Td 8688

Federal Register / Vol. 61, No. 240 / Thursday, December 12, 1996 / Rules and Regulations 65321
Approved: November 1, 1996.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Donald C. Lubick,
Acting Assistant Secretary of the Treasury.
[FR Doc. 96–31363 Filed 12–11–96; 8:45 am]

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.

BILLING CODE 4830–01–U

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):

26 CFR Parts 1 and 602
[TD 8688]
RIN 1545–AS14

Certain Elections Under the Omnibus
Budget Reconciliation Act of 1993
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.

Act section

Code section

AGENCY:

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

13114 ........................
13150 ........................
13206(d) ....................
13225 ........................

1044(a).
108(c)(3)(C).
163(d)(4)(B)(iii).
6655(e)(2)(C).

On December 27, 1993, the Federal
Register published temporary
regulations (TD 8509) and a crossreference 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 § 1.108(c)–1,
and the corresponding temporary
regulations are removed. The comments
and a description of the modifications to
proposed § 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 § 301.9100–3T or any
regulations that supersede § 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.

65322 Federal Register / Vol. 61, No. 240 / Thursday, December 12, 1996 / Rules and Regulations
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);
* * *
§ 1.108(c)–1T

[Removed

Par. 2. Section 1.108(c)–1T is
removed.
§ 1.163(d)–1T

[Removed]

Par. 3. Section 1.163(d)–1T is
removed.
§ 1.1044(a)–1T

[Removed]

Par. 4. Section 1.1044(a)–1T is
removed.
§ 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:
§ 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 timelyfiled (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.
§ 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.
§ 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.
§ 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.

Federal Register / Vol. 61, No. 240 / Thursday, December 12, 1996 / Rules and Regulations 65323
PART 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT

26 CFR Parts 1 and 602
[TD 8687]
RIN 1545–AT92

Par. 10. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.

Par. 11. In § 602.101, paragraph (c) is
amended as follows:
1. The following entries are removed
from the table:
§ 602.101

OMB Control numbers.

Source of Income From Sales of
Inventory and Natural Resources
Produced in One Jurisdiction and Sold
in Another Jurisdiction; Correction
Internal Revenue Service (IRS),
Treasury.
ACTION: Correction to final and
temporary regulations.
AGENCY:

This document contains
corrections to final and temporary
regulations (TD 8687), which were
published in the Federal Register on
Current
CFR part or section where
Friday, November 29, 1996 (61 FR
OMB
conidentified and described
60540) governing the source of income
trol No.
from sales of natural resources or other
inventory produced in the United States
*
*
*
*
*
1.108(c)–1T ...............................
1545–1421 and sold outside the United States or
produced outside the United States and
sold in the United States.
*
*
*
*
*
1.163(d)–1T ..............................
1545–1421 EFFECTIVE DATE: December 30, 1996.
FOR FURTHER INFORMATION CONTACT:
*
*
*
*
*
Anne Shelburne (202) 622–3880, (not a
1.1044(a)–1T ............................
1545–1421 toll-free number).
SUPPLEMENTARY INFORMATION:

*

*
*
(c) * * *

*

SUMMARY:

*

*
*
*
*
*
1.6655(e)–1T ............................
1545–1421

Background

2. The following entries are added in
numerical order to the table:

The final regulations that are the
subject of these corrections are under
section 863 of the Internal Revenue
Code.

§ 602.101

*

OMB Control numbers.

*
*
(c) * * *

*

*

Need for Correction

As published, the final regulations
contain errors which may prove to be
misleading and are in need of
Current
CFR part or section where
clarification. Correction of Publication
OMB
conidentified and described
trol No.
Accordingly, the publication of the
final regulations (TD 8687), which are
the subject of FR Doc. 96–30617, is
*
*
*
*
*
1.108(c)–1 .................................
1545–1421 corrected as follows:
1. On page 60540, column 3, in the
preamble, under the caption DATES, line
*
*
*
*
*
1.163(d)–1 .................................
1545–1421 3, the language ‘‘Applicability:
Taxpayers may apply’’ is corrected to
*
*
*
*
*
read ‘‘Applicability: These regulations
1.1044(a)–1 ...............................
1545–1421 apply to taxable years beginning after
December 30, 1996. However, taxpayers
*
*
*
*
*
may apply’’.
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

§ 1.863–1

[Corrected]

2. On page 60546, column 3, §1.863–
1 (e), is corrected to read as follows:
§ 1.863–1

*

Allocation of gross income.

*
*
*
*
(e) Effective dates. The rules of
paragraphs (a), (b) and (c) of this section
will apply to taxable years beginning
after December 30, 1996. However,
taxpayers may apply the rules of this
section for taxable years beginning after
July 11, 1995, and on or before

December 30, 1996. For years beginning
before December 30, 1996, see §1.863–
1 (as contained in 26 CFR part 1 revised
as of April 1, 1996).
*
*
*
*
*
§ 1.863–2

[Corrected]

3. On page 60547, column 1, § 1.863–
2 (c), line 2, the language ‘‘apply to
taxable years beginning’’ is corrected to
read ‘‘apply to taxable years beginning
after’’.
4. On page 60547, column 2, § 1.863–
2 (c), line 2 from the top of the column,
the language ‘‘1995, and before
December 30, 1996.’’ is corrected to read
‘‘1995, and on or before December 30,
1996.’’.
§ 1.863–3

[Corrected]

5. On page 60550, column 3, § 1.863–
3 (h), is corrected to read as follows:
§ 1.863–3 Allocation and apportionment of
income from certain sales of inventory.

*

*
*
*
*
(h) Effective dates. The rules of this
section apply to taxable years beginning
after December 30, 1996. However,
taxpayers may apply these regulations
for taxable years beginning after July 11,
1995, and on or before December 30,
1996. For years beginning before
December 30, 1996, see §§ 1.863–3A and
1.863–3AT.
*
*
*
*
*
Cynthia E. Grigsby,
Chief, Regulations Unit, Assistant Chief
Counsel (Corporate).
[FR Doc. 96–31717 Filed 12–10–96; 2:21 pm]
BILLING CODE 4830–01-U

NATIONAL LABOR RELATIONS
BOARD
29 CFR Part 102
Rules Governing Misconduct by
Attorneys or Party Representatives
AGENCY:

National Labor Relations

Board.
ACTION:

Final rule.

The National Labor Relations
Board issues a final rule modifying its
current rules governing misconduct by
attorneys and party representatives.
EFFECTIVE DATE: January 13, 1997.
FOR FURTHER INFORMATION CONTACT: John
J. Toner, Executive Secretary, National
Labor Relations Board, 1099 14th Street,
NW, Room 11600, Washington, DC
20570. Telephone: (202)273–1940.
SUPPLEMENTARY INFORMATION: In a notice
of proposed rulemaking (NPR)
published on May 20, 1996 (61 FR
25158), the Board proposed various
SUMMARY: