SECTION 6. AMENDMENT OF

REGULATION SECTION 1.6045–2

In general, section 1.6045–2 of the existing regulations, which was issued prior to enactment of the JGTRRA, excludes from the broker reporting requirements of section 6045 payments in lieu of dividends received by a broker on behalf of an individual. That is, these regulations generally require broker reporting only for payments in lieu of dividends received on behalf of corporations. The Service expects to amend section 1.6045–2 to reflect the differential tax treatment under JGTRRA for dividends and payments in lieu of dividends, effective for dividends received on or after January 1, 2003.

Under the existing regulations, brokers must allocate transferred shares (that is, shares giving rise to payments in lieu of dividends) among: (1) shares of stock that the broker has borrowed under a securities lending agreement with the customer (borrowed shares); and (2) shares of stock that are held by the broker on behalf of customers who have authorized the broker to loan their shares to third parties (loanable shares). Loanable shares also include shares of the same class and issue held for the broker’s own account. Under the existing regulations, transferred shares may be allocated first to borrowed shares; then, to the extent that the number of transferred shares exceeds the number of borrowed shares (or if the broker does not allocate the transferred shares to the borrowed shares

October 6, 2003 753 2003-40 I.R.B.

Alternatively, comments may be hand delivered between the hours of 8:00 a.m. and 5:00 p.m. to:

CC:PA:LPD:PR (NOT–139295–03) Courier’s Desk Internal Revenue Service 1111 Constitution Avenue, NW Washington, D.C. 20224

Comments may also be transmitted electronically via the following e-mail address: Notice.Comments@irscoun sel.treas.gov . Please include “Notice 2003–67” in the subject line of any electronic communications.