Acquisition of an S Corporation by a Member of a

Official source: Federal Register (GovInfo) (https://www.govinfo.gov/content/pkg/FR-1999-11-10/pdf/99-29085.pdf), retrieved 2026-10-03. U.S. Government work (17 U.S.C. § 105).

Federal Register / Vol. 64, No. 217 / Wednesday, November 10, 1999 / Rules and Regulations 61205

the fact that the regulations will provide administrative relief to small entities by removing the administrative burden of filing a separate one-day return currently required for certain acquisitions. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. 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 author of these regulations is Jeffrey L. Vogel of the Office of the Assistant Chief Counsel (Corporate), IRS. However, other personnel from the IRS and Treasury Department participated in their development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 1 is amended as follows:

PART 1—INCOME 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 1.1362–3 is amended by adding a sentence to the end of paragraph (a) to read as follows:

§ 1.1362–3 Treatment of S termination year.

(a) In general . * - - See, however, § 1.1502–76(b)(1)(ii)(A)( 2 ) for special rules for an S election that terminates under section 1362(d) immediately before the S corporation becomes a member of a consolidated group (within the meaning of § 1.1502–1(h)).

- - - Par. 3. Section 1.1502–76 is amended as follows:

The text of paragraph (b)(1)(ii)(A) following the paragraph heading is redesignated as paragraph (b)(1)(ii)(A)( 1 ).
A paragraph heading for newly designated paragraph (b)(1)(ii)(A)( 1 ) is added.
The first sentence of newly designated paragraph (b)(1)(ii)(A)( 1 ) is revised.
Paragraph (b)(1)(ii)(A)( 2 ) is added.
Paragraph (b)(2)(v) is redesignated as paragraph (b)(2)(vi).

to 5 U.S.C. 553(b)(B), and, pursuant to 5 U.S.C. 553(d)(3), a delayed effective date is not required. Since this document is not subject to the notice and public comment requirements of 5 U.S.C. 553, it is not subject to the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Nor does the amendment result in a ‘‘significant regulatory action’’ under E.O. 12866.

List of Subjects in 19 CFR Part 10

Customs duties and inspection, Imports, International traffic, Reporting and recordkeeping requirements, Vehicles.

Amendment to the Regulations

Part 10, Customs Regulations (19 CFR part 10), is amended as set forth below.

PART 10—ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE, ETC.

The general authority citation for part 10 and the relevant specific sectional authority citation continue to read as follows:

Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized Tariff Schedule of the United States (HTSUS)), 1321, 1481, 1484, 1498, 1508, 1623, 1624, 3314;

- - - Sections 10.41, 10.41a, 10.107 also issued under 19 U.S.C. 1322;
- - - 1. Section 10.41 is amended by revising the first sentence of paragraph (d) to read as follows:

§ 10.41 Instruments; exceptions.

- - - (d) Any foreign-owned locomotive or other railroad equipment, truck, bus, taxicab, or other vehicle, aircraft, or undocumented boat brought into the United States for the purpose of carrying merchandise or passengers between points in the United States for hire or as an element of a commercial transaction, except as provided at §§ 123.12 (a) and (b), 123.14(c), and 141.4(b)(4), is subject to treatment as an importation of merchandise from a foreign country and a regular entry for such vehicle, aircraft or boat will be made. * -
- - - Raymond W. Kelly, Commissioner of Customs.

Approved: August 3, 1999. Dennis M. O’Connell, Acting Deputy Assistant Secretary of the Treasury.

[FR Doc. 99–29380 Filed 11–9–99; 8:45 am]

BILLING CODE 4820–02–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8842]

RIN 1545–AW32

Acquisition of an S Corporation by a Member of a Consolidated Group

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final regulations under section 1502 of the Internal Revenue Code. These final regulations provide specific rules that apply to the acquisition of the stock of an S corporation by a member of a consolidated group. These rules eliminate the compliance burdens associated with filing a separate return for the day that an S corporation is acquired by a consolidated group. Additionally, the regulations clarify the rule for the filing of the separate return for a corporation’s items for the period not included in the consolidated return.

DATES: Effective Date: These regulations are effective November 10, 1999.

Applicability Date: For dates of applicability, see § 1.1502–76(b)(6)(i).

FOR FURTHER INFORMATION CONTACT: Vincent Daly, (202) 622–7770 (not a tollfree number).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

On December 17, 1998, the IRS published in the Federal Register a notice of proposed rulemaking (REG– 106219–98, 63 FR 69581), concerning acquisitions by a consolidated group of at least eighty percent of the stock of an S corporation. Although a comment was received questioning the advisability of a special rule for the acquisition of an S corporation, the IRS and Treasury have determined the rules are necessary to eliminate the administrative burden of filing a separate tax return for the day the S corporation is acquired. The proposed regulations are adopted by this Treasury decision.

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on

61206 Federal Register / Vol. 64, No. 217 / Wednesday, November 10, 1999 / Rules and Regulations

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 117

[CGD05–99–006]

RIN 2115–AE47

Drawbridge Operation Regulations; Sassafras River, Georgetown, MD

AGENCY: Coast Guard, DOT.

ACTION: Final rule.

Regulatory Information

On May 14, 1999, the Coast Guard published a Notice of Proposed Rulemaking (NPRM) entitled ‘‘Drawbridge Operation Regulations: Sassafras River, Georgetown, MD’’ in the Federal Register (64 FR 26349). We received no letters commenting on the proposed rule. No public hearing was requested, and none was held.

Background and Purpose

The Maryland Route 213 Sassafras River drawbridge across the Sassafras River, Mile 10.0, at Georgetown, Maryland, is currently required to open on signal year-round. The Maryland Department of Transportation (MDOT) has requested that the Coast Guard change the operating schedule for the drawbridge by requiring a six-hour

New paragraph (b)(2)(v) is added.
Paragraphs (b)(4) and (b)(5) are redesignated as paragraphs (b)(5) and (b)(6), respectively.
New paragraph (b)(4) is added.
Newly designated paragraph (b)(5) is amended as follows:

a. Example 6 (b), first sentence is revised.

b. Example 6 (c), second sentence is revised.

c. Example 7 is added. 10. Newly designated paragraph (b)(6)(i) is revised.

The revisions and additions read as follows:

§ 1.1502–76 Taxable year of members of group.

- - - (b) * - - (1) * - (ii) * - *(A) End of the day rule—( 1 ) In general. If a corporation (S), other than one described in paragraph (b)(1)(ii)(A)( 2 ) of this section, becomes or ceases to be a member during a consolidated return year, it becomes or ceases to be a member at the end of the day on which its status as a member changes, and its tax year ends for all Federal income tax purposes at the end of that day. * * *

( 2 ) Special rule for former S corporations. If S becomes a member in a transaction other than in a qualified stock purchase for which an election under section 338(g) is made, and immediately before becoming a member an election under section 1362(a) was in effect, then S will become a member at the beginning of the day the termination of its S corporation election is effective. S’s tax year ends for all Federal income tax purposes at the end of the preceding day. This paragraph (b)(1)(ii)(A)( 2 ) applies to transactions occurring after November 10, 1999.

- - - (2) * - (v) Acquisition of S corporation. If a corporation is acquired in a transaction to which paragraph (b)(1)(ii)(A)( 2 ) of this section applies, then paragraphs (b)(2)(ii) and (iii) of this section do not apply and items of income, gain, loss, deduction, and credit are assigned to each short taxable year on the basis of the corporation’s normal method of accounting as determined under section

This paragraph (b)(2)(v) applies to transactions occurring after November 10, 1999.

- - - (4) Determination of due date for separate return. Paragraph (c) of this section contains rules for the filing of the separate return referred to in this paragraph (b). In applying paragraph (c) of this section, the due date for the filing

of S’s separate return shall also be determined without regard to the ending of the tax year under paragraph (b)(1)(ii) of this section or the deemed cessation of its existence under paragraph (b)(2)(i) of this section.

(5) * -

Example 6. Allocation of partnership items. - - (b) Analysis. Under paragraph (b)(2)(vi)(A) of this section, T is treated, solely for purposes of determining T’s tax year in which the partnership’s items are included, as selling or exchanging its entire interest in the partnership as of P’s sale of T’s stock. *

(c) Controlled partnership. - - - Under paragraph (b)(2)(vi)(B) of this section, T’s distributive share of the partnership items is treated as T’s items for purposes of paragraph (b)(2) of this section. * - Example 7 . Acquisition of S corporation . (a) Facts. Z is a small business corporation for which an election under section 1362(a) was in effect at all times since Year 1. At all times, Z had only 100 shares of stock outstanding, all of which were owned by individual A. On July 1 of Year 3, P acquired all of the Z stock. P does not make an election under section 338(g) with respect to its purchase of the Z stock.

(b) Analysis. As a result of P’s acquisition of the Z stock, Z’s election under section 1362(a) terminates. See sections 1361(b)(1)(B) and 1362(d)(2). Z is required to join in the filing of the P consolidated return. See § 1.1502–75. Z’s tax year ends for all Federal income tax purposes on June 30 of Year 3. If no extension of time is sought, Z must file a separate return for the period from January 1 through June 30 of Year 3 on or before March 15 of Year 4. See paragraph (b)(4) of this section. Z will become a member of the P consolidated group as of July 1 of Year 3. See paragraph (b)(1)(ii)(A)( 2 ) of this section. P group’s Year 3 consolidated return will include Z’s items from July 1 to December 31 of Year 3.

(6) Effective date —(i) General rule. Except as provided in paragraphs (b)(1)(ii) (A)(2) and (b)(2)(v) of this section, this paragraph (b) applies to corporations becoming or ceasing to be members of consolidated groups on or after January 1, 1995.

- - - Bob Wenzel, Deputy Commissioner of Internal Revenue.

Approved: October 29, 1999. Jonathan Talisman, Acting Assistant Secretary of the Treasury.

[FR Doc. 99–29085 Filed 11–9–99; 8:45 am]

BILLING CODE 4830–01–U

SUMMARY: The Coast Guard is changing the regulations that govern the operation of the Maryland Route 213 drawbridge across the Sassafras River, Mile 10.0, at Georgetown, Maryland. This change will restrict drawbridge openings from November 1 through March 31, from midnight to 8 a.m., by requiring a sixhour advance notice for drawbridge openings. This change will eliminate the need to have the bridge constantly manned during times of minimal use while still providing for the reasonable needs of navigation.

DATES: This rule is effective December 10, 1999.

ADDRESSES: Comments and material received from the public, as well as documents indicated in this preamble as being available in the docket, are part of docket CGD05–99–006 and are available for inspection or copying at the office of the Commander (AOWB), Fifth Coast Guard District, Federal Building, 4th Floor, 431 Crawford Street, Portsmouth, Virginia 23704–5004, between 8 a.m. and 4:30 p.m., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Ann B. Deaton, Bridge Administrator, Fifth Coast Guard District, at 757–398–6222.

SUPPLEMENTARY INFORMATION: