E7-10799. Guidance Regarding the Active Trade or Business Requirement Under Section 355(b); Correction

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Correction to notice of proposed rulemaking.

SUMMARY:

This document contains corrections to a notice of proposed rulemaking (REG-123365-03) that was published in the Federal Register on Tuesday, May 8, 2007 (72 FR 26012) providing guidance on issues involving the active trade or business requirement under section 355(b), including guidance resulting from the enactment of section 355(b)(3).

FOR FURTHER INFORMATION CONTACT:

Russell P. Subin, [phone] (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The correction notice that is the subject of this document is under section 355(b) of the Internal Revenue Code.

Need for Correction

As published, the notice of proposed rulemaking (REG-123365-03) contains errors that may prove to be misleading and are in need of clarification.

Correction of Publication

Accordingly, the publication of proposed rulemaking (REG-123365-03), which was the subject of FR Doc. 07-2269, is corrected as follows:

1. On page 26014, column 2, in the preamble, under the paragraph heading “1. SAG Rule Applicable During the Pre-Distribution Period”, second paragraph of the column, fourth line, the language “members are disregarded and all assets” is corrected to read “members is disregarded and all assets”.

2. On page 26014, column 2, in the preamble, under the paragraph heading “1. SAG Rule Applicable During the Pre-Distribution Period”, second paragraph of the column, eleventh line, the language “a five-year active trade or businesses.” is corrected to read “a five-year active trade or business.”.

3. On page 26015, column 1, in the preamble, under the paragraph heading “3. Acquisitions of Stock in Subsidiary SAG Members”, fifth line of the column, the language “in sections B.4 and C.3.a.ii. of this” is corrected to read “in sections B.4. and C.3.a.ii. of this”.

4. On page 26015, column 1, in the preamble, under the paragraph heading “C. Acquisitions of a Trade or Business”, second line of the paragraph, the language “provide that a trade or business” is corrected to read “provides that a trade or business”.

5. On page 26015, column 3, in the preamble, under the paragraph heading “1. Purpose of Section 355(b)(2)(C) and (D)”, second paragraph of the column, fourth line, the language “using it assets—instead of its stock, or” is corrected to read “using its assets—instead of its stock, or”.

6. On page 26016, column 2, in the preamble, under the paragraph heading “i. Certain Acquisitions by the DSAG or CSAG”, last line of the first paragraph, the language “assets to acquire the trade or business” is corrected to read “assets to acquire the trade or business.”.

7. On page 26016, column 3, in the preamble, under the paragraph heading “ii. Certain Acquisitions by a Distributee Corporation”, tenth line of the paragraph, the language “section A.1 of this preamble, section” is corrected to read “section A.1. of this preamble, section”.

8. On page 26017, column 2, in the preamble, under the paragraph heading “i. Acquisitions in Exchange for Assets”, third paragraph of the column, first line, the language “As discussed in section C.1 of this” is corrected to read “As discussed in section C.1. of this”.

9. On page 26018, column 1, in the preamble, under the paragraph heading “i. Acquisitions in Exchange for Assets”, fourth paragraph of the column, sixth line, the language “and (D) are satisfied. Such an” is corrected to read “and (D) is satisfied. Such an”.

10. On page 26019, column 3, in the preamble, under the paragraph heading “c. Application of Section 355(b)(2)(C) and (D) to Predecessors”, second paragraph of the column, third line, the language “singly-entity for purposes of section” is corrected to read “single-entity for purposes of section”.

11. On page 26025, column 1, in the preamble, under the paragraph heading “J. Additional Requests for Comments”, eleventh line of the column, the language “sections D.1.b. and D.2.c of this” is corrected to read “sections D.1.b. and D.2.c. of this”.

12. On page 26025, column 2, in the preamble, under the paragraph heading “J. Additional Requests for Comments”, fourth line from the bottom of second paragraph, the language “example, § 1.355-3(c) Example (9)” is corrected to read “example, § 1.355-3(c) Example 9”.

§ 1.355-3

[Corrected]

13. On page 26026, column 2, § 1.355-3(b)(1)(i), lines eight and nine of the paragraph, the language “355(b)(1). Sections 355(b)(2)(A) and (b)(3)(A) provide that a corporation is” is corrected to read “355(b)(1). Section 355(b)(2)(A) and (b)(3)(A) provides that a corporation is”.

14. On page 26026, column 2, § 1.355-3(b)(1)(i), seventh line from the bottom of the paragraph, the language “sections solely as a result of” is corrected to read “section solely as a result of”.

15. On page 26028, column 1, § 1.355-3(b)(4)(i)(A), fourth line of the paragraph, the language “Under sections 355(b)(2)(C) and (b)(3), a” is corrected to read “Under section 355(b)(2)(C) and (b)(3), a”.

16. On page 26028, column 1, § 1.355-3(b)(4)(i)(A), last line of the column, the language “by reasons of such transactions” is corrected to read “by reason of such transactions”.

17. On page 26030, column 2, § 1.355-3(d)(1)(iv), third line, the language “within the meeting of section 368(c).” is corrected to read “within the meaning of section 368(c).”.

18. On page 26031, column 3, § 1.355-3(d)(2) Example 9. (iii), fourth line from the bottom of paragraph, the language “is engaged the active conduct of ATB2.” is corrected to read “is engaged in the active conduct of ATB2.”.

19. On page 26033, column 2, § 1.355-3(d)(2) Example 24., lines six through twelve, the language “Partnership, each of X, Y, and Z satisfy the requirements of paragraph (b)(2)(v)(B) of this section. Accordingly, each of X, Y, and Z are attributed the trade or business assets and activities of Partnership, satisfy the requirements of paragraph (b)(2)(i) of this section, and are engaged in the active” is corrected to read “Partnership, each of X, Y, and Z satisfies the requirements of paragraph (b)(2)(v)(B) of this section. Accordingly, each of X, Y, and Z is attributed the trade or business assets and activities of Partnership, satisfies the requirements of paragraph (b)(2)(i) of this section, and is engaged in the active”.

20. On page 26034, column 1, § 1.355-3(d)(2) Example 27., sixth line from the bottom of paragraph, the language “recognized. Accordingly, if the D were to” is corrected to read “recognized. Accordingly, if D were to”.

21. On page 26034, column 1, § 1.355-3(d)(2) Example 29., seventh line, the language “under section 357(c) gain on the transfer of” is corrected to read “under section 357(c) on the transfer of”.

22. On page 26034, column 2, § 1.355-3(d)(2) Example 32., sixth line from the bottom of paragraph, the language “neither ATB1 nor control of C were acquired” is corrected to read “neither ATB1 nor control of C was acquired”.

23. On page 26034, column 3, § 1.355-3(d)(2) Example 35., second line from the bottom of paragraph, the language “distribution, it can rely on ATB1 to satisfy” is corrected to read “distribution, it could rely on ATB1 to satisfy”.

24. On page 26034, column 3, § 1.355-3(d)(2) Example 36., second line, the language “reorganization and distributions. For more” is corrected to read “reorganization and distribution. For more”.

25. On page 26035, column 2, § 1.355-3(d)(2) Example 39., fifth line from the bottom of paragraph, the language “The result would also be the same if prior to” is corrected to read “The result would be the same if prior to”.

26. On page 26035, column 2, § 1.355-3(d)(2) Example 40., fourth line from the bottom of paragraph, the language “The result would be the same if P acquired” is corrected to read “The results would be the same if P acquired”.

27. On page 26035, column 3, § 1.355-3(d)(2) Example 42., third line of the column, the language “distributes all the C stock, C could not rely” is corrected to read “distributes all the C stock, C cannot rely”.

28. On page 26036, column 3, § 1.355-3(d)(2) Example 50., fifteenth line from the bottom of paragraph, the language “if X, instead if S, merged into D, S would” is corrected to read “if X, instead of S, merged into D, S would”.

LaNita Van Dyke,

Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).