96-31362. Certain Elections Under the Omnibus Budget Reconciliation Act of 1993  

  • [Federal Register Volume 61, Number 240 (Thursday, December 12, 1996)]
    [Rules and Regulations]
    [Pages 65321-65323]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 96-31362]
    
    
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    DEPARTMENT OF THE TREASURY
    26 CFR Parts 1 and 602
    
    [TD 8688]
    RIN 1545-AS14
    
    
    Certain Elections Under the Omnibus Budget Reconciliation Act of 
    1993
    
    AGENCY: Internal Revenue Service (IRS), Treasury.
    
    ACTION: Final regulations.
    
    -----------------------------------------------------------------------
    
    SUMMARY: This document contains final regulations relating to the time 
    and manner of making certain elections under the Omnibus Budget 
    Reconciliation Act of 1993. These regulations provide guidance to 
    persons making the elections.
    
    EFFECTIVE DATE: December 12, 1996.
    
    FOR FURTHER INFORMATION CONTACT: George Bradley, 202-622-4920 (not a 
    toll-free number).
    
    SUPPLEMENTARY INFORMATION:
    
    Paperwork Reduction Act
    
        The collections of information contained in these final regulations 
    have been reviewed and approved by the Office of Management and Budget 
    in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under 
    control number 1545-1421. Responses to these collections of information 
    are required to obtain the benefits of the particular election that is 
    the subject of the collection.
        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 control number.
        The estimated annual burden per respondent varies from 15 minutes 
    to 45 minutes, depending on individual circumstances, with an estimated 
    average of 30 minutes.
        Comments concerning the accuracy of this burden estimate and 
    suggestions for reducing this burden should be sent to the Internal 
    Revenue Service, Attn: IRS Reports Clearance Officer, T:FP, Washington, 
    DC 20224, and to the Office of Management and Budget, Attn: Desk 
    Officer for the Department of the Treasury, Office of Information and 
    Regulatory Affairs, Washington, DC 20503.
        Books or records relating to this 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.
    
    Background
    
        This document contains final regulations relating to elections 
    under the following sections of the Internal Revenue Code of 1986 
    (Code) and the Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-
    66, 107 Stat. 312) (Act):
    
    ------------------------------------------------------------------------
                    Act section                         Code section        
    ------------------------------------------------------------------------
    13114.....................................  1044(a).                    
    13150.....................................  108(c)(3)(C).               
    13206(d)..................................  163(d)(4)(B)(iii).          
    13225.....................................  6655(e)(2)(C).              
    ------------------------------------------------------------------------
    
        On December 27, 1993, the Federal Register published temporary 
    regulations (TD 8509) and a cross-reference notice of proposed 
    rulemaking (IA-62-93), 58 FR 68300 and 58 FR 68336, respectively, 
    relating to these elections. Three written comments responding to the 
    regulations were submitted. Since none of the commentators requested a 
    public hearing, one was not held. After consideration of the comments, 
    the proposed regulations are adopted as final regulations subject to 
    modifications to proposed Sec. 1.108(c)-1, and the corresponding 
    temporary regulations are removed. The comments and a description of 
    the modifications to proposed Sec. 1.108(c)-1 are discussed below.
    
    Summary of Comments and Modifications
    
        All three comments related to the election under section 
    163(d)(4)(B)(iii), which allows a taxpayer to take all or a portion of 
    certain net capital gains, attributable to dispositions of property 
    held for investment, into account as investment income. As a 
    consequence, the capital gains affected by this election are not 
    eligible for the maximum capital gain rate of 28 percent. The election 
    must be made on Form 4952, Investment Interest Expense Deduction, on or 
    before the due date (including extensions) of the income tax return for 
    the taxable year in which the net capital gain is recognized.
        The commentators questioned the authority of the IRS to require a 
    formal election, stated that a formal election will add to the 
    complexity of filing individual income tax returns, and suggested that 
    taxpayers be allowed to freely change the manner in which they treat 
    long-term capital gains, as long as the taxable year is open. These 
    comments were given careful consideration. However, they have not been 
    incorporated into these final regulations. The IRS and the Treasury 
    Department believe that the requirement of a formal election is 
    supported by the language of section 163(d)(4)(B)(iii), is not unduly 
    burdensome, and provides taxpayers with flexibility, since the election 
    is revocable.
        The final regulations modify the requirements for making the 
    election for discharge of qualified real property business indebtedness 
    under section 108(c). Under the previous temporary regulations a 
    taxpayer was required to make the election with the taxpayer's income 
    tax return for the taxable year in which the discharge occurred, but 
    was permitted to file an election with an amended return or claim for 
    credit or refund if the taxpayer established reasonable cause for 
    failure to file the election with the original return. The final 
    regulations require the taxpayer to make the election on the timely-
    filed (including extensions) Federal income tax return for the taxable 
    year in which the taxpayer has discharge of indebtedness income that is 
    excludible under section 108(a). Therefore, a taxpayer that fails to 
    make the election on that return must request the Commissioner's 
    consent to file a late election under Sec. 301.9100-3T or any 
    regulations that supersede Sec. 301.9100-3T.
    
    Special Analyses
    
        It has been determined that these regulations are not significant 
    rules as defined in Executive Order 12866. It also has been determined 
    that section 553(b) of the Administrative Procedure Act (5 U.S.C. 
    chapter 5) does not apply to these regulations, and because the notice 
    of proposed rulemaking preceding the regulations was issued prior to 
    March 29, 1996, a Regulatory Flexibility Analysis 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 
    Small Business Administration for comment on its impact on small 
    business.
    
        Drafting Information: The principal author of these regulations 
    is George Bradley, Office of Assistant Chief Counsel (Income Tax and 
    Accounting), Internal Revenue Service. However, personnel from other 
    offices of the Internal Revenue Service and the Treasury Department 
    participated in their development.
    
    [[Page 65322]]
    
    List of Subjects
    
    26 CFR Part 1
    
        Income taxes, Reporting and recordkeeping requirements.
    
    26 CFR Part 602
    
        Reporting and recordkeeping requirements.
    
    Adoption of Amendments to the Regulations
    
        Accordingly, parts 1 and 602 of title 26 of the Code of Federal 
    Regulations are amended as follows:
    
    PART 1--INCOME TAXES
    
        Paragraph 1. The authority citation for part 1 is amended by 
    removing the entry for section 1.108(c)-1T and by adding an entry in 
    numerical order to read as follows.
    
        Authority: 26 U.S.C. 7805 * * *
    
        Section 1.108(c)-1 also issued under the authority of 26 U.S.C. 
    108(d)(9); * * *
    
    
    Sec. 1.108(c)-1T  [Removed
    
        Par. 2. Section 1.108(c)-1T is removed.
    
    
    Sec. 1.163(d)-1T  [Removed]
    
        Par. 3. Section 1.163(d)-1T is removed.
    
    
    Sec. 1.1044(a)-1T  [Removed]
    
        Par. 4. Section 1.1044(a)-1T is removed.
    
    
    Sec. 1.6655(e)-1T  [Removed]
    
        Par. 5. Section 1.6655(e)-1T is removed.
        Par. 6. Section 1.108(c)-1 is added to read as follows:
    
    
    Sec. 1.108(c)-1  Time and manner for making election under the Omnibus 
    Budget Reconciliation Act of 1993.
    
        (a) Description. Section 108(c)(3)(C), as added by section 13150 of 
    the Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-66, 107 
    Stat. 446), allows certain noncorporate taxpayers to elect to treat 
    certain indebtedness described in section 108(c)(3) that is discharged 
    after December 31, 1992, as qualified real property business 
    indebtedness. This discharged indebtedness is excluded from gross 
    income to the extent allowed by section 108.
        (b) Time and manner for making election. The election described in 
    this section must be made on the timely-filed (including extensions) 
    Federal income tax return for the taxable year in which the taxpayer 
    has discharge of indebtedness income that is excludible from gross 
    income under section 108(a). The election is to be made on a completed 
    Form 982, in accordance with that Form and its instructions.
        (c) Revocability of election. The election described in this 
    section is revocable with the consent of the Commissioner.
        (d) Effective date. The rules set forth in this section are 
    effective December 27, 1993.
        Par. 7. Section 1.163(d)-1 is added to read as follows.
    
    
    Sec. 1.163(d)-1  Time and manner for making election under the Omnibus 
    Budget Reconciliation Act of 1993.
    
        (a) Description. Section 163(d)(4)(B)(iii), as added by section 
    13206(d) of the Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-
    66, 107 Stat. 467), allows an electing taxpayer to take all or a 
    portion of certain net capital gains, attributable to dispositions of 
    property held for investment, into account as investment income. As a 
    consequence, the capital gains affected by this election are not 
    eligible for the maximum capital gain rate of 28 percent. The election 
    may be made for net capital gains recognized by noncorporate taxpayers 
    during any taxable year beginning after December 31, 1992.
        (b) Time and manner for making the election. The election under 
    section 163(d)(4)(B)(iii) must be made on or before the due date 
    (including extensions) of the income tax return for the taxable year in 
    which the net capital gain is recognized. The election is to be made on 
    Form 4952, Investment Interest Expense Deduction, in accordance with 
    the Form and its instructions.
        (c) Revocability of election. The election described in this 
    section is revocable with the consent of the Commissioner.
        (d) Effective date. The rules set forth in this section are 
    effective December 12, 1996.
        Par. 8. Section 1.1044(a)-1 is added to read as follows.
    
    
    Sec. 1.1044(a)-1  Time and manner for making election under the Omnibus 
    Budget Reconciliation Act of 1993.
    
        (a) Description. Section 1044(a), as added by section 13114 of the 
    Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-66, 107 Stat. 
    430), generally allows individuals and C corporations that sell 
    publicly traded securities after August 9, 1993, to elect not to 
    recognize certain gain from the sale if the taxpayer purchases common 
    stock or a partnership interest in a specialized small business 
    investment company (SSBIC) within the 60-day period beginning on the 
    date the publicly traded securities are sold.
        (b) Time and manner for making the election. The election under 
    section 1044(a) must be made on or before the due date (including 
    extensions) for the income tax return for the year in which the 
    publicly traded securities are sold. The election is to be made by 
    reporting the entire gain from the sale of publicly traded securities 
    on Schedule D of the income tax return in accordance with instructions 
    for Schedule D, and by attaching a statement to Schedule D showing--
        (1) How the nonrecognized gain was calculated;
        (2) The SSBIC in which common stock or a partnership interest was 
    purchased;
        (3) The date the SSBIC stock or partnership interest was purchased; 
    and
        (4) The basis of the SSBIC stock or partnership interest.
        (c) Revocability of election. The election described in this 
    section is revocable with the consent of the Commissioner.
        (d) Effective date. The rules set forth in this section are 
    effective December 12, 1996.
        Par. 9. Section 1.6655(e)-1 is added to read as follows.
    
    
    Sec. 1.6655(e)-1  Time and manner for making election under the Omnibus 
    Budget Reconciliation Act of 1993.
    
        (a) Description. Section 6655(e)(2)(C), as added by section 13225 
    of the Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-66, 107 
    Stat. 486), allows a corporate taxpayer to make an annual election to 
    use a different annualization period to determine annualized income for 
    purposes of paying any required installment of estimated income tax for 
    a taxable year beginning after December 31, 1993.
        (b) Time and manner for making the election. An election under 
    section 6655(e)(2)(C) must be made on or before the date required for 
    the payment of the first required installment for the taxable year. For 
    a calendar or fiscal year corporation, Form 8842, Election to Use 
    Different Annualization Periods for Corporate Estimated Tax, must be 
    filed by the 15th day of the 4th month of the taxable year for which 
    the election is to apply. Form 8842 must be filed with the Internal 
    Revenue Service Center where the corporation files its income tax 
    return.
        (c) Revocability of election. The election described in this 
    section is irrevocable.
        (d) Effective date. The rules set forth in this section are 
    effective December 12, 1996.
    
    [[Page 65323]]
    
    PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
    
        Par. 10. The authority citation for part 602 continues to read as 
    follows:
    
        Authority: 26 U.S.C. 7805.
    
        Par. 11. In Sec. 602.101, paragraph (c) is amended as follows:
        1. The following entries are removed from the table:
    
    
    Sec. 602.101  OMB Control numbers.
    
    * * * * *
        (c) * * *
    
    ------------------------------------------------------------------------
                                                                 Current OMB
         CFR part or section where identified and described      control No.
    ------------------------------------------------------------------------
                                                                            
                      *        *        *        *        *                 
    1.108(c)-1T................................................    1545-1421
                                                                            
                      *        *        *        *        *                 
    1.163(d)-1T................................................    1545-1421
                                                                            
                      *        *        *        *        *                 
    1.1044(a)-1T...............................................    1545-1421
                                                                            
                      *        *        *        *        *                 
    1.6655(e)-1T...............................................    1545-1421
    ------------------------------------------------------------------------
    
        2. The following entries are added in numerical order to the table:
    
    
    Sec. 602.101  OMB Control numbers.
    
    * * * * *
        (c) * * *
    
    ------------------------------------------------------------------------
                                                                 Current OMB
         CFR part or section where identified and described      control No.
    ------------------------------------------------------------------------
                                                                            
                      *        *        *        *        *                 
    1.108(c)-1.................................................    1545-1421
                                                                            
                      *        *        *        *        *                 
    1.163(d)-1.................................................    1545-1421
                                                                            
                      *        *        *        *        *                 
    1.1044(a)-1................................................    1545-1421
                                                                            
                      *        *        *        *        *                 
    1.6655(e)-1................................................    1545-1421
    ------------------------------------------------------------------------
    
    Margaret Milner Richardson,
    Commissioner of Internal Revenue.
        Approved: November 1, 1996.
    Donald C. Lubick,
    Acting Assistant Secretary of the Treasury.
    [FR Doc. 96-31362 Filed 12-11-96; 8:45 am]
    BILLING CODE 4380-01-U
    
    
    

Document Information

Effective Date:
12/12/1996
Published:
12/12/1996
Department:
Treasury Department
Entry Type:
Rule
Action:
Final regulations.
Document Number:
96-31362
Dates:
December 12, 1996.
Pages:
65321-65323 (3 pages)
Docket Numbers:
TD 8688
RINs:
1545-AS14: Certain Elections Under the Omnibus Budget Reconciliation Act of 1993
RIN Links:
https://www.federalregister.gov/regulations/1545-AS14/certain-elections-under-the-omnibus-budget-reconciliation-act-of-1993
PDF File:
96-31362.pdf
CFR: (9)
26 CFR 1.1044(a)-1
26 CFR 1.108(c)-1
26 CFR 1.163(d)-1
26 CFR 1.6655(e)-1
26 CFR 1.1044(a)-1T
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