SECTION 3. SALE OR EXCHANGE

OF QUALIFIED PREFERRED STOCK BY A PARTNERSHIP IN WHICH AN APPLICABLE FINANCIAL INSTITUTION IS A PARTNER

.01 Scope . This section applies if either all of the requirements in Paragraph (1) of this Subsection, or all of the requirements in Paragraph (2) of this Subsection, are satisfied.

(1) Sale or exchange on or after Jan- uary 1, 2008, and before September 7, 2008.

November 24, 2008 1196 2008–47 I.R.B.

(2) The partnership held the QPS on September 6, 2008, and at all times thereafter until the distribution to the taxpayer;

(3) On September 6, 2008, and at all times thereafter until the partnership made the distribution to the taxpayer, at least 95 percent in value of the partnership’s assets consisted of QPS and cash or cash equivalents; and

(4) On September 6, 2008, and at all times thereafter until the Acquisition, the taxpayer was an applicable financial institution (or a Subsidiary described in Section 6.01(2)(b)–(e) of this revenue procedure) and was a partner of the partnership.

.02 Application . (1) Solely for purposes of EESA § 301, the taxpayer is treated as having held on September 6, 2008, the QPS described in Section 5.01(1) of this revenue procedure. (Neither EESA § 301 nor this revenue procedure causes QPS to be described in section 751(c) or (d) of the Code.)

(2) Section 5.02(1) of this revenue procedure does not apply to QPS that is received by the taxpayer from the partnership after September 6, 2008, to the extent that receipt of the QPS is as a result of a change or increase after September 6, 2008, in the taxpayer’s partnership interest, including as a result of—

(a) The taxpayer’s acquisition of additional partnership interests;

(b) Changes in the manner in which partners share in rights to distributions of QPS; or

(c) Disproportionate distributions to other partners by the partnership of other property or cash.

(3) The limitation in Section 5.02(2)(a) of this revenue procedure does not apply to the extent the taxpayer acquired additional partnership interests as transferred basis property within the meaning of section 7701(a)(43) of the Code from a person that—

(a) Held the partnership interest on September 6, 2008, and at all times thereafter until the transfer of the partnership interest to the taxpayer and

(b) Was an applicable financial institution for this entire period.

(c) Disproportionate distributions of cash or other property to other partners by the partnership.

(3) The limitation in Section 3.02(2)(a) of this revenue procedure does not apply to the extent the taxpayer acquired an additional partnership interest as transferred basis property within the meaning of section 7701(a)(43) of the Code from a person that—

(a) Held the partnership interest on September 6, 2008, and at all times thereafter until the transfer of the partnership interest to the taxpayer; and

(b) Was an applicable financial institution for this entire period.

.03 Reporting Requirements. In accordance with existing requirements, the partnership must separately state on its information returns gain or loss attributable to the sale or exchange of QPS. See § 1.702–1(a)(8)(ii) of the Income Tax Regulations.