SECTION 7. DESIGNATION BY A

TERMINATING COMMON PARENT OF A CORPORATION OTHER THAN ITS QUALIFYING SUCCESSOR AS SUBSTITUTE AGENT

.01 In general . A terminating common parent may designate a substitute agent. See §§ 1.1502–77(d)(1), 1.1502– 77(h)(1)(ii), and 1.1502–77A(d). Designation by a terminating common parent is available for any and all taxable years for which the terminating common parent is agent for the group. If the terminating common parent designates a corporation other than its qualifying successor as substitute agent, that designation is subject to approval by the IRS and is not effective unless and until it is approved. The designation must be made in accordance with the procedures of this section 7. The terminating common parent may designate:

(1) Any corporation that was a member of the group during any part of the consolidated return year for which the designation applies and has not subsequently been disregarded as an entity separate from its owner or reclassified as a partnership for Federal tax purposes; or

(2) Any successor of such a corporation, if such successor is a domestic corporation and is not disregarded as an entity separate from its owner or classified as a partnership for Federal tax purposes, including a corporation that will become a successor at the time that the common parent’s existence terminates. The designation of a successor of a member as substitute agent is available for consolidated return years beginning before June 28, 2002, only if the terminating common parent elects to apply § 1.1502–77(d)(1) pursuant to § 1.1502– 77(h)(1)(ii) in accordance with subsection .03(5) of this section 7. (See section 6 of this revenue procedure regarding the terminating common parent’s designation of its qualifying successor as substitute agent.)

2002–28 I.R.B. 101 July 15, 2002

.05 Designations solely for consoli- dated return years subject to § 1.1502– 77A(d) . If the designation applies only to one or more consolidated return years beginning before June 28, 2002, and the designated substitute agent was a member (but not a successor of a member) of the group for the year(s) for which the designation applies, the election in paragraph (5) of subsection .03 and the statement signed on behalf of the designated substitute agent in paragraph (10) of subsection .03 are not applicable and are therefore not required.

.06 Approval . (1) The IRS may approve or disapprove for any reason a designation of a substitute agent under this section 7. Approval of such designation is in the sole discretion of the IRS.

(2) No designation by a terminating common parent under this section 7 applies unless and until it is approved by the IRS. Approval of a terminating common parent’s designation under this section 7 will not be effective before the existence of the common parent making the designation terminates.

(3) The IRS will approve or disapprove any designation under this section 7 in writing to the terminating common parent and the substitute agent. Unless written approval is received from the IRS, taxpayers may not assume that the substitute agent has the authority to act on behalf of the group.