SECTION 2. BACKGROUND

.01 The transactions in question generally involve a transfer that purportedly complies with section 351 of the Internal Revenue Code of high basis, high value assets from a transferor corporation (“Taxpayer”) to a transferee corporation controlled by the transferor. The assets are transferred in exchange for stock of the transferee corporation and the transferee’s assumption of a liability of the transferor, which has not yet been taken into account for tax purposes. The Taxpayer takes the position that the basis of the stock of the transferee corporation received by the transferor is equal to the bases in the assets transferred, without a reduction in basis for the liability assumed. The transferor subsequently sells the stock at a reported capital loss equivalent to the present value of the assumed liability. When the liability ultimately is taken into account for tax purposes, the transferee claims the tax benefits associated with the liability.

.02 The Commissioner of the Internal Revenue Service and Treasury have designated these transactions as “listed transactions” for purposes of Temp. Treas. Reg. § 1.6011–4T(b)(2) in Notice 2001–17.

VII. EFFECTIVE DATE RULES

Regulations to be issued under section 954(i) concerning the issues addressed in this notice will be effective for taxable years beginning on or after the date such regulations are published as final in the Federal Register. Until such regulations are issued, controlling shareholders of a QIC may rely on this notice to determine the interest rates and appropriate foreign loss payment patterns of a QIC for purposes of section 954(i). Controlling U.S. shareholders also may apply the guidance in this notice to prior taxable years.

VIII. PAPERWORK REDUCTION ACT

The collections of information contained in the notice have been reviewed and approved by the Office of Management and Budget for review in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1799.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collections of information in this notice are in section V headed Applicable Loss Payment Patterns. This information is required by the IRS to determine whether a QIC is allowed to determine its income by using its own payment pattern data for a particular line of business. The information will be used on examination to determine whether a QIC is calculating its foreign loss payment patterns correctly. The likely respondents are U.S. shareholders that own foreign insurance companies.

The estimated total annual reporting burden is 300 hours.

The estimated average annual burden per respondent is 1 hour.

The estimated number of respondents is 300. The estimated annual frequency of responses is once.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

IX. REQUEST FOR COMMENTS AND DRAFTING INFORMATION

The IRS and Treasury request comments on the rules described in this notice and on the additional issues, if any, that should be addressed when regulations under section 954(i) are issued. Written comments may be submitted to the Associate Chief Counsel (International), Attention: Steven Jensen (Notice 2002–69), Room 4562, CC:INTL: Br5, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington DC 20224. Alternatively, taxpayers may submit comments directly to the IRS Internet site at http://www.irs.ustreas.gov/prod/ tax_regs/comments.html. Comments will be available for public inspection and copying. Treasury and the IRS request comments by March 28, 2003. For further information regarding this notice, contact Steven Jensen of the Office of Associate Chief Counsel (International) at 202–622– 3870 (not a toll-free call).

Rev. Proc. 2002–67

Settlement of Section 351 Contingent Liability Tax Shelter Cases