-01-P

40810 Federal Register / Vol. 81, No. 121 / Thursday, June 23, 2016 / Rules and Regulations DEPARTMENT OF THE TREASURY heading ‘‘a. § 1.7874–4T, In General’’ ACTION: Final and temporary the fifth and sixth lines, the language regulations; correcting amendment. Internal Revenue Service ‘‘entity acquisition described in section 7874(a)(2)(B)(i) is excluded from the’’ is SUMMARY: This document contains 26 CFR Part 1 corrected to read ‘‘entity acquisition is corrections to final and temporary excluded from the’’. regulations (TD 9761) that were [TD 9761] 4. On page 20869, in the preamble, published in the Federal Register on RIN 1545–BM88 the first column, the twenty-fifth line April 8, 2016 (81 FR 20858). The from the bottom of the column, the temporary regulations address Inversions and Related Transactions; language ‘‘60% or 80% on the transactions that are structured to avoid Correction completion date.’’ is corrected to read the purposes of sections 7874 and 367 AGENCY: Internal Revenue Service (IRS), ‘‘60 or 80 on the completion date.’’. of the Internal Revenue Code and Treasury. 5. On page 20871, in the preamble, certain post-inversion tax avoidance the second column, the third and tenth transactions. ACTION: Final and temporary regulations; correction. lines from the top of the first full DATES: This correction is effective on paragraph, the language ‘‘domestic’’ is June 23, 2016 and applicable on April SUMMARY: This document contains removed. 8, 2016. corrections to final and temporary 6. On page 20873, in the preamble, regulations (TD 9761) that were the third column, under the paragraph FOR FURTHER INFORMATION CONTACT: Rose published in the Federal Register on heading ‘‘II. Rules Addressing Certain E. Jenkins at (202) 317–6934 (not a toll April 8, 2016 (81 FR 20858). The Post-Inversions Tax Avoidance free number). temporary regulations address Transactions’’ the first line, the SUPPLEMENTARY INFORMATION: transactions that are structured to avoid language ‘‘As stated in Section 1 of the 2014’’ is corrected to read ‘‘As stated in Background the purposes of sections 7874 and 367 of the Internal Revenue Code and section 1 of the 2014’’. The final and temporary regulations certain post-inversion tax avoidance 7. On page 20874, in the preamble, (TD 9761) that are the subject of this transactions. the third column, the twenty-second correction are under sections 304, 367, line from the top of the column, the 956, 7701(l), and 7874 of the Internal DATES: This correction is effective on language ‘‘completion date, is treated as Revenue Code. June 23, 2016 and applicable on April an’’ is corrected to read ‘‘completion 8, 2016. Need for Correction date is treated as an’’. FOR FURTHER INFORMATION CONTACT: Rose 8. On page 20877, in the preamble, As published, the final and temporary E. Jenkins at (202) 317–6934 (not a toll the first column, under the paragraph regulations (TD 9761) contain errors that free number). heading ‘‘ii. Exceptions From may prove to be misleading and are in SUPPLEMENTARY INFORMATION: Recharacterization’’ the twelfth line of need of clarification. Background the first full paragraph, the language ‘‘recognized. See Section 2.C of this List of Subjects in 26 CFR Part 1 The final and temporary regulations Part’’ is corrected to read ‘‘recognized. Income taxes, Reporting and (TD 9761) that are the subject of this See Section 2.c of this Part’’. recordkeeping requirements. correction are under sections 304, 367, 9. On page 20880, in the preamble, 956, 7701(l), and 7874 of the Internal the first column, under the paragraph Correction of Publication Revenue Code. heading ‘‘b. Regulations Implementing Accordingly, 26 CFR part 1 is Need for Correction the Section 367(b) Asset Dilution Rule’’ corrected by making the following the third line from the bottom of the correcting amendments: As published, the final and temporary column, the language ‘‘property to a regulations (TD 9761) contain errors that foreign transferee’’ is corrected to read PART 1—INCOME TAXES may prove to be misleading and are in ‘‘property to a transferee foreign’’. need of clarification. ■ Paragraph 1. The authority citation Martin V. Franks, Correction of Publication for part 1 continues to read in part as Chief, Publications and Regulations Branch, follows: Accordingly, the final and temporary Legal Processing Division, Associate Chief regulations (TD 9761), that are the Counsel (Procedure and Administration). Authority: 26 U.S.C. 7805 * * * subject of FR Doc. 2016–07300, are [FR Doc. 2016–14648 Filed 6–22–16; 8:45 am] ■ Par. 2. Section 1.304–7T is amended corrected as follows: BILLING CODE 4830–01–P by revising paragraph (f) to read as 1. On page 20858, in the preamble, follows: the second column, the ninth line from the bottom of the column, the language DEPARTMENT OF THE TREASURY § 1.304–7T Certain acquisitions by foreign acquiring corporations (temporary). ‘‘section 7874 and § 1.367(a)–3(c) and’’ is corrected to read ‘‘section 7874 and’’. Internal Revenue Service * * * * * 2. On page 20860, in the preamble, (f) Expiration date. This section the third column, under the paragraph 26 CFR Part 1 expires on or before April 4, 2019. asabaliauskas on DSK3SPTVN1PROD with RULES heading ‘‘E. Section 7701’’, the language [TD 9761] ■ Par. 3. Section 1.367(a)–3T is ‘‘re-characterizing’’ and ‘‘re- amended by revising paragraph (k) to characterization’’ is corrected to read RIN 1545–BM88 read as follows: ‘‘recharacterizing’’ and Inversions and Related Transactions; ‘‘recharacterization’’ respectively § 1.367(a)–3T Treatment of transfers of Correction stock or securities to foreign corporations wherever it appears. 3. On page 20862, in the preamble, AGENCY: Internal Revenue Service (IRS), (temporary). the third column, under the paragraph Treasury. * * * * * VerDate Sep<11>2014 16:58 Jun 22, 2016 Jkt 238001 PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 E:\FR\FM\23JNR1.SGM 23JNR1

Federal Register / Vol. 81, No. 121 / Thursday, June 23, 2016 / Rules and Regulations 40811 (k) Expiration date. Paragraph § 1.367(b)–4 [Amended] language in the ‘‘Remove’’ column and (c)(3)(iii)(C) of this section expires on or ■ Par. 4. For each entry in § 1.367(b)–4 add in its place the language in the before April 4, 2019. in the ‘‘Paragraph’’ column remove the ‘‘Add’’ column as set forth below: Paragraph Remove Add (b)(1)(i)(B)(2) ....................................................................................... foreign acquiring corporation ........... transferee foreign corporation. (b)(1)(ii)(A), first sentence ................................................................... foreign acquiring corporation ........... transferee foreign corporation. (b)(2)(i)(A) ........................................................................................... foreign acquiring corporations ......... transferee foreign corporation. (b)(2)(i)(B) ........................................................................................... foreign acquiring corporation ........... transferee foreign corporation. (b)(2)(i)(C) ........................................................................................... foreign acquiring corporation ........... transferee foreign corporation. (b)(3)(i) ................................................................................................ foreign acquiring corporation ........... transferee foreign corporation. (d)(2), Example, heading .................................................................... foreign acquiring corporation ........... transferee foreign corporation. § 1.367(b)–4T [Amended] Example 3. * * * plan (or the series of related (ii) * * * transactions)). ■ Par. 5. Section 1.367(b)–4T(d)(1) is (B) * * * Although FA (a non-CFC foreign amended by removing the language related person) indirectly owns $4x of FT * * * * * ‘‘§ 1.367(b)–(3)’’ and adding in its place stock both immediately before and after the (m) Expiration date. This section the language ‘‘§ 1.367(b)–3’’. specified transaction and any related expires on or before April 4, 2019. ■ Par. 6. Section 1.956–2T is amended transaction, all of that stock is directly owned ■ Par. 10. Section 1.7874–3T is by revising the first sentence of by DT (a domestic corporation), and as a amended by revising paragraph (g) to paragraph (a)(4)(iii) Example 3.(A), the result, under paragraph (f)(4) of this section, read as follows: second sentence of paragraph (a)(4)(iii) none of that stock is treated as directly or indirectly owned by FP for purposes of § 1.7874–3T Substantial business Example 3.(B), and the third sentence of activities (temporary). paragraph (a)(4)(iii) Example 4.(B) to calculating the pre-transaction ownership read as follows: percentage and the post-transaction * * * * * ownership percentage with respect to FT. (g) Expiration date. The applicability § 1.956–2T Definition of United States * * * of paragraphs (b)(4) and (d)(10) of this property (temporary). * * * * * section expires on or before April 4, * * * * * Example 11. * * * 2019. (a) * * * (ii) * * * However, after the April 30, 2016 ■ Par. 11. Section 1.7874–6T is (4) * * * transfer, because FS ceases to be a foreign amended by revising paragraphs (f)(3) (iii) * * * related person, it ceases to be a specified and (i) to read as follows: related person. * * * Example 3. (A) Facts. Before the inversion § 1.7874–6T Stock transferred by members transaction, FA also wholly owns USP, a * * * * * of the EAG (temporary). domestic corporation, which, in turn, wholly ■ Par. 8. Section 1.7874–1T is amended owns, LFS, a foreign corporation that is a by revising paragraph (i) to read as * * * * * controlled foreign corporation. * * * follows: (f) * * * (B) * * * Because LFS was a controlled (3) A transferring corporation means a foreign corporation and a member of the EAG § 1.7874–1T Disregard of affiliate-owned corporation that is a former domestic with respect to the inversion transaction on stock (temporary). entity shareholder or former domestic the completion date, and DT was not a entity partner. * * * * * United States shareholder with respect to LFS on or before the completion date, LFS is (i) Expiration date. This section * * * * * excluded from the definition of expatriated expires on or before April 4, 2019. (i) Expiration date. This section foreign subsidiary pursuant to § 1.7874– ■ Par. 9. Section 1.7874–2T is amended expires on or before April 4, 2019. 12T(a)(9)(ii). * * * by revising paragraphs (c)(4)(iii) and (m) ■ Par. 12. Section 1.7874–7T is Example 4. * * * to read as follows: amended by revising the first sentence (B) * * * Because LFSS was not a member of paragraph (g) Example 2.(ii) and of the EAG with respect to the inversion § 1.7874–2T Surrogate foreign corporation paragraph (i) to read as follows: transaction on the completion date, LFSS is (temporary). not excluded from the definition of * * * * * § 1.7874–7T Disregard of certain stock expatriated foreign subsidiary pursuant to attributable to passive assets (temporary). § 1.7874–12T(a)(9)(ii). * * * (c) * * * (4) * * * * * * * * * * * * * (g) * * * ■ Par. 7. Section 1.7701(l)–4T is (iii) Additional related transactions. amended by revising the ninth sentence If, pursuant to the same plan (or a series Example 2. * * * of related transactions), a foreign (ii) Analysis. Without regard to the of paragraph (a), the fourth sentence of application of §§ 1.7874–4T(b) and 1.7874– paragraph (g) Example 3.(ii)(B), and the corporation directly or indirectly 10T(b) and paragraph (b) of this section, the third sentence of paragraph (g) Example acquires (under the principles of ownership percentage described in section 11.(ii) to read as follows: paragraph (c)(4)(ii) of this section) 7874(a)(2)(B)(ii) would be less than 5 (by vote substantially all of the properties and value), or 4 (4/100, or 4 shares of FA asabaliauskas on DSK3SPTVN1PROD with RULES § 1.7701(l)–4T Rules regarding inversion directly or indirectly held by a stock held by Individual B by reason of transactions (temporary). subsequent acquiring corporation in a owning the DT stock, determined under (a) * * * See § 1.367(b)–4T(e) and (f) transaction occurring after the § 1.7874–2(f)(2), over 100 shares of FA stock for rules concerning certain other subsequent acquisition, then the outstanding after the DT acquisition). exchanges after an inversion principles of paragraph (c)(4)(i) of this * * * * * transaction. * * * section apply to such transaction (and (i) Expiration date. The applicability * * * * * any subsequent transaction or of this section expires on or before April (g) * * * transactions occurring pursuant to the 4, 2019. VerDate Sep<11>2014 16:58 Jun 22, 2016 Jkt 238001 PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 E:\FR\FM\23JNR1.SGM 23JNR1

40812 Federal Register / Vol. 81, No. 121 / Thursday, June 23, 2016 / Rules and Regulations ■ Par. 13. Section 1.7874–8T is are treated as a single acquired foreign does not include income or gain amended by revising the third sentence corporation for purposes of this section. recognized by reason of the transfer or of paragraph (h) Example 1.(ii), the fifth * * * * * license, after the domestic entity sentence of paragraph (h) Example 2.(ii), (f) * * * acquisition, of property that is described the ninth sentence of paragraph (h) Example. * * * in section 1221(a)(1) in the hands of the Example 3.(ii), and paragraph (j) to read (ii) * * * transferor or licensor. as follows: (A) The FT acquisition is a foreign * * * * * acquisition because, pursuant to the FT (g) Expiration date. This section § 1.7874–8T Disregard of certain stock acquisition, FA (a foreign acquiring expires on or before April 4, 2019. attributable to multiple domestic entity corporation) acquires 100 percent of the stock acquisitions (temporary). ■ Par. 17. Section 1.7874–12T is of FT and is thus treated as indirectly * * * * * acquiring 100 percent of the properties held amended by revising paragraph (c) to by FT (an acquired foreign corporation). read as follows: (h) * * * * * * Example 1. * * * § 1.7874–12T Definitions (temporary). (ii) * * * As a result, and because there * * * * * * * * * * were no redemptions of FA stock, the (iv) * * * FA’s indirect acquisition of FT’s properties is a covered foreign acquisition (c) Expiration date. This section excluded amount is $150x (calculated as 100, expires on or before April 4, 2019. the total number of prior acquisition shares, because 35 shares of FA stock (the shares multiplied by $1.50x, the fair market value of received by Individual B) are held by reason Martin V. Franks, a single share of FA stock on the completion of holding stock in FT; thus, the foreign ownership percentage is 100 percent (35/35). Chief, Publications and Regulations Branch, date with respect to the DT2 acquisition). Legal Processing Division, Associate Chief * * * * * * Counsel (Procedure and Administration). * * * * * * * * * * [FR Doc. 2016–14649 Filed 6–22–16; 8:45 am] Example 2. * * * (h) Expiration date. The applicability of this section expires on or before April BILLING CODE 4830–01–P (ii) * * * As a result, the excluded amount is $112.50x, calculated as 75 (100, the total 4, 2019. number of prior acquisition shares, less 25, ■ Par. 15. Section 1.7874–10T is the allocable redeemed shares) multiplied by amended by revising paragraphs (d)(2) $1.50x (the fair market value of a single share and (j) to read as follows: DEPARTMENT OF THE INTERIOR of FA stock on the completion date with respect to the DT2 acquisition). * * * § 1.7874–10T Disregard of certain Bureau of Safety and Environmental distributions (temporary). Enforcement * * * * * Example 3. * * * * * * * * (ii) * * * Accordingly, the excluded (d) * * * 30 CFR Part 250 amount is $112.50x, calculated as 150 (200, (2) On the completion date, former the total number of prior acquisition shares, domestic entity shareholders or former [Docket ID: BSEE–2016–0006; EEEE500000 less 50, the allocable redeemed shares) domestic entity partners, as applicable, 16XE1700DX EX1SF0000.DAQ000] multiplied by $0.75x (the fair market value in the aggregate, own (applying the of a single class of FA stock on the attribution rules of section 318(a) with completion date with respect to the DT2 RIN 1014–AA15 the modifications described in section acquisition). * * * 304(c)(3)(B)) less than five percent (by Oil and Gas and Sulphur Operations in * * * * * vote and value) of the stock of (or a the Outer Continental Shelf—Technical (j) Expiration date. The applicability partnership interest in) each member of Corrections; Correction of this section expires on or before April the expanded affiliated group. 4, 2019. * * * * * AGENCY: Bureau of Safety and (j) Expiration date. This section Environmental Enforcement (BSEE), ■ Par. 14. Section 1.7874–9T is expires on or before April 4, 2019. Interior. amended by revising paragraph (e)(1), the first sentence of paragraph (f) ■ Par. 16. Section 1.7874–11T is ACTION: Final rule; correction. Example.(ii)(A), the seventh sentence of amended by revising paragraphs (b)(1) paragraph (f) Example.(iv) and and (2), and (g) to read as follows: SUMMARY: The Bureau of Safety and paragraph (h) to read as follows: Environmental Enforcement (BSEE) is § 1.7874–11T Rules regarding inversion correcting a final rule that appeared in § 1.7874–9T Disregard of certain stock in gain (temporary). the Federal Register on June 6, 2016 (81 third-country transactions (temporary). * * * * * FR 36145). * * * * * (b) * * * (1) General rule. Except as DATES: Effective July 28, 2016. provided in paragraphs (b)(2) and (3) of (e) * * * this section, inversion gain includes FOR FURTHER INFORMATION CONTACT: (1) Acquisition of multiple foreign income (including an amount treated as Betty Cox, Regulations and Standards corporations that are tax residents of the a dividend under section 78) or gain Branch at (703) 787–1665 or email at same foreign country. When multiple recognized by an expatriated entity for regs@bsee.gov. foreign acquisitions occur pursuant to any taxable year that includes any SUPPLEMENTARY INFORMATION: In the FR the same plan (or a series of related portion of the applicable period by Doc. 2016–12487 appearing on page asabaliauskas on DSK3SPTVN1PROD with RULES transactions) and two or more of the reason of a direct or indirect transfer of 36150 in the Federal Register of acquired foreign corporations were stock or other properties or license of Monday, June 6, 2016, the following subject to tax as a resident of the same any property either as part of the correction is made: foreign country before the foreign domestic entity acquisition, or after acquisitions and all related transactions, such acquisition if the transfer or § 250.904 [Corrected] then those foreign acquisitions are license is to a specified related person. 1. On page 36150, in the first column, treated as a single foreign acquisition (2) Exception for property described remove amendatory instruction 20 and those acquired foreign corporations in section 1221(a)(1). Inversion gain correcting § 250.904. VerDate Sep<11>2014 16:58 Jun 22, 2016 Jkt 238001 PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 E:\FR\FM\23JNR1.SGM 23JNR1


Document Created: 2018-02-08 07:41:36
Document Modified: 2018-02-08 07:41:36
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionFinal and temporary regulations; correcting amendment.
DatesThis correction is effective on June 23, 2016 and applicable on April 8, 2016.
ContactRose E. Jenkins at (202) 317-6934 (not a toll free number).
FR Citation81 FR 40810 
RIN Number1545-BM88
CFR AssociatedIncome Taxes and Reporting and Recordkeeping Requirements
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR