[Federal Register Volume 59, Number 53 (Friday, March 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6088]
[[Page Unknown]]
[Federal Register: March 18, 1994]
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DEPARTMENT OF THE TREASURY
26 CFR Part 1 and Part 602
[TD 8531]
RIN 1545-A054
Final Regulations Under Section 382 of the Internal Revenue Code
of 1986; Limitations on Corporate Net Operating Loss Carryforwards
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations under section 382 of
the Internal Revenue Code of 1986. The final regulations provide rules
regarding the treatment of options in determining whether a loss
corporation has an ownership change, within the meaning of section 382.
These rules are necessary to enable a loss corporation to determine
whether it is subject to the annual limitation provided in section 382
on the use of certain losses.
DATES: These regulations are effective November 5, 1992. For dates of
applicability of these regulations, see ``Effective date'' paragraph in
the SUPPLEMENTARY INFORMATION portion of the preamble.
FOR FURTHER INFORMATION CONTACT: Annette M. Ahlers of the Office of
Assistant Chief Counsel (Corporate), Internal Revenue Service, 1111
Constitution Avenue NW., Washington, DC 20224 (Attention:
CC:DOM:CORP:1), or telephone (202) 622-7750 (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 of 1980 (44 U.S.C.
3504(h)) under control number 1545-1120. The estimated annual burden
per respondent varies from .1 hour to .5 hour, depending on individual
circumstances, with an estimated average of .3 hour.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing the burden should be sent to the Internal
Revenue Service, Attention: IRS Reports Clearance Officer, PC:FP,
Washington, DC 20224, and to the Office of Management and Budget,
Attention: Desk Officer for the Department of the Treasury, Office of
Information and Regulatory Affairs, Washington, DC 20503.
Background
This document contains final regulations to be added to the Income
Tax Regulations (26 CFR part 1) under section 382 of the Internal
Revenue Code (Code). The final regulations provide rules regarding the
treatment of options in determining whether a loss corporation has an
ownership change within the meaning of that section.
Proposed regulations on this subject were set forth in a notice of
proposed rulemaking published in the Federal Register on November 5,
1992. See 57 FR 52743. The Internal Revenue Service (IRS) received
comments on the proposed regulations and held a public hearing on
February 2, 1993. Having considered the comments and the statements
made at the hearing, the IRS and the Treasury Department adopt the
proposed regulations as revised by this Treasury decision.
Explanation of Provisions
Section 382 of the Code limits the amount of income earned by a
corporation after an ownership change that can be offset by losses
incurred prior to the ownership change. In general, an ownership change
is an increase of more than 50 percentage points in stock ownership by
5-percent shareholders over a three-year period.
Section 382(l)(3)(A) states that, except as provided in
regulations, an option to acquire stock is treated as exercised if the
deemed exercise would result in an ownership change. That section also
provides that a similar rule applies in the case of certain interests
that are similar to options. These rules are implemented by Sec. 1.382-
2T(h)(4) of the temporary regulations.
The IRS issued the proposed regulations in response to numerous
comments regarding the practical difficulties of applying the option
rules in the temporary regulations. The proposed regulations were
intended to reduce these practical difficulties by narrowing the scope
of the option rules and simplifying their application.
The proposed regulations treat an option as exercised only if it is
issued or transferred for an abusive principal purpose. The proposed
regulations define an abusive principal purpose as a principal purpose
of manipulating the timing of an owner shift to avoid, or ameliorate
the impact of, an ownership change by one of two means. These two means
are (1) providing the holder of the option, prior to its exercise, with
a substantial portion of the attributes of ownership of the underlying
stock, and (2) facilitating the creation of income to absorb the loss
corporation's losses prior to the exercise of the option.
The determination of whether an option is issued or transferred for
an abusive principal purpose is based on all relevant facts and
circumstances. The proposed regulations include a nonexclusive list of
factors that evidence an abusive principal purpose. One factor, for
example, is the receipt by the loss corporation of a capital
contribution (in exchange for stock or otherwise) in connection with
the issuance or transfer of an option.
This Treasury Decision adopts the proposed regulations with several
revisions. The following discussion describes the principal differences
between the proposed and final regulations.
A. The Ownership, Control, and Income Tests
The final regulations treat an option as exercised if it satisfies
either an ownership test, a control test, or an income test.
The ownership test is substantially the same as the first element
of the abusive principal purpose test of the proposed regulations. An
option satisfies the ownership test if a principal purpose of its
issuance, transfer, or structuring is to avoid or ameliorate the impact
of an ownership change by providing the holder of the option, prior to
its exercise or transfer, with a substantial portion of the attributes
of ownership of the underlying stock.
The control test applies to an option held by a major shareholder
or used in connection with a major corporate acquisition. An actual or
constructive holder of more than 50 percent of a corporation's stock
can generally exercise significant influence over the corporation prior
to the exercise of the option. The rules of the proposed regulations,
however, may not adequately take into account the relationship between
a major shareholder or option holder and the loss corporation. In
particular, the attributes of ownership element of the abusive
principal purpose test of the proposed regulations focuses only on the
attributes of ownership of the stock covered by an option. It does not
take into account an option holder's influence over a corporation as a
result of owning other stock or options. In addition, the proposed
regulations imply (and, as described below, the final regulations
explicitly state) that the ability of the holder of an option with a
fixed exercise price to share in future appreciation of the underlying
stock is not, by itself, a substantial portion of the attributes of
ownership of the stock. However, the extent to which a fixed price
option transfers an economic interest in the loss corporation to an
option holder may be of particular concern when the option is held by a
major shareholder or is used in connection with a major corporate
acquisition.
For the reasons described above, the final regulations adopt a
control test that applies to options held by major shareholders or used
in connection with major corporate acquisitions. An option satisfies
the control test if (1) a principal purpose of its issuance, transfer,
or structuring is to avoid or ameliorate the impact of an ownership
change, and (2) the holder of the option and any persons related to the
option holder have, in the aggregate, a direct and indirect ownership
interest in the loss corporation of more than 50 percent (determined as
if the increase in such persons' percentage ownership interest that
would result from the exercise of the option in question and any other
options to acquire stock held by such persons, and any other intended
increases in such persons' percentage ownership interest, actually
occurred on the date the option is issued or transferred).
The control test will subject certain options to inquiry even if it
is unlikely that the option holder (or a related person) will actually
acquire (directly or indirectly) more than 50 percent of the stock of
the loss corporation. The control test is not satisfied, however,
unless a requisite purpose is present. For example, the control test
will apply to a contingent option to acquire more than 50 percent of
the stock of a loss corporation even though the option holder has no
other relationship to the corporation. Nevertheless, in such a
situation, the option would not be treated as exercised if it were not
issued with a principal purpose to avoid or ameliorate the impact of an
ownership change.
The income test is substantially the same as the second element of
the abusive principal purpose test of the proposed regulations. An
option satisfies the income test if a principal purpose of its
issuance, transfer, or structuring is to avoid or ameliorate the impact
of an ownership change by facilitating the creation of income prior to
its exercise or transfer. The final regulations clarify that the
creation of income concept is a broad one, and refers not only to the
creation of income, but to the creation of any value (e.g., unrealized
built-in gains that would ameliorate the impact of an ownership
change), and also to the acceleration of income or the deferral of
deductions.
B. Clarification of Principal Purpose Concept
The proposed regulations treat an option as exercised if a
principal purpose of its issuance or transfer is abusive. Various forms
of this purpose standard are employed throughout the Code and
regulations. See, e.g., sections 306(b)(4) (``one of its principal
purposes''); 336(d)(2)(B) (``a principal purpose''); 453(e)(7) (``one
of its principal purposes''); 7872(c) (``1 of the principal
purposes''); 1.707-6(b) (``a principal purpose''); 1.1275-2T(g) (``a
principal purpose''); and 1.1504-4(g)(3)(iv)(B) (``a principal
purpose''). The IRS and the Treasury Department considered other
formulations of a purpose test in an effort to provide greater clarity
on the application of the test. No appropriate substitute was
identified. Accordingly, the final regulations retain the ``a principal
purpose'' standard, but clarify that the relevant inquiry under this
standard is not limited to the purposes for which an option is issued
or transferred. The inquiry also focuses on the purposes of structuring
the option, either alone or in combination with other arrangements. An
abusive purpose can be a principal purpose even when it is outweighed
by the non-tax reasons (taken together or separately) for the
occurrence or structure of a transaction.
C. Elimination of Abuse Factors and Disclosure Requirement
As noted above, the proposed regulations provide a nonexclusive
list of factors that evidence an abusive principal purpose. The
proposed regulations require a loss corporation to disclose certain
information to the IRS if it does not treat as exercised an option to
which one of the specific abuse factors applies.
The IRS and the Treasury Department have determined that the
enforcement benefits that would be achieved by the disclosure
requirement do not justify the administrative burden it would impose on
taxpayers (in addition to the general disclosure requirement of the
temporary regulations; see Sec. 1.382-2T(a)(2)(ii)). Therefore, the
final regulations do not retain the disclosure requirement of the
proposed regulations. The accuracy-related penalty of section 6662 may
apply, however, if a substantial underpayment results from a position
that lacks substantial authority that is not adequately disclosed by
the taxpayer.
Because the promulgation of specific abuse factors in the proposed
regulations related largely to the disclosure requirement, the final
regulations do not retain the specific abuse factors. The elimination
of the abuse factors also addresses commentators' concerns that these
factors could have been viewed as creating a presumption that an option
to which a factor applied was issued or transferred for an abusive
principal purpose.
Instead of providing specific abuse factors that are evidence of an
abusive principal purpose, the final regulations merely identify a
series of factors that exemplify circumstances that may be probative
under the ownership, control, and income tests. The weight given to
these factors depends on the facts and circumstances. The presence or
absence of any of these factors does not create a presumption.
Among the factors that are relevant in applying all three tests are
any business purposes for the issuance, transfer, or structure of an
option, the likelihood of exercise of the option (taking into account,
for example, any contingencies to its exercise), transactions related
to the issuance or transfer of the option, and the consequences of
treating the option as exercised. An option is not treated as exercised
under any of the tests, however, if a principal purpose of its
issuance, transfer, or structuring is to avoid an ownership change by
having it treated as exercised.
The final regulations also provide examples of additional factors
that are taken into account in applying each of the separate tests.
Among the additional factors that are taken into account in applying
the ownership test are the relationship between the exercise price of
the option and the value of the underlying stock at the time of the
issuance or transfer of the option, whether the option provides its
holder with the right to participate in the management of the loss
corporation or with other rights that ordinarily would be afforded to
owners of the underlying stock, and the existence of reciprocal put and
call options. The ability of the holder of an option with a fixed
exercise price to share in future appreciation of the underlying stock
is also a relevant factor, but is not sufficient, by itself, for the
option to be treated as exercised. Conversely, the fact that the holder
of such an option does not bear the risk of loss due to declines in
value of the underlying stock does not preclude the option from
satisfying the ownership test.
Among the additional factors that are taken into account in
applying the control test are the economic interests in the loss
corporation of the option holder or related persons and the influence
of those persons over the management of the loss corporation.
Among the additional factors that are taken into account in
applying the income test are whether, in connection with the issuance
or transfer of the option, the loss corporation engages in income
acceleration transactions or the holder of the option or a related
person purchases stock from, or makes a capital contribution or loan
to, the loss corporation that can reasonably be expected to avoid or
ameliorate the impact of an ownership change. Examples of income
acceleration transactions are those outside the ordinary course of the
loss corporation's business that accelerate income or gain into the
period prior to the exercise of the option or defer deductions to the
period after the exercise of the option.
Commentators on the proposed regulations asked for clarification of
the definition of ``capital contribution'' and guidance on the
relevance of capital contributions in determining whether an option is
treated as exercised. The final regulations address these comments in
two respects. First, as noted above, the final regulations eliminate
the abuse factors of the proposed regulations, including the factor
related to capital contributions. Therefore, although a capital
contribution or similar transaction made in connection with the
issuance or transfer of an option is relevant in applying the income
test, it cannot be viewed as giving rise to a presumption that the
option satisfies the test. In addition, the final regulations provide
further guidance regarding the relevance of a capital contribution or
similar transaction. The final regulations provide that a capital
contribution or similar transaction is more probative toward an option
satisfying the income test the larger the amount received by the loss
corporation in the transaction or related transactions. Further, such a
transaction is generally not taken into account in applying the income
test if it is made to enable the loss corporation to continue the basic
operations of its business for such purposes as meeting the monthly
payroll or funding other operating expenses.
D. Safe Harbors
In response to commentators' requests, the final regulations
provide several safe harbors. The safe harbors apply to (i) typical
contracts to acquire stock that are closed on a change date within one
year after they are entered into, (ii) options that are part of
security arrangements in typical lending transactions, (iii) certain
compensatory options, (iv) certain options exercisable only upon death,
disability, mental incompetency, or retirement, and (v) certain rights
of first refusal. In addition, the final regulations authorize the IRS
to promulgate additional safe harbors by publication in the Internal
Revenue Bulletin.
An option to which a safe harbor applies is generally not subject
to the ownership, control, or income test. A contract to acquire stock,
however, is not exempted from the income test regardless of whether it
is described in the safe harbor applicable to contracts.
E. Treatment of Options Related to Certain Bankruptcy Reorganizations
Section 382(l)(5) provides rules that apply to ownership changes
that occur while the loss corporation is under the jurisdiction of a
court in a title 11 or similar case. A loss corporation that qualifies
for these special rules can use its pre-change losses, after certain
reductions, without regard to the annual limitation provided in section
382.
Section 1.382-9(o) of the regulations provides that the option
attribution rules of the temporary regulations do not apply to certain
options that arise as part of a plan of reorganization in a title 11 or
similar case until the time that the plan becomes effective. This rule
clarifies the timing of any ownership change that results from the
plan. This Treasury decision amends Sec. 1.382-9(o) to provide that
neither the option attribution rules of the temporary regulations nor
the new rules of the final regulations apply prior to the time the plan
becomes effective.
In general, the new option rules of the final regulations apply to
determine whether an ownership change occurs at the time the plan
becomes effective. As explained in Part F, below, however, a loss
corporation that is subject to a title 11 or similar case filed on or
before May 17, 1994 may elect to apply the option attribution rules of
the temporary regulations up to the time that the plan of
reorganization becomes effective.
Section 1.382-9(e) of the regulations provides rules regarding the
treatment of options for purposes of determining eligibility for the
special rules of section 382(l)(5). The preamble of the proposed
regulations requested comments on the desirability of changes to the
rules of Sec. 1.382-9(e) in light of the option rules of the proposed
regulations. The IRS and the Treasury Department are considering the
comments received in response to this request.
F. Effective Date
The option rules of the proposed regulations were proposed to apply
on any testing date on or after November 5, 1992. Many commentators
asked that taxpayers be allowed to apply the new option rules
retroactively. These commentators observed that many of the options
that were treated as exercised under the temporary regulations (and
thus resulted in ownership changes) would not be treated as exercised
under the rules of the proposed regulations. Thus, if the same options
had been issued after the effective date of the proposed regulations,
they would not necessarily have caused an ownership change. The
commentators argued that the application of the section 382 limitation
should not depend on the timing of the issuance of certain options.
The IRS and the Treasury Department have declined to allow
taxpayers to apply the new option rules retroactively because the
results of retroactive application of these rules would be
inappropriate. The results would be largely the same as if no option
attribution rules had been in effect prior to November 5, 1992, except
cases in which attribution favored the taxpayer. A taxpayer could argue
that the options in question could not have had an abusive principal
purpose because the temporary regulations treated an option as
exercised whenever an ownership change would result. Accordingly, a
taxpayer who had an ownership change under the prior rules could
reverse the ownership change by electing to apply the new rules
retroactively--an election the taxpayer would presumably make unless,
in retrospect, the application of the temporary regulations had proved
to be favorable.
In light of the foregoing, the final regulations retain the general
effective date of the proposed regulations; the option rules of the
final regulations generally apply on testing dates on or after November
5, 1992.
Although the option rules of the final regulations, and not those
of the temporary regulations, generally apply on testing dates on or
after November 5, 1992, the final regulations allow a loss corporation
to elect to apply the option rules of the temporary regulations for an
extended period. For most loss corporations, the election applies to
all testing dates that occur before May 17, 1994. If, however, the loss
corporation is subject to a title 11 or similar case filed on or before
May 17, 1994, the election applies to all testing dates on or before
the time the plan of reorganization becomes effective.
The final regulations provide an exception to the general effective
date for the control test. The test generally does not apply to an
option issued on or before March 17, 1994, or issued within 60 days
after that date pursuant to a plan existing before that date. The
control test will apply to such an option, however, on testing dates on
or after the date of a transfer of the option that would itself cause
the option to satisfy the control test.
Special Analyses
It has been determined that this Treasury Decision is not a
significant regulatory action, as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It has also been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter
6) do not apply to these regulations, and, therefore, a Regulatory
Flexibility Analysis is not required. Pursuant to section 7805(f) of
the 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 Annette M. Ahlers,
Office of Assistant Chief Counsel (Corporate). However, other personnel
from the IRS and Treasury Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Amendments to the Regulations
PART 1--INCOME TAXES
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
Paragraph 1. The authority citation for part 1 is amended by
removing the current citations for Secs. 1.382-2, 1.382-4, and 1.382-9
and by adding the following citations to read as follows:
Authority: 26 U.S.C. 7805 * * * Section 1.382-2 also issued 26
U.S.C. 382(k)(6)(B)(ii) and 26 U.S.C. 382(m). * * * Section 1.382-4
also issued under 26 U.S.C. 382(l)(3) and 382(m). * * * Section
1.382-9 also issued under 26 U.S.C. 382(l)(3) and (m). * * *
Authority: 26 U.S.C. 7805.
Par. 2. Section 1.382-1 is amended as follows:
1. Entries for Sec. 1.382-2, paragraphs (a)(3) through (b)(3) are
added.
2. Entries for Sec. 1.382-2T are amended by:
a. Revising the entry for paragraph (a)(2)(i).
b. Adding an entry for paragraph (h)(4)(xiii).
c. Removing the entry for paragraph (h)(4)(x)(Z).
d. Adding entries for paragraphs (m)(4)(vi) and (m)(4)(vii).
3. The entries for Sec. 1.382-4 are revised.
4. The additions and revisions read as follows:
Sec. 1.382-1 Table of Contents.
* * * * *
Sec. 1.382-2 General rules for ownership change.
(a) * * *
(3) Stock.
(i) In general. [Reserved]
(ii) Convertible stock.
(4) Testing date.
(i) In general.
(ii) Exceptions.
(b) Effective dates.
(1) In general. [Reserved]
(2) Rules provided in paragraph (a)(3)(ii) of this section.
(i) In general.
(ii) Certain convertible preferred stock.
(3) Rules provided in paragraph (a)(4) of this section.
Sec. 1.382-2T Definition of ownership change under section 382, as
amended by the Tax Reform Act of 1986 (temporary).
(a) * * *
(2) * * *
(i) Testing dates prior to November 5, 1992.
* * * * *
(h) * * *
(4) * * *
(xiii) Effective date.
* * * * *
(m) * * *
(4) * * *
(vi) Rules provided in paragraph (h)(4) of this section.
(vii) Rules provided in paragraph (a)(2)(i) of this section.
* * * * *
Sec. 1.382-4 Constructive ownership of stock.
(a) In general. [Reserved]
(b) Attribution from corporations, partnerships, estates and
trusts. [Reserved]
(c) Attribution to corporations, partnerships, estates and
trusts. [Reserved]
(d) Treatment of options as exercised.
(1) General rule.
(2) Options treated as exercised.
(i) Issuance or transfer.
(ii) Subsequent testing dates.
(3) The ownership test.
(4) The control test.
(i) In general.
(ii) Operating rules.
(A) Person and related persons.
(B) Indirect ownership interest.
(5) The income test.
(6) Application of the ownership, control, and income tests.
(i) In general.
(ii) Application of ownership test.
(iii) Application of control test.
(iv) Application of income test.
(7) Safe harbors.
(i) Contracts to acquire stock.
(ii) Escrow, pledge, or other security agreements.
(iii) Compensatory options.
(iv) Options exercisable only upon death, disability, mental
incompetency or retirement.
(v) Rights of first refusal.
(vi) Options designated in the Internal Revenue Bulletin.
(8) Additional rules.
(i) Contracts to acquire stock.
(ii) Indirect transfer of an option.
(iii) Options related to interests in non-corporate entities.
(iv) Puts.
(9) Definition of option.
(i) In general.
(ii) Convertible stock.
(iii) Series of options.
(iv) General principles of tax law.
(10) Subsequent treatment of options treated as exercised on a
change date.
(i) In general.
(ii) Alternative look-back rule for options exercised within 3
years after change date.
(11) Transfers not subject to deemed exercise.
(12) Certain rules regarding non-stock interests as stock.
(e) Stock transferred under certain agreements. [Reserved]
(f) Family attribution. [Reserved]
(g) Definitions.
(h) Effective date.
(1) In general. [Reserved]
(2) Option attribution rules.
(i) General rule.
(ii) Special rule for control test.
(iii) Convertible stock issued prior to July 20, 1988.
(A) In general.
(B) Exceptions.
(1) Nonvoting convertible preferred stock.
(2) Other convertible stock.
(iv) Convertible stock issued on or after July 20, 1988, and
before November 5, 1992.
(v) Certain options in existence immediately before and after an
ownership change.
(vi) Election to apply Sec. 1.382-2T(h)(4).
(A) In general.
(B) Additional consequences of election.
(C) Time and manner of making the election.
(D) Amended returns.
(3) Special rule for options subject to attribution under
Sec. 1.382-2T(h)(4).
* * * * *
Par. 3. Section 1.382-2 is amended as follows:
1. By revising paragraph (a)(1)(i)(B).
2. By adding paragraphs (a)(3), (a)(4), and (b).
3. The revision and additions read as follows.
Sec. 1.382-2 General rules for ownership change.
(a) * * *
(1) * * *
(i) * * *
(B) For the taxable year that includes a testing date, as defined
in paragraph (a)(4) of this section or Sec. 1.382-2T(a)(2)(i),
whichever is applicable (determined for purposes of this paragraph
(a)(1) without regard to whether the corporation is a loss
corporation), has a net operating loss, a net capital loss, excess
foreign taxes under section 904(c), unused general business credits
under section 38, or an unused minimum tax credit under section 53, or
* * * * *
(3) Stock--(i) In general. [Reserved]
(ii) Convertible stock. The term ``stock'' includes any convertible
stock. For rules regarding the treatment of certain convertible stock
as an option, see Sec. 1.382-4(d)(9)(ii).
(4) Testing date--(i) In general. Except as provided in paragraph
(a)(4)(ii) of this section, a loss corporation is required to determine
whether an ownership change has occurred immediately after any owner
shift, or issuance or transfer (including an issuance or transfer
described in Sec. 1.382-4(d)(8)(i) or (ii)) of an option with respect
to stock of the loss corporation that is treated as exercised under
Sec. 1.382-4(d)(2). Each date on which a loss corporation is required
to make a determination of whether an ownership change has occurred is
referred to as a testing date. All computations of increases in
percentage ownership are to be made as of the close of the testing date
and any transactions described in this paragraph (a)(4) that occur on
that date are treated as occurring simultaneously at the close of the
testing date. See Sec. 1.382-2T(e)(1) for the definition of owner
shift. The term option, as used in this paragraph (a)(4), includes
interests that are treated as options under Sec. 1.382-4(d)(9). For
rules regarding the determination of whether dates prior to November 5,
1992, are testing dates, see Sec. 1.382-2T(a)(2)(i).
(ii) Exceptions. A loss corporation is not required to determine
whether an ownership change has occurred immediately after--
(A) Any transfer of stock, or an option with respect to stock, of
the loss corporation in any of the circumstances described in section
382(l)(3)(B) (death, gift, divorce, etc.); or
(B) The transfer of an option described in Sec. 1.382-4(d)(11)(i)
or (ii) (relating to transfers between persons who are not 5-percent
shareholders or between members of certain public groups).
(b) Effective dates--(1) In general. [Reserved]
(2) Rules provided in paragraph (a)(3)(ii) of this section--(i) In
general. Except as provided in paragraph (b)(2)(ii) of this section,
the rules provided in paragraph (a)(3)(ii) of this section apply with
respect to any convertible stock.
(ii) Certain convertible preferred stock. Convertible stock that,
when issued, would be described in section 1504(a)(4) by disregarding
subparagraph (D) thereof and by ignoring the potential participation in
corporate growth that the conversion feature may offer is treated as
stock described in that section (and thus is not treated as stock for
the purpose of determining whether an ownership change occurs, but is
taken into account for the purpose of determining the value of the loss
corporation immediately before an ownership change; see sections
382(e)(1) and 382(k)(6)(A)) if--
(A) The stock was issued on or after July 20, 1988, and prior to
November 5, 1992; or
(B) The stock was issued prior to July 20, 1988, and the loss
corporation makes the election described in Notice 88-67, 1988-1 C.B.
555, (see Sec. 601.601(d)(2)(ii)(b) of this chapter for availability of
Cumulative Bulletins (C.B.)) on or before the earlier of the date
prescribed in the Notice or December 7, 1992.
(3) Rules provided in paragraph (a)(4) of this section. The rules
provided in paragraph (a)(4) of this section apply to determine whether
dates on or after November 5, 1992, are testing dates.
Par. 4. Section 1.382-2T is amended as follows:
1. The paragraph heading for paragraph (a)(2)(i) is revised.
2. A sentence is added at the end of paragraph (a)(2)(i)(B).
3. Paragraph (f)(18)(iii) is amended by adding a sentence at the
end of the concluding text.
4. Paragraph (h)(4)(x)(Z) is removed.
5. Paragraph (h)(4)(xiii) is added.
6. Paragraphs (m)(4)(vi) and (m)(4)(vii) are added.
7. The revisions and additions read as follows:
Sec. 1.382-2T Definition of ownership change under section 382, as
amended by the Tax Reform Act of 1986 (temporary).
(a) * * *
(2) * * *
(i) Testing dates prior to November 5, 1992.* * *
(B) * * * See paragraph (m)(4)(vii) of this section for special
rules regarding the effective date of the provisions of this paragraph
(a)(2)(i).
* * * * *
(f) * * *
(18) * * *
(iii) Treating interests not constituting stock as stock. * * * See
Sec. 1.382-4(d)(12) for rules that apply with respect to options and
this paragraph (f)(18)(iii).
* * * * *
(h) * * *
(4) * * *
(xiii) Effective date. See paragraph (m)(4)(vi) of this section for
special rules regarding the effective date of the provisions of this
paragraph (h)(4).
* * * * *
(m) * * *
(4) * * *
(vi) Rules provided in paragraph (h)(4) of this section. The rules
provided in paragraph (h)(4) of this section do not apply on any
testing date on or after November 5, 1992. The rule provided in
paragraph (h)(4)(viii) of this section applies to the lapse or
forfeiture of any option treated as exercised under paragraph (h)(4)(i)
of this section. If an option is treated as exercised under paragraph
(h)(4)(i) of this section, and the option is actually exercised on a
day that is within 120 days after the date on which the option is
treated as exercised, the rule provided in paragraph (h)(4)(vi)(B) of
this section applies (even if the actual exercise of the option occurs
on a date on which the rules of paragraph (h)(4) of this section would
not otherwise apply). Thus, in such a case, the loss corporation may
elect to treat paragraphs (h)(4)(i) and (vi)(A) of this section as not
applying to the option and take into account only the acquisition of
loss corporation stock resulting from the actual exercise of the
option.
(vii) Rules provided in paragraph (a)(2)(i) of this section. The
rules provided in paragraph (a)(2)(i) of this section apply to
determine whether dates prior to November 5, 1992, are testing dates.
For rules regarding the determination of whether dates on or after
November 5, 1992, are testing dates, see Sec. 1.382-2(a)(4).
* * * * *
Par. 5. Section 1.382-4 is revised to read as follows: Sec. 1.382-4
Constructive ownership of stock.
(a) In general. [Reserved]
(b) Attribution from corporations, partnerships, estates and
trusts. [Reserved]
(c) Attribution to corporations, partnerships, estates and trusts.
[Reserved]
(d) Treatment of options as exercised--(1) General rule. Except as
provided in paragraph (d)(2) of this section, an option is not treated
as exercised under section 382(l)(3)(A).
(2) Options treated as exercised--(i) Issuance or transfer. For
purposes of determining whether an ownership change occurs, an option
is treated as exercised on the date of its issuance or transfer if, on
that date, the option satisfies--
(A) The ownership test of paragraph (d)(3) of this section,
(B) The control test of paragraph (d)(4) of this section, or
(C) The income test of paragraph (d)(5) of this section.
(ii) Subsequent testing dates. Except as provided in paragraph
(d)(10) of this section, an option that is treated as exercised on the
date of its issuance or transfer is treated as exercised on any
subsequent testing date (as defined in Sec. 1.382-2(a)(4)) for purposes
of determining whether an ownership change occurs.
(3) The ownership test. An option satisfies the ownership test if a
principal purpose of the issuance, transfer, or structuring of the
option (alone or in combination with other arrangements) is to avoid or
ameliorate the impact of an ownership change of the loss corporation by
providing the holder of the option, prior to its exercise or transfer,
with a substantial portion of the attributes of ownership of the
underlying stock.
(4) The control test-- (i) In general. An option satisfies the
control test if--
(A) A principal purpose of the issuance, transfer, or structuring
of the option (alone or in combination with other arrangements) is to
avoid or ameliorate the impact of an ownership change of the loss
corporation, and
(B) The holder of the option and any persons related to the option
holder have, in the aggregate, a direct and indirect ownership interest
in the loss corporation of more than 50 percent (determined as if the
increase in such persons' percentage ownership interest that would
result from the exercise of the option in question and any other
options to acquire stock held by such persons, and any other intended
increases in such persons' percentage ownership interest, actually
occurred on the date the option is issued or transferred).
(ii) Operating rules--(A) Person and related persons. For purposes
of this paragraph (d)(4)--
(1) The term person includes an individual or entity, but not a
public group, as defined in Sec. 1.382-2T(f)(13), and
(2) Persons are related if they bear a relationship specified in
section 267(b) or 707(b) or if they have a formal or informal
understanding among themselves to make a coordinated acquisition of
stock, within the meaning of Sec. 1.382-3(a)(1)(i).
(B) Indirect ownership interest. The indirect ownership interest
that the holder of the option and any persons related to the holder
have in the loss corporation is determined by applying the constructive
ownership rules of Sec. 1.382-2T(h), other than Sec. 1.382-
2T(h)(2)(i)(A) (which treats stock attributed pursuant to section
318(a)(2) as no longer being owned by the entity from which it is
attributed) and Sec. 1.382-2T(h)(4) (which treats options as exercised
in certain circumstances). If, however, the application of such
constructive ownership rules without regard to Sec. 1.382-
2T(h)(2)(i)(A) would result in the same stock of the loss corporation
being owned by two or more such persons, appropriate adjustments must
be made so that such stock is not counted more than once in computing
the aggregate ownership interests of such persons.
(5) The income test. An option satisfies the income test if a
principal purpose of the issuance, transfer, or structuring of the
option (alone or in combination with other arrangements) is to avoid or
ameliorate the impact of an ownership change of the loss corporation by
facilitating the creation of income (including accelerating income or
deferring deductions) or value (including unrealized built-in gains)
prior to the exercise or transfer of the option.
(6) Application of the ownership, control, and income tests--(i) In
general. Whether an option satisfies the ownership, control, or income
test depends on all the relevant facts and circumstances. Among the
factors that are relevant in applying all three tests are any business
purposes for the issuance, transfer, or structure of the option, the
likelihood of exercise of the option (taking into account, for example,
any contingencies to its exercise), transactions related to the
issuance or transfer of the option, and the consequences of treating
the option as exercised.
An option is not treated as exercised under any of the three tests,
however, if a principal purpose of its issuance, transfer, or
structuring is to avoid an ownership change by having it treated as
exercised. Paragraphs (d)(6) (ii), (iii) and (iv) of this section
describe additional examples of factors that are relevant in applying
each test. The weight given to any factor depends on all the facts and
circumstances. The presence or absence of any factor described in this
paragraph (d)(6) does not create a presumption.
(ii) Application of ownership test. Among the additional factors
that are taken into account in applying the ownership test are the
relationship, at the time of issuance or transfer of the option,
between the exercise price of the option and the value of the
underlying stock, whether the option provides its holder or a related
person with the right to participate in the management of the loss
corporation or with other rights that ordinarily would be afforded to
owners of the underlying stock, and the existence of reciprocal options
(e.g., a call option held by the prospective purchaser and a
corresponding put option held by the prospective seller). The ability
of the holder of an option with a fixed exercise price to share in
future appreciation of the underlying stock is also a relevant factor,
but is not sufficient, by itself, for the option to satisfy the
ownership test. Conversely, the fact that the holder of such an option
does not bear the risk of loss due to declines in value of the
underlying stock does not preclude the option from satisfying the
ownership test.
(iii) Application of control test. Among the additional factors
that are taken into account in applying the control test are the
economic interests in the loss corporation of the option holder or
related persons and the influence of those persons over the management
of the loss corporation (in either case, through the option or a
related arrangement, or through rights in stock).
(iv) Application of income test. Among the additional factors that
are taken into account in applying the income test are whether, in
connection with the issuance or transfer of the option, the loss
corporation engages in income acceleration transactions or the holder
of the option or a related person purchases stock (including section
1504(a)(4) stock) from, or makes a capital contribution or loan to, the
loss corporation that can reasonably be expected to avoid or ameliorate
the impact of an ownership change. Examples of income acceleration
transactions are those outside the ordinary course of the loss
corporation's business that accelerate income or gain into the period
prior to the exercise of the option (or defer deductions to the period
after the exercise of the option). A stock purchase, capital
contribution, or loan is more probative toward an option satisfying the
income test the larger the amount received by the loss corporation in
the transaction or related transactions. A stock purchase, capital
contribution, or loan is generally not taken into account in applying
the income test if it is made to enable the loss corporation to
continue basic operations of its business (e.g., to meet the monthly
payroll or fund other operating expenses of the loss corporation).
(7) Safe harbors. Except as provided in paragraph (d)(7)(i) of this
section, an option described in this paragraph (d)(7) is not treated as
exercised pursuant to the ownership, control, or income test. The
failure of an option to be described in this paragraph (d)(7) does not
affect the determination of whether the option satisfies the ownership,
income, or control test. The following options are described in this
paragraph (d)(7):
(i) Contracts to acquire stock. A stock purchase agreement or a
similar arrangement, the terms of which are commercially reasonable, in
which the parties' obligations to complete the transaction are subject
only to reasonable closing conditions, and which is closed on a change
date within one year after it is entered into. An option is not exempt
from the income test of paragraph (d)(5) of this section solely by
reason of its description in this paragraph (d)(7)(i).
(ii) Escrow, pledge, or other security agreements. An option that
is part of a security arrangement in a typical lending transaction
(including a purchase money loan), if the arrangement is subject to
customary commercial conditions. For this purpose, a security
arrangement includes, for example, an agreement for holding stock in
escrow or under a pledge or other security agreement, or an option to
acquire stock contingent upon a default under a loan.
(iii) Compensatory options. An option to acquire stock in a
corporation with customary terms and conditions provided to an
employee, director, or independent contractor in connection with the
performance of services for the corporation or a related person (and
that is not excessive by reference to the services performed) and
which--
(A) Is nontransferable within the meaning of Sec. 1.83-3(d); and
(B) Does not have a readily ascertainable fair market value as
defined in Sec. 1.83-7(b) on the date the option is issued.
(iv) Options exercisable only upon death, disability, mental
incompetency, or retirement. An option entered into between
stockholders of a corporation (or a stockholder and the corporation)
with respect to stock of either stockholder, that is exercisable only
upon the death, disability, mental incompetency of the stockholder, or,
in the case of stock acquired in connection with the performance of
services for the corporation or a related person (and that is not
excessive by reference to the services performed), the stockholder's
retirement.
(v) Rights of first refusal. A bona fide right of first refusal
with customary terms, entered into between stockholders of a
corporation (or between the corporation and a stockholder), and
regarding the corporation's stock.
(vi) Options designated in the Internal Revenue Bulletin. An option
designated by the Internal Revenue Service in the Internal Revenue
Bulletin as being exempt from one or more of the ownership, control, or
income tests. See Sec. 601.601(d)(2)(ii) of this chapter (relating to
the Internal Revenue Bulletin).
(8) Additional rules--(i) Contracts to acquire stock. For purposes
of this paragraph (d), a contract is considered to be issued or
transferred on the date it is entered into or assigned, respectively.
(ii) Indirect transfer of an option. If an entity is formed or
availed of for a principal purpose of facilitating an indirect transfer
of an option by issuing or transferring interests in the entity, an
issuance or transfer of an interest in the entity will be treated as a
transfer of the option for purposes of applying the ownership, control,
and income tests of paragraphs (d) (3) through (5) of this section.
(iii) Options related to interests in non-corporate entities. The
rules of this paragraph (d) apply, with appropriate adjustments, to
options to acquire or transfer interests in non-corporate entities.
(iv) Puts. In applying the rules of this section to puts,
appropriate adjustments must be made to take into account that the put
provides its holder with a right to transfer, instead of acquire,
stock.
(9) Definition of option--(i) In general. Any contingent purchase,
warrant, convertible debt, put, stock subject to a risk of forfeiture,
contract to acquire stock, or similar interest is treated as an option
for purposes of this paragraph (d), regardless of whether it is
contingent or otherwise not currently exercisable.
(ii) Convertible stock. Convertible stock is treated as an option
for purposes of this paragraph (d) (in addition to being treated as
stock under Sec. 1.382-2(a)(3)(ii)) only if the terms of the conversion
feature permit or require consideration other than the stock being
converted.
(iii) Series of options. For purposes of this paragraph (d), an
option to acquire an option with respect to the stock of the loss
corporation, and each one of a series of such options, is treated as an
option to acquire such stock.
(iv) General principles of tax law. This paragraph (d) does not
affect the determination under general principles of tax law (such as
substance over form) of whether an instrument is an option or stock.
(10) Subsequent treatment of options treated as exercised on a
change date--(i) In general. The following rules apply to options that
are treated as exercised under paragraph (d)(2) of this section on a
change date:
(A) The option is not treated as exercised under paragraph (d)(2)
of this section on any testing date after the change date and prior to
a transfer of the option that would itself (i.e., without regard to the
purposes for the issuance or any prior transfers of the option) cause
the option to satisfy the ownership test of paragraph (d)(3) of this
section, the control test of paragraph (d)(4) of this section, or the
income test of paragraph (d)(5) of this section; and
(B) The exercise of the option, if by the person who owned the
option immediately after the ownership change (or by a transferee of
the option who acquired the option, directly or indirectly, from that
person in one or more transfers described in paragraph (d)(11) of this
section), does not contribute to another ownership change on any
testing date on or after the date of exercise.
(ii) Alternative look-back rule for options exercised within 3
years after change date. If a loss corporation, on its return, as
originally filed, for a taxable year that includes a change date,
properly treats an option as exercised under paragraph (d)(2) of this
section on the change date, and the option is actually exercised within
three years after the change date, the loss corporation may treat the
rules of paragraph (d)(10)(i) of this section as inapplicable to the
option and instead treat the option as having been exercised on the
change date for the purpose of determining whether an ownership change
occurs on any and all testing dates after the change date (filing such
amended returns as may be necessary for taxable years ending after the
change date and before the date of exercise of the option). A transfer
after the change date of an option to which this paragraph (d)(10)(ii)
applies is treated as a transfer of the stock subject to the option.
The exercise of an option to which this paragraph (d)(10)(ii) applies
is not taken into account for the purpose of determining whether an
ownership change occurs on or after the date of exercise.
(11) Transfers not subject to deemed exercise. Paragraph (d)(2) of
this section does not apply to the transfer of an option (including a
transfer described in paragraph (d)(8)(i) or (ii) of this section),
if--
(i) Neither the transferor nor the transferee is a 5-percent
shareholder and neither person would be a 5-percent shareholder if all
options held by that person to acquire stock were treated as exercised;
(ii) The transfer is between members of separate public groups
resulting from the application of the segregation rules of Sec. 1.382-
2T(j)(2) and (3)(iii); or
(iii) The transfer occurs in any of the circumstances described in
section 382(l)(3)(B) (relating to stock acquired by reason of death,
gift, divorce, separation, etc.).
(12) Certain rules regarding non-stock interests as stock. Section
1.382-2T(f)(18)(iii) does not apply to treat an option (whether or not
treated as exercised under this paragraph (d)) as stock.
(e) Stock transferred under certain agreements. [Reserved]
(f) Family attribution. [Reserved]
(g) Definitions. The terms and nomenclature used in this section,
and not otherwise defined herein, have the same meaning as in section
382 and the regulations thereunder.
(h) Effective date--(1) In general. [Reserved]
(2) Option attribution rules--(i) General rule. The rules of
paragraph (d) of this section apply, instead of the rules of
Sec. 1.382-2T(h)(4), on any testing date on or after November 5, 1992.
See paragraph (h)(2)(vi) of this section for an election relating to
the effective date.
(ii) Special rule for control test. An option issued on or before
March 17, 1994, or an option issued within 60 days after that date
pursuant to a plan existing before that date, is not treated as
exercised under the control test provided in paragraph (d)(4) of this
section on any testing date prior to a transfer of the option after
March 17, 1994 that would itself cause the option to satisfy the
control test.
(iii) Convertible stock issued prior to July 20, 1988--(A) In
general. Except as provided in paragraph (h)(2)(iii)(B) of this
section, convertible stock issued prior to July 20, 1988, is not
treated as an option subject to the rules of Sec. 1.382-2T(h)(4) or
paragraph (d)(2) of this section.
(B) Exceptions--(1) Nonvoting convertible preferred stock.
Convertible stock issued prior to July 20, 1988, is treated as an
option subject to the rules of Sec. 1.382-2T(h)(4) or paragraph (d)(2)
of this section if--
(i) The stock, when issued, would be described in section
1504(a)(4) by disregarding subparagraph (D) thereof and by ignoring the
potential participation in corporate growth that the conversion feature
may offer; and
(ii) The loss corporation makes the election described in Notice
88-67, 1988-1 C.B. 555 (see Sec. 601.601(d)(2)(ii)(b) of this chapter
for availability of Cumulative Bulletins (C.B.)), on or before the
earlier of the date prescribed in Notice 88-67 or December 7, 1992.
(2) Other convertible stock. Convertible stock issued prior to July
20, 1988, is treated as an option subject to the rules of Sec. 1.382-
2T(h)(4) or paragraph (d)(2) of this section if--
(i) The terms of the conversion feature permit or require the
tender of consideration other than the stock being converted; and
(ii) The loss corporation makes the election described in Notice
88-67 on or before the date prescribed in the Notice.
(iv) Convertible stock issued on or after July 20, 1988, and before
November 5, 1992. Convertible stock issued on or after July 20, 1988,
and before November 5, 1992, is treated as an option subject to the
rules of Sec. 1.382-2T(h)(4) or paragraph (d) of this section only if--
(A) The stock, when issued, would be described in section
1504(a)(4) by disregarding subparagraph (D) thereof and by ignoring the
potential participation in corporate growth that the conversion feature
may offer; or
(B) The terms of the conversion feature permit or require the
tender of consideration other than the stock being converted.
(v) Certain options in existence immediately before and after an
ownership change. If an option existed immediately before and after an
ownership change occurring on a testing date to which Sec. 1.382-
2T(h)(4) applies--
(A) The option is not treated as exercised under paragraph (d)(2)
of this section on any testing date after the change date and prior to
a transfer of the option that would itself cause the option to satisfy
the ownership test of paragraph (d)(3) of this section, the control
test of paragraph (d)(4) of this section, or the income test of
paragraph (d)(5) of this section; and
(B) Except as provided in Sec. 1.382-2T(m)(4)(vi) (which relates to
the effective date of the rules provided in Sec. 1.382-2T(h)(4) and
includes a special rule related to options that are actually exercised
within 120 days after they are treated as exercised under that
section), the actual exercise of the option, if by the person who owned
the option immediately after the ownership change (or by a transferee
of the option who acquired the option, directly or indirectly, from
that person in one or more transfers described in paragraph (d)(11) of
this section), will not contribute to an ownership change on any
testing date on or after the date of exercise.
(vi) Election to apply Sec. 1.382-2T(h)(4)--(A) In general. If a
loss corporation makes an election under this paragraph (h)(2)(vi),
Secs. 1.382-2T(a)(2)(i) and (h)(4) (relating to testing dates and
option attribution) apply (instead of the definition of testing date in
Sec. 1.382-2(a)(4) and paragraph (d) of this section) for the purpose
of determining whether an ownership change occurs--
(1) On any testing date on or before May 17, 1994, or
(2) In the case of a loss corporation that is under the
jurisdiction of a court in a title 11 or similar case filed on or
before May 17, 1994, subject to Sec. 1.382-9(o)(1), on any testing date
at or before the time the plan of reorganization becomes effective.
(B) Additional consequences of election. If a loss corporation
makes an election under this paragraph (h)(2)(vi)--
(1) In determining whether any convertible preferred stock issued
by the loss corporation during the period that the election is in
effect is treated as stock or as an option, the convertible preferred
stock is treated as if it were issued on November 4, 1992, and
(2) The special effective date for the control test provided in
paragraph (h)(2)(ii) of this section does not apply to any option with
respect to stock of the loss corporation.
(C) Time and manner of making the election. The election described
in paragraph (h)(2)(vi)(A) of this section is made by attaching a
statement to the loss corporation's income tax return for the first
taxable year ending after November 4, 1992, in which a testing date
(within the meaning of Sec. 1.382-2T(a)(2)(i)) occurs, or if such
return is filed on or before May 17, 1994, with its first return filed
after May 17, 1994. However, a loss corporation that is under the
jurisdiction of a court in a title 11 or similar case filed on or
before May 17, 1994, may make the election described in paragraph
(h)(2)(vi)(A) by attaching a statement to its tax return for its first
taxable year ending after that date. The statement must say ``THIS IS
AN ELECTION UNDER Sec. 1.382-4(h)(2)(vi) TO APPLY Sec. 1.382-2T(h)(4)
ON OR AFTER NOVEMBER 5, 1992.'' Any amended returns required by
paragraph (h)(2)(vi)(D) of this section must accompany the return with
which the election is made. An election under paragraph (h)(2)(vi)(A)
of this section is irrevocable.
(D) Amended returns. If an election under this paragraph (h)(2)(vi)
affects the amount of taxable income or loss for a prior taxable year,
the loss corporation (or the common parent of any consolidated group of
which the loss corporation was a member for the year) must file an
amended return for the year that reflects the effect of the election.
(3) Special rule for options subject to attribution under
Sec. 1.382-2T(h)(4). Section Sec. 1.382-2T(h)(4)(i) does not apply to
any option designated by the Internal Revenue Service in the Internal
Revenue Bulletin as being excepted from the operation of Sec. 1.382-
2T(h)(4)(i).
Par. 6. Section 1.382-9(o)(1) is revised to read as follows:
Sec. 1.382-9. Special rules under section 382 for corporations under
the jurisdiction of a court in a title 11 or similar case.
* * * * *
(o) Treatment of certain options for ownership change purposes--(1)
Neither Sec. 1.382-2T(h)(4)(i) nor Sec. 1.382-4(d) (relating to the
treatment of options as exercised) applies to the following options to
acquire stock of a loss corporation reorganized pursuant to a plan of
reorganization that is confirmed in a title 11 or similar case (within
the meaning of section 368(a)(3)(A)) but only until the time the plan
becomes effective--
(i) Any option created by the solicitation or receipt of
acceptances to the plan;
(ii) The option created by the confirmation of the plan; and
(iii) Any option created under the plan.
* * * * *
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 7. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 8. Section 602.101(c) is amended by adding the entry for
``1.382-4'' in the table to read as follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(c) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described control No.
------------------------------------------------------------------------
*****
1.382-4.................................................... 1545-1120
*****
------------------------------------------------------------------------
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: February 24, 1994.
Leslie Samuels,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 94-6088 Filed 3-17-94; 8:45 am]
BILLING CODE 4830-01-U
