81 FR 72751 - Treatment of Certain Interests in Corporations as Stock or Indebtedness

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 81, Issue 204 (October 21, 2016)

Page Range		72751-72753
FR Document		2016-25104

The Department of the Treasury (Treasury Department) and the IRS are issuing temporary regulations that affect corporations and partnerships that issue purported indebtedness to related corporations or partnerships in the Rules and Regulations section of this issue of the Federal Register. The temporary regulations provide rules addressing the treatment of instruments issued by partnerships, consolidated groups, and certain transactions involving qualified cash- management arrangements. The text of the temporary regulations also serves as the text of these proposed regulations.

Federal Register, Volume 81 Issue 204 (Friday, October 21, 2016)

[Federal Register Volume 81, Number 204 (Friday, October 21, 2016)]
[Proposed Rules]
[Pages 72751-72753]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-25104]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-130314-16]
RIN 1545-BN68


Treatment of Certain Interests in Corporations as Stock or 
Indebtedness

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulation.

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

SUMMARY: The Department of the Treasury (Treasury Department) and the 
IRS are issuing temporary regulations that affect corporations and 
partnerships that issue purported indebtedness to related corporations 
or partnerships in the Rules and Regulations section of this issue of 
the Federal Register. The temporary regulations provide rules 
addressing the treatment of instruments issued by partnerships, 
consolidated groups, and certain transactions involving qualified cash-
management arrangements. The text of the temporary regulations also 
serves as the text of these proposed regulations.

DATES: Written or electronic comments and requests for a public hearing 
must be received by January 19, 2017.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-130314-16), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20224. 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-
130314-16), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC 20224, or sent electronically via the 
Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-
130314-16).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Austin M. Diamond-Jones, (202) 317-5363, or Joshua G. Rabon, (202) 317-
6937; concerning submissions of comments or requests for a public 
hearing, Regina Johnson, (202) 317-5177 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    The temporary regulations in the Rules and Regulations section of 
this issue of the Federal Register contain rules under sections 385 and 
752 of the Internal Revenue Code (Code) that establish requirements 
that ordinarily must be satisfied in order for certain related-party 
interests in a corporation to be treated as indebtedness for federal 
tax purposes. The text of the temporary regulations also serves as the 
text of the proposed regulations herein. The preamble to the temporary 
regulations explains the temporary regulations and the corresponding 
proposed regulations.

[[Page 72752]]

Special Analyses

I. Regulatory Planning and Review

    Executive Orders 13563 and 12866 direct agencies to assess costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). Executive Order 13563 
emphasizes the importance of quantifying both costs and benefits, of 
reducing costs, of harmonizing rules, and of promoting flexibility. 
Related rules in the final and temporary regulations under section 385 
in TD 9790, published in the Rules and Regulations section of this 
issue of the Federal Register, have been designated a ``significant 
regulatory action'' under section 3(f) of Executive Order 12866. For a 
discussion of the economic impact of those final and temporary 
regulations, as well as these proposed regulations, please see the 
Regulatory Assessment accompanying TD 9790, published in the Rules and 
Regulations section of this issue of the Federal Register.

II. Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act (5 U.S.C. Chapter 6), it 
is hereby certified that the final and temporary regulations in TD 
9790, published in the Rules and Regulations section of this issue of 
the Federal Register, and accordingly, these proposed regulations 
proposed by cross-reference to the temporary regulations, will not have 
a significant economic impact on a substantial number of small 
entities. Accordingly, a regulatory flexibility analysis is not 
required.
    To facilitate the federal tax analysis of an interest in a 
corporation, taxpayers are required under existing law to substantiate 
their classification of an interest as stock or indebtedness for 
federal tax purposes. Section 1.385-3 provides that certain interests 
in a corporation that are held by a member of the corporation's 
expanded group and that otherwise would be treated as indebtedness for 
federal tax purposes are treated as stock. Section 1.385-3T provides 
that for certain debt instruments issued by a controlled partnership, 
the holder is deemed to transfer all or a portion of the debt 
instrument to the partner or partners in the partnership in exchange 
for stock in the partner or partners. Section 1.385-4T provides rules 
regarding the application of Sec. Sec.  1.385-3 and 1.385-3T to members 
of a consolidated group. Sections 1.385-3 and 1.385-3T include multiple 
exceptions that limit their application. In particular, the threshold 
exception provides that the first $50 million of expanded group debt 
instruments that otherwise would be reclassified as stock or deemed to 
be transferred to a partner in a controlled partnership under Sec.  
1.385-3 or Sec.  1.385-3T will not be reclassified or deemed 
transferred under Sec.  1.385-3 or Sec.  1.385-3T. Although it is 
possible that the classification rules in Sec. Sec.  1.385-3, 1.385-3T, 
and 1.385-4T could have an effect on small entities, the threshold 
exception of the first $50 million of debt instruments otherwise 
subject to recharacterization or deemed transfer under Sec. Sec.  
1.385-3, 1.385-3T, and 1.385-4T makes it unlikely that a substantial 
number of small entities will be affected by Sec. Sec.  1.385-3T or 
1.385-4T.
    Pursuant to section 7805(f) of the Code, the final regulations in 
TD 9790, published in the Rules and Regulations section of this issue 
of the Federal Register, have been submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on their 
impact on small business. Comments were received requesting that the 
monetary thresholds contained in proposed Sec. Sec.  1.385-2, 1.385-3, 
and 1.385-4 be increased in order to mitigate the impact on small 
businesses. These comments are addressed in Parts IV.B.1.d and V.E.4 of 
the Summary of Comments and Explanation of Revisions in the preamble of 
TD 9790, published in the Rules and Regulations section of this issue 
of the Federal Register. No comments were received concerning the 
economic impact on small entities from the Small Business 
Administration.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the ``Addresses'' 
heading. Treasury and the IRS request comments on all aspects of the 
proposed rules. All comments will be available at www.regulations.gov 
or upon request. A public hearing will be scheduled if requested in 
writing by any person that timely submits electronic or written 
comments. If a public hearing is scheduled, notice of the date, time, 
and place for the public hearing will be published in the Federal 
Register.

Drafting Information

    The principal authors of these regulations are Austin M. Diamond-
Jones of the Office of Associate Chief Counsel (Corporate) and Joshua 
G. Rabon of the Office of Associate Chief Counsel (International). 
However, other personnel from the Treasury Department and the IRS 
participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding an 
entry in numerical order to read in part as follows:

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

    Section 1.385-4 also issued under 26 U.S.C. 385 and 1502.

0
Par. 2. Section 1.385-3 is amended by:
0
1. Revising paragraph (b)(3)(vii).
0
2. Revising paragraph (d)(4).
0
3. Revising paragraph (f).
0
4. Revising paragraphs (g)(5)-(8), (15)-(17), and (22)-(23).
0
5. Revising Example 12 through Example 19 in paragraph (h)(3).
0
6. Adding paragraph (k).
    The revisions and additions read as follows:


Sec.  1.385-3  Transactions in which debt proceeds are distributed or 
that have a similar effect.

* * * * *
    (b) * * *
    (3) * * *
    (vii) [The text of the proposed amendment to Sec.  1.385-
3(b)(3)(vii) is the same as the text of Sec.  1.385-3T(b)(3)(vii) 
published elsewhere in this issue of the Federal Register.]
* * * * *
    (d) * * *
    (4) [The text of the proposed amendment to Sec.  1.385-3(d)(4) is 
the same as the text of Sec.  1.385-3T(d)(4) published elsewhere in 
this issue of the Federal Register.]
* * * * *
    (f) [The text of the proposed amendment to Sec.  1.385-3(f) is the 
same as the text of Sec.  1.385-3T(f) published elsewhere in this issue 
of the Federal Register.]
    (g) * * *
    (5) [The text of the proposed amendment to Sec.  1.385-3(g)(5) is 
the same as the text of Sec.  1.385-3T(g)(5) published elsewhere in 
this issue of the Federal Register.]
    (6) [The text of the proposed amendment to Sec.  1.385-3(g)(6) is 
the

[[Page 72753]]

same as the text of Sec.  1.385-3T(g)(6) published elsewhere in this 
issue of the Federal Register.]
    (7) [The text of the proposed amendment to Sec.  1.385-3(g)(7) is 
the same as the text of Sec.  1.385-3T(g)(7) published elsewhere in 
this issue of the Federal Register.]
    (8) [The text of the proposed amendment to Sec.  1.385-3(g)(8) is 
the same as the text of Sec.  1.385-3T(g)(8) published elsewhere in 
this issue of the Federal Register.]
* * * * *
    (15) [The text of the proposed amendment to Sec.  1.385-3(g)(15) is 
the same as the text of Sec.  1.385-3T(g)(15) published elsewhere in 
this issue of the Federal Register.]
    (16) [The text of the proposed amendment to Sec.  1.385-3(g)(16) is 
the same as the text of Sec.  1.385-3T(g)(16) published elsewhere in 
this issue of the Federal Register.]
    (17) [The text of the proposed amendment to Sec.  1.385-3(g)(16) is 
the same as the text of Sec.  1.385-3T(g)(17) published elsewhere in 
this issue of the Federal Register.]
* * * * *
    (22) [The text of the proposed amendment to Sec.  1.385-3(g)(22) is 
the same as the text of Sec.  1.385-3T(g)(22) published elsewhere in 
this issue of the Federal Register.]
    (23) [The text of the proposed amendment to Sec.  1.385-3(g)(23) is 
the same as the text of Sec.  1.385-3T(g)(23) published elsewhere in 
this issue of the Federal Register.]
* * * * *
    (h) * * *
    (3) * * *
    Example 12. [The text of the proposed amendment to Sec.  1.385-
3(h)(3), Example 12 is the same as the text of Sec.  1.385-3T(h)(3), 
Example 12 published elsewhere in this issue of the Federal 
Register.]
    Example 13. [The text of the proposed amendment to Sec.  1.385-
3(h)(3), Example 13 is the same as the text of Sec.  1.385-3T(h)(3), 
Example 13 published elsewhere in this issue of the Federal 
Register.]
    Example 14.  [The text of the proposed amendment to Sec.  1.385-
3(h)(3), Example 14 is the same as the text of Sec.  1.385-3T(h)(3), 
Example 14 published elsewhere in this issue of the Federal 
Register.]
    Example 15.  [The text of the proposed amendment to Sec.  1.385-
3(h)(3), Example 15 is the same as the text of Sec.  1.385-3T(h)(3), 
Example 15 published elsewhere in this issue of the Federal 
Register.]
    Example 16. [The text of the proposed amendment to Sec.  1.385-
3(h)(3), Example 16 is the same as the text of Sec.  1.385-3T(h)(3), 
Example 16 published elsewhere in this issue of the Federal 
Register.]
    Example 17.  [The text of the proposed amendment to Sec.  1.385-
3(h)(3), Example 17 is the same as the text of Sec.  1.385-3T(h)(3), 
Example 17 published elsewhere in this issue of the Federal 
Register.]
    Example 18. [The text of the proposed amendment to Sec.  1.385-
3(h)(3), Example 18 is the same as the text of Sec.  1.385-3T(h)(3), 
Example 18 published elsewhere in this issue of the Federal 
Register.]
    Example 19. [The text of the proposed amendment to Sec.  1.385-
3(h)(3), Example 19 is the same as the text of Sec.  1.385-3T(h)(3), 
Example 19 published elsewhere in this issue of the Federal 
Register.]
* * * * *
    (k) [The text of the proposed amendment to Sec.  1.385-3(k) is the 
same as the text of Sec.  1.385-3T(k) published elsewhere in this issue 
of the Federal Register.]
0
Par. 3. Section 1.385-4 is added to read as follows:


Sec.  1.385-4  Treatment of consolidated groups.

    [The text of proposed Sec.  1.385-4 is the same as the text of 
Sec.  1.385-4T published elsewhere in this issue of the Federal 
Register.]
0
Par. 4. Section 1.752-2 is amended by:
0
1. Revising paragraph (c)(3).
0
2. Revising paragraph (l)(4).
    The addition and revision read as follows


Sec.  1.752-2   Partner's share of recourse liabilities.

* * * * *
    (c) * * *
    (3) [The text of the proposed amendment to Sec.  1.752-2(c)(3) is 
the same as the text of Sec.  1.752-2T(c)(3) published elsewhere in 
this issue of the Federal Register.]
* * * * *
    (l) * * *
    (4) [The text of the proposed amendment to Sec.  1.752-2(l)(4) is 
the same as the text of Sec.  1.752-2T(l)(4) published elsewhere in 
this issue of the Federal Register.]

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2016-25104 Filed 10-13-16; 5:00 pm]
 BILLING CODE 4830-01-P

Federal Register / Vol. 81, No. 204 / Friday, October 21, 2016 / Proposed Rules 72751

(h) Compliance Times for the Requirements (2) Contacting the Manufacturer: For any ACTION: Notice of proposed rulemaking
of Paragraph (g) of This AD requirement in this AD to obtain corrective by cross-reference to temporary
Do the actions required by paragraph (g) of actions from a manufacturer, the action must regulation.
this AD at the earliest of the times specified be accomplished using a method approved
in paragraphs (h)(1), (h)(2), and (h)(3) of this by the Manager, International Branch, ANM–
AD, or within 30 days after the effective date 116, Transport Airplane Directorate, FAA; or SUMMARY: The Department of the
of this AD, whichever occurs later. the European Aviation Safety Agency Treasury (Treasury Department) and the
(1) Before the accumulation of 5,000 total (EASA); or Airbus’s EASA Design IRS are issuing temporary regulations
flight cycles after the date of manufacture of Organization Approval (DOA). If approved by that affect corporations and partnerships
the airplane. the DOA, the approval must include the that issue purported indebtedness to
(2) Before the accumulation of 7,500 total DOA-authorized signature.
(3) Required for Compliance (RC): If any related corporations or partnerships in
flight hours after the date of manufacture of
the airplane. service information contains procedures or the Rules and Regulations section of this
(3) Within 30 months after the date of tests that are identified as RC, those issue of the Federal Register. The
manufacture of the airplane. procedures and tests must be done to comply temporary regulations provide rules
with this AD; any procedures or tests that are addressing the treatment of instruments
(i) Exclusion From Actions Required by not identified as RC are recommended. Those
Paragraph (g) of This AD issued by partnerships, consolidated
procedures and tests that are not identified groups, and certain transactions
An airplane that does not have a as RC may be deviated from using accepted
manufacturer serial number specified in methods in accordance with the operator’s involving qualified cash-management
figure 1 to paragraphs (g) and (i) of this AD maintenance or inspection program without arrangements. The text of the temporary
is excluded from the requirements of obtaining approval of an AMOC, provided regulations also serves as the text of
paragraph (g) of this AD, provided that, a the procedures and tests identified as RC can these proposed regulations.
FVP having P/N 786073–1–0 with a serial be done and the airplane can be put back in
number specified in figure 2 to paragraphs (g) an airworthy condition. Any substitutions or DATES: Written or electronic comments
and (i) of this AD has not been installed on changes to procedures or tests identified as and requests for a public hearing must
that airplane after July 2012. If a FVP having RC require approval of an AMOC. be received by January 19, 2017.
P/N 786073–1–0 with a serial number
specified in figure 2 to paragraphs (g) and (i) (l) Related Information ADDRESSES: Send submissions to:
of this AD is installed, or the serial number (1) Refer to Mandatory Continuing CC:PA:LPD:PR (REG–130314–16), Room
cannot be identified: Within 12 months after Airworthiness Information (MCAI) EASA 5203, Internal Revenue Service, P.O.
the effective date of this AD, replace the FVP Airworthiness Directive 2016–0114, dated Box 7604, Ben Franklin Station,
with a serviceable part, in accordance with June 15, 2016; corrected June 23, 2016; for Washington, DC 20224. Submissions
the Accomplishment Instructions of Airbus related information. This MCAI may be
found in the AD docket on the Internet at
may be hand-delivered Monday through
Service Bulletin A320–28–1221, Revision 02,
dated January 11, 2016. A review of airplane http://www.regulations.gov by searching for Friday between the hours of 8 a.m. and
maintenance records is acceptable if it can be and locating Docket No. FAA–2015–7526. 4 p.m. to CC:PA:LPD:PR (REG–130314–
conclusively determined from that review (2) For service information identified in 16), Courier’s Desk, Internal Revenue
that a FVP having a serial number specified this AD, contact Airbus, Airworthiness Service, 1111 Constitution Avenue NW.,
in figure 2 to paragraphs (g) and (i) of this Office—EIAS, 1 Rond Point Maurice Washington, DC 20224, or sent
AD has not been installed on that airplane Bellonte, 31707 Blagnac Cedex, France; electronically via the Federal
after July 2012. telephone +33 5 61 93 36 96; fax +33 5 61
93 44 51; email account.airworth-eas@
eRulemaking Portal at
(j) Parts Installation Limitation airbus.com; Internet http://www.airbus.com. http://www.regulations.gov (IRS REG–
As of the effective date of this AD, a FVP You may view this referenced service 130314–16).
having P/N 786073–1–0 and a serial number information at the FAA, Transport Airplane
FOR FURTHER INFORMATION CONTACT:
listed in figure 2 to paragraphs (g) and (i) of Directorate, 1601 Lind Avenue SW., Renton,
this AD may be installed on any airplane, WA. For information on the availability of Concerning the proposed regulations,
provided the FVP is marked with ‘‘Amdt B.’’ this material at the FAA, call 425–227–1221. Austin M. Diamond-Jones, (202) 317–
5363, or Joshua G. Rabon, (202) 317–
(k) Other FAA AD Provisions Issued in Renton, Washington, on
September 26, 2016. 6937; concerning submissions of
The following provisions also apply to this comments or requests for a public
AD: Dionne Palermo,
hearing, Regina Johnson, (202) 317–
(1) Alternative Methods of Compliance Acting Manager, Transport Airplane
(AMOCs): The Manager, International Directorate, Aircraft Certification Service. 5177 (not toll-free numbers).
Branch, ANM–116, Transport Airplane [FR Doc. 2016–23787 Filed 10–20–16; 8:45 am] SUPPLEMENTARY INFORMATION:
Directorate, FAA, has the authority to
BILLING CODE 4910–13–P
approve AMOCs for this AD, if requested Background
using the procedures found in 14 CFR 39.19.
In accordance with 14 CFR 39.19, send your The temporary regulations in the
request to your principal inspector or local Rules and Regulations section of this
DEPARTMENT OF THE TREASURY
Flight Standards District Office, as issue of the Federal Register contain
appropriate. If sending information directly rules under sections 385 and 752 of the
Internal Revenue Service
to the International Branch, send it to ATTN:
Sanjay Ralhan, Aerospace Engineer, Internal Revenue Code (Code) that
International Branch, ANM–116, Transport 26 CFR Part 1 establish requirements that ordinarily
Airplane Directorate, FAA, 1601 Lind must be satisfied in order for certain
mstockstill on DSK3G9T082PROD with PROPOSALS

Avenue SW., Renton, WA 98057–3356; [REG–130314–16] related-party interests in a corporation
telephone 425–227–1405; fax 425–227–1149. to be treated as indebtedness for federal
Information may be emailed to: 9-ANM-116- RIN 1545–BN68 tax purposes. The text of the temporary
AMOC-REQUESTS@faa.gov. Before using regulations also serves as the text of the
any approved AMOC, notify your appropriate Treatment of Certain Interests in
principal inspector, or lacking a principal proposed regulations herein. The
Corporations as Stock or Indebtedness
inspector, the manager of the local flight preamble to the temporary regulations
standards district office/certificate holding AGENCY: Internal Revenue Service (IRS), explains the temporary regulations and
district office. Treasury. the corresponding proposed regulations.

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72752 Federal Register / Vol. 81, No. 204 / Friday, October 21, 2016 / Proposed Rules

Special Analyses multiple exceptions that limit their Rabon of the Office of Associate Chief
application. In particular, the threshold Counsel (International). However, other
I. Regulatory Planning and Review
exception provides that the first $50 personnel from the Treasury
Executive Orders 13563 and 12866 million of expanded group debt Department and the IRS participated in
direct agencies to assess costs and instruments that otherwise would be their development.
benefits of available regulatory reclassified as stock or deemed to be
alternatives and, if regulation is transferred to a partner in a controlled List of Subjects in 26 CFR Part 1
necessary, to select regulatory partnership under § 1.385–3 or § 1.385– Income taxes, Reporting and
approaches that maximize net benefits 3T will not be reclassified or deemed recordkeeping requirements.
(including potential economic, transferred under § 1.385–3 or § 1.385–
environmental, public health and safety Proposed Amendments to the
3T. Although it is possible that the Regulations
effects, distributive impacts, and classification rules in §§ 1.385–3, 1.385–
equity). Executive Order 13563 3T, and 1.385–4T could have an effect Accordingly, 26 CFR part 1 is
emphasizes the importance of on small entities, the threshold proposed to be amended as follows:
quantifying both costs and benefits, of exception of the first $50 million of debt
reducing costs, of harmonizing rules, instruments otherwise subject to PART 1—INCOME TAXES
and of promoting flexibility. Related recharacterization or deemed transfer ■ Paragraph 1. The authority citation
rules in the final and temporary under §§ 1.385–3, 1.385–3T, and 1.385– for part 1 is amended by adding an entry
regulations under section 385 in TD 4T makes it unlikely that a substantial in numerical order to read in part as
9790, published in the Rules and number of small entities will be affected
Regulations section of this issue of the follows:
by §§ 1.385–3T or 1.385–4T.
Federal Register, have been designated Pursuant to section 7805(f) of the Authority: 26 U.S.C. 7805 * * *
a ‘‘significant regulatory action’’ under Code, the final regulations in TD 9790, Section 1.385–4 also issued under 26
section 3(f) of Executive Order 12866. published in the Rules and Regulations U.S.C. 385 and 1502.
For a discussion of the economic impact section of this issue of the Federal
■ Par. 2. Section 1.385–3 is amended
of those final and temporary regulations, Register, have been submitted to the
as well as these proposed regulations, by:
Chief Counsel for Advocacy of the Small ■ 1. Revising paragraph (b)(3)(vii).
please see the Regulatory Assessment Business Administration for comment ■ 2. Revising paragraph (d)(4).
accompanying TD 9790, published in on their impact on small business. ■ 3. Revising paragraph (f).
the Rules and Regulations section of this Comments were received requesting that ■ 4. Revising paragraphs (g)(5)–(8), (15)–
issue of the Federal Register. the monetary thresholds contained in (17), and (22)–(23).
II. Regulatory Flexibility Act proposed §§ 1.385–2, 1.385–3, and ■ 5. Revising Example 12 through
1.385–4 be increased in order to Example 19 in paragraph (h)(3).
Pursuant to the Regulatory Flexibility mitigate the impact on small businesses. ■ 6. Adding paragraph (k).
Act (5 U.S.C. Chapter 6), it is hereby These comments are addressed in Parts The revisions and additions read as
certified that the final and temporary IV.B.1.d and V.E.4 of the Summary of follows:
regulations in TD 9790, published in the Comments and Explanation of Revisions
Rules and Regulations section of this in the preamble of TD 9790, published § 1.385–3 Transactions in which debt
issue of the Federal Register, and in the Rules and Regulations section of proceeds are distributed or that have a
accordingly, these proposed regulations similar effect.
this issue of the Federal Register. No
proposed by cross-reference to the comments were received concerning the * * * * *
temporary regulations, will not have a economic impact on small entities from (b) * * *
significant economic impact on a the Small Business Administration. (3) * * *
substantial number of small entities. (vii) [The text of the proposed
Accordingly, a regulatory flexibility Comments and Requests for Public amendment to § 1.385–3(b)(3)(vii) is the
analysis is not required. Hearing same as the text of § 1.385–3T(b)(3)(vii)
To facilitate the federal tax analysis of Before these proposed regulations are published elsewhere in this issue of the
an interest in a corporation, taxpayers adopted as final regulations, Federal Register.]
are required under existing law to consideration will be given to any * * * * *
substantiate their classification of an comments that are submitted timely to (d) * * *
interest as stock or indebtedness for the IRS as prescribed in this preamble (4) [The text of the proposed
federal tax purposes. Section 1.385–3 under the ‘‘Addresses’’ heading. amendment to § 1.385–3(d)(4) is the
provides that certain interests in a Treasury and the IRS request comments same as the text of § 1.385–3T(d)(4)
corporation that are held by a member on all aspects of the proposed rules. All published elsewhere in this issue of the
of the corporation’s expanded group and comments will be available at Federal Register.]
that otherwise would be treated as www.regulations.gov or upon request. A * * * * *
indebtedness for federal tax purposes public hearing will be scheduled if (f) [The text of the proposed
are treated as stock. Section 1.385–3T requested in writing by any person that amendment to § 1.385–3(f) is the same
provides that for certain debt timely submits electronic or written as the text of § 1.385–3T(f) published
instruments issued by a controlled comments. If a public hearing is elsewhere in this issue of the Federal
partnership, the holder is deemed to scheduled, notice of the date, time, and Register.]
mstockstill on DSK3G9T082PROD with PROPOSALS

transfer all or a portion of the debt place for the public hearing will be (g) * * *
instrument to the partner or partners in published in the Federal Register. (5) [The text of the proposed
the partnership in exchange for stock in amendment to § 1.385–3(g)(5) is the
the partner or partners. Section 1.385– Drafting Information same as the text of § 1.385–3T(g)(5)
4T provides rules regarding the The principal authors of these published elsewhere in this issue of the
application of §§ 1.385–3 and 1.385–3T regulations are Austin M. Diamond- Federal Register.]
to members of a consolidated group. Jones of the Office of Associate Chief (6) [The text of the proposed
Sections 1.385–3 and 1.385–3T include Counsel (Corporate) and Joshua G. amendment to § 1.385–3(g)(6) is the

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Document Created: 2018-02-13 16:35:58
Document Modified: 2018-02-13 16:35:58

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Notice of proposed rulemaking by cross-reference to temporary regulation.
Dates		Written or electronic comments and requests for a public hearing must be received by January 19, 2017.
Contact		Concerning the proposed regulations, Austin M. Diamond-Jones, (202) 317-5363, or Joshua G. Rabon, (202) 317- 6937; concerning submissions of comments or requests for a public hearing, Regina Johnson, (202) 317-5177 (not toll-free numbers).
FR Citation		81 FR 72751
RIN Number		1545-BN68
CFR Associated		Income Taxes and Reporting and Recordkeeping Requirements

81 FR 72751 - Treatment of Certain Interests in Corporations as Stock or Indebtedness

DEPARTMENT OF THE TREASURYInternal Revenue Service

Federal Register Volume 81, Issue 204 (October 21, 2016)

DEPARTMENT OF THE TREASURY
Internal Revenue Service