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CFR Citation: 26 CFR Part 1

RIN ID: RIN 1545-BD95

REG ID: [REG-139683-04]

NOTICE: PROPOSED RULES

ACTION: Income taxes:

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

SUBJECT CATEGORY: Section 1374 Effective Dates

DATES: Written or electronic comments, and a request for a public hearing, must be received by March 22, 2005.

DOCUMENT SUMMARY: In the Rules and Regulations section of this issue of the Federal Register, the IRS is issuing temporary regulations that provide guidance concerning the applicability of section 1374 to S corporations that acquire assets in carryover basis transactions from C corporations on or after December 27, 1994, and to certain corporations that terminate S corporation status and later elect again to become S corporations. The text of these regulations also serves as the text of these proposed regulations.

SUMMARY: S corporations; section 1374 effective dates; cross-reference,

FOR FURTHER INFORMATION CONTACT Concerning the proposed regulations, Stephen R. Cleary; (202) 6227750, concerning submissions of comments, Sonya Cruse, (202) 6224693 (not tollfree numbers).
SUPPLEMENTARY INFORMATION

Background and Explanation of Provisions

Temporary Regulations in the Rules and Regulations section of this issue of the Federal Register amend 26 CFR part 1 relating to section 1374. The temporary regulations provide that (a) section 1374(d)(8) applies to any transaction described in that section that occurs on or after December 27, 1994, regardless of the date of the S corporation's election under section 1362, and (b) for purposes of section 633(d)(8) of the Tax Reform Act of 1986, as amended by the Technical and Miscellaneous Revenue Act of 1988, a corporation's most recent S election, not an earlier election that has been revoked or terminated, determines whether or not it is subject to current section 1374. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the amendments.

Special Analysis

It has been determined that this proposed regulation is 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 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to Sec. 1.13748(a)(2) of these regulations. Because Sec. 1.13748(a)(2) does not impose a collection of information on small entities, it is not subject to the provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6). It is hereby certified that Sec. 1.137410(c) of this regulation will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that Sec. 1.137410(c) of this regulation addresses an uncommon fact situation not likely to affect a significant number of small entities. Therefore, a regulatory flexibility analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, these proposed regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their 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 (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department specifically request comments on the clarity of the proposed rules and how they may be made easier to understand. All comments will be available for public inspection and copying. A public hearing may be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date,
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time, and place for the public hearing will be published in the Federal Register.

Drafting Information

The principal author of these regulations is Stephen R. Cleary of the Office of Associate Chief Counsel (Corporate). Other personnel from Treasury 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 1INCOME 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 1.13748 is amended by redesignating paragraph (a) as paragraph (a)(1) and adding paragraph (a)(2) to read as follows: Sec. 1.13748 Section 1374(d)(8) transactions.
(a) (1) * * *
(2) [The text of the proposed amendment to Sec. 1.13748(a)(2) is the same as the text of Sec. 1.13748T(a)(2) published elsewhere in this issue of the Federal Register.].

* * * * *

Par. 3. In Sec. 1.137410, paragraph (c) is added to read as follows:
Sec. 1.137410 Effective date and additional rules
* * * * *
(c) The text of proposed Sec. 1.137410(c) is the same as the text of Sec. 1.137410T(c) published elsewhere in this issue of the Federal Register].
Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 0428012 Filed 122104; 8:45 am]
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