Internal Revenue Bulletin 2012-29 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

Bulletin No. 201
2-29
July 16, 2012
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
T.D. 9594, page 57.
Final regulations under section 1502 of the Code provide for
an election under which a consolidated group can avoid im-
mediately taking into account an intercompany item after the
liquidation of a target corporation. Pursuant to the election,
the liquidation, followed by a recontribution of assets, will be
recharacterized as a cross-chain reorganization, rather than a
liquidation or an upstream reorganization followed by a drop of
assets.
REG–134935–11, page 64.
Proposed regulations under section 904(f)(3) of the Code pro-
vide proposed rules regarding the recapture of overall foreign
losses on certain dispositions of property, as well as the coor-
dination of the rules for determining high-taxed income under
section 904(d) with section 904(b), (f) and (g).
Notice 2012–45, page 59.
This notice provides guidance under section 1297 of the Code
regarding the treatment of income from certain government
bonds held by certain active banks for purposes of determining
whether a foreign corporation is a passive foreign investment
company (PFIC).
EMPLOYEE PLANS
REG–113738–12, page 66.
Proposed regulations under section 411(d)(6) of the Code
provide guidance under the anti-cutback rules which generally
prohibit plan amendments eliminating or reducing accrued
benefits, early retirement benefits, retirement-type subsidies,
and optional forms of benefit under qualified retirement plans.
These proposed regulations would provide an additional limited
exception to the anti-cutback rules to permit a plan sponsor
that is a debtor in a bankruptcy proceeding to amend its
single-employer defined benefit plan to eliminate a single-sum
distribution option (or other optional form of benefit providing
for accelerated payments) under the plan if certain specified
conditions are satisfied. A public hearing is scheduled for
August 24, 2012.
REG–153627–08, page 60.
Proposed regulations under sections 6057 and 6081 of the
Code relate to the reporting and notice requirements for de-
ferred vested benefits. These proposed regulations would af-
fect administrators of, employers maintaining, participants in,
and beneficiaries of, plans that are subject to the reporting and
participant notice requirements.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
July 16, 20122012–29 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 368.—
Definitions
Relating to Co
rporate
Reorganizations
Final regulations under section 1502 of the Code
provide for an election under which a consolidated
group can avoid immediately taking into account an
intercompany item after the liquidation of a target
corporation. Pursuant to the election, the liquidation,
followed by a recontribution of assets, will be rechar-
acterized as a cross-chain reorganization, rather than
a liquidation or an upstream reorganization followed
by a drop of assets. See T.D. 9594, page 57.
Section 1502.—Regulations
26 CFR 1.1502–13: Intercompany transactions.
T.D. 9594
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Modification to Consolidated
Return Regulation Permitting
an Election to Treat a
Liquidation of a Target,
Followed by a Recontribution
to a New Target, as a
Cross-Chain Reorganization
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains final
regulations under section 1502 of the Inter-
nal Revenue Code (Code). These final reg-
ulations modify the election under which
a consolidated group can avoid immedi-
ately taking into account an intercompany
item after the liquidation of a target corpo-
ration. These regulations apply to corpo-
rations filing consolidated income tax re-
turns.
DATES
:Effective Date:These regulations
are ef
fective on June 20, 2012.
Appli
cability Date:The changes
refle
cted in these final regulations
(§1.1502–13(
f)(5)(ii)(B)(1)and(2)) gen-
erally apply t
o transactions in which T’s
liquidation i
nto B occurs on or after Oc-
tober 25, 200
7. For transactions in which
T’s liquidat
ion into B occurs before Octo-
ber 25, 2007,
§1.1502–13(f)(5)(ii)(B)(1)
and (2)ineff
ect prior to October 25, 2007
as containe
din26CFRpart1,revised
April 1, 200
9, continue to apply.
FOR FURTHER
INFORMATION
CONTACT: Mi
chael R. Gould, (202)
622–7550 (n
ot a toll-free number).
SUPPLEMENT
ARY INFORMATION:
Paperwork R
eduction Act
The collect
ion of information con-
tained in t
hese regulations has been re-
viewed and
approved by the Office of
Managemen
t and Budget in accordance
with the Pa
perwork Reduction Act of
1995 (44 U.
S.C. 3507(d)) under control
number 15
45–1433. The collection of
informat
ion in these final regulations
is requir
ed in order for the parent of a
consolid
ated group to make the election
found in §
1.1502–13(f)(5)(ii)(B).
An agency
may not conduct or sponsor,
and a pers
on is not required to respond
to, a col
lection of information unless the
collect
ion of information displays a valid
control
number.
Books or
records relating to a collection
of infor
mation must be retained as long
as their
contents may become material in
the admi
nistration of any internal revenue
law. Ge
nerally, tax returns and tax return
inform
ation are confidential, as required
by 26 U.
S.C. 6103.
Backgr
ound and Explanation of
Provis
ions
This do
cument contains amend-
ments t
o26CFRpart1. OnSeptem-
ber 4,
2009, the IRS and Treasury De-
partm
ent published temporary (T.D.
9458,
2009–43 I.R.B. 547) and pro-
posed
(REG–139068–08, 2009–43 I.R.B.
558) r
egulations in theFederal Reg-
iste
r(74 FR 45757 and 74 FR 45789,
resp
ectively). The regulations modify
the e
lection under which a consolidated
group can avoi
d immediately taking into
account an int
ercompany item after the
liquidation o
f a target corporation. On
March 4, 2011
, the IRS and Treasury
Department p
ublished final regulations
in theFedera
lRegister(T.D. 9515,
2011–14 I.R.
B. 599 [76 FR 11956]),
which repub
lished the 2009 temporary
regulation
s without substantive change, to
make a minor
correction to the ordering
of the regul
ations as they appeared in
theFederal
Register. The IRS and
the Treasu
ry Department received no
comments r
esponding to the proposed
and tempor
ary regulations. No public
hearing wa
s requested or held. Therefore,
this docu
ment adopts the provisions
of the pro
posed regulations with no
substant
ive change and the corresponding
temporar
y regulations are removed. See
§601.601
(d)(2).
Special A
nalyses
It has bee
n determined that this Trea-
sury dec
ision is not a significant reg-
ulatory
action as defined in Executive
Order 12
866 as supplemented by Exec-
utive Or
der 13563. Therefore, a reg-
ulatory
assessment is not required. It
also ha
s been determined that section
553(b)
of the Administrative Procedure
Act (5 U
.S.C. chapter 5) does not ap-
plytot
hese regulations. Pursuant to
the Reg
ulatory Flexibility Act (5 U.S.C.
chapt
er 6), it is hereby certified that this
rule w
ill not have a significant economic
impac
t on a substantial number of small
entit
ies. This certification is based on the
fact t
hat this regulation primarily affects
memb
ers of consolidated groups which
tend
to be large corporations. Accordingly,
areg
ulatory flexibility analysis is not
requ
ired. Pursuant to section 7805(f) of
the I
nternal Revenue Code, the notice
of p
roposed rulemaking preceding this
reg
ulation was submitted to the Chief
Cou
nsel for Advocacy of the Small
Bus
iness Administration for comment
on t
heir impact on small business. No
com
ments were received.
2012–29 I.R.B.57July 16, 2012

Drafting Information
The principal authors of these final
regulations are Mary W. Lyons, formerly
of the Office of Associate Chief Counsel
(Corporate), and Michael R. Gould of
the Office of Associate Chief Counsel
(Corporate). However, other personnel
from the IRS and Treasury Department
participated in their development.
****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by removing the entry
for §1.1502–13T to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1502–13 also issued under
26 U.S.C. 1502. * * *
Par. 2. Section 1.1502–13 is amended
by revising paragraphs (f)(5)(ii)(B)(1)and
(2) and adding new paragraph (f)(5)(ii)(F)
to read as follows:
§1.1502–13 Intercompany transactions.
*****
(f) * * *
(5) * * *
(ii) * * *
(B)Section 332—(1)In general. If sec-
tion 332 would otherwise apply to T’s (old
T’s) liquidation into B, and B transfers sub-
stantially all of old T’s assets to a new
member (new T), and if a direct transfer
of substantially all of old T’s assets to new
T would qualify as a reorganization de-
scribed in section 368(a), then, for all Fed-
eral income tax purposes, T’s liquidation
into B and B’s transfer of substantially all
of old T’s assets to new T will be disre-
garded and instead, the transaction will be
treated as if old T transferred substantially
all of its assets to new T in exchange for
new T stock and the assumption of T’s li-
abilities in a reorganization described in
section 368(a). (Under paragraph (j)(1) of
this section, B’s stock in new T would be
a successor asset to B’s stock in old T, and
S’s gain would be taken into account based
on the new T stock.)
(2)Time limitation and adjustments.
The transfer of old T’s assets to new T
qualifies under paragraph (f)(5)(ii)(B)(1)
of this section only if B has entered into a
written plan, on or before the due date of
the group’s consolidated income tax return
(including extensions) for the tax year
that includes the date of old T’s liquida-
tion, to transfer the old T assets to new T,
and the statement described in paragraph
(f)(5)(ii)(E) of this section is included
on or with a timely filed consolidated
income tax return (including extensions)
for the tax year that includes the date of
the liquidation. However, in the case of a
liquidation of old T on or after October 25,
2007, by a taxpayer whose original tax
return for the year of liquidation was
filed on or before November 3, 2009, see
§1.1502–13T(f)(5)(ii)(F)(3) as contained
in 26 CFR part 1, revised April 1, 2012. In
either case, the transfer of substantially all
of T’s assets to new T must be completed
within 12 months of the filing of the
return. Appropriate adjustments are made
to reflect any events occurring before
the formation of new T and to reflect
any assets not transferred to new T, or
liabilities not assumed by new T. For
example, if B retains an asset of old T,
the asset is treated under paragraph (f)(3)
of this section as acquired by new T but
distributed to B immediately after the
reorganization.
*****
(F)Effective/applicability date—(1)
General rule. Paragraphs (f)(5)(ii)(B)(1)
and (2) of this section apply to transactions
in which old T’s liquidation into B occurs
on or after October 25, 2007.
(2)Prior periods. For transactions in
which old T’s liquidation into B occurs
before October 25, 2007, see paragraphs
(f)(5)(ii)(B)(1)and(2)ofthissectioninef-
fect prior to October 25, 2007, as contained
in 26 CFR part 1, revised April 1, 2009.
*****
§1.1502–13T [Removed].
Par. 3. Section §1.1502–13T is re-
moved.
Part 602—OMB CONTROL NUMBERS
UNDER THE PAPERWORK
REDUCTION ACT
Par. 4. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 5. In §602.101, paragraph (b) is
amended by adding the following entry in
numerical order to the table to read as fol-
lows:
§602.101 OMB Control numbers
*****
(b) * * *
CFR part or section where
Identified and described
Current OMB
control No.
*****
1.1502–13
...........................................................
1545–1433
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved June 11, 2012.
Emily S. McMahon,
(Acting) Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on June 19, 2012,
8:45 a.m., and published in the issue of the Federal Register
for J
une 20, 2012, 77 F.R. 36914)
July 16, 2012582012–29 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Treatment of Income From
Certain Government Bonds
for Purposes of the Passive
Foreign Investment Company
Rules
Notice 2012–45
SECTION 1. PURPOSE
This notice provides guidance regard-
ing the treatment of certain government
bonds for purposes of determining whether
a foreign corporation is a passive foreign
investment company (PFIC).
SECTION 2. BACKGROUND
Section 1297(a) provides that a PFIC
is any foreign corporation if 75 percent or
more of its gross income for the taxable
year is passive income or the average per-
centage of assets held by the corporation
during the taxable year which produce pas-
sive income or which are held for the pro-
duction of passive income is at least 50
percent. Section 1297(b)(1) provides that
passive income means any income which
is of a kind which would be foreign per-
sonal holding company income as defined
in section 954(c), subject to the excep-
tions of section 1297(b)(2). Under section
1297(b)(2)(A), the term “passive income”
does not include any income derived in the
active conduct of a banking business by
an institution licensed to do business as a
bank in the United States or, to the extent
provided in regulations, by any other cor-
poration (active banking exception).
In Notice 89–81, 1989–2 C.B. 399,
the Internal Revenue Service (IRS) and
the Department of the Treasury (Treasury
Department) described rules that would
expand the active banking exception to
certain foreign corporations not licensed
to do business as a bank in the United
States, and identified the types of banking
activities that produce income excluded
from passive income under the active
banking exception. In 1995, the IRS and
the Treasury Department issued proposed
regulations on the active banking excep-
tion. Prop. Reg. § 1.1296–4.
SECTION 3. QUALIFYING FOREIGN
GOVERNMENT BONDS HELD BY
ACTIVE BANKS
Recent economic conditions have re-
sulted in a shift in the assets held by some
non-U.S. financial institutions. As a re-
sult of these conditions, certain financial
institutions are holding government bonds
at higher than historical levels. These in-
creased levels have raised an issue con-
cerning the treatment of these financial in-
stitutions, and specifically the treatment of
government bonds, under the PFIC rules.
This notice announces that, solely for
purposes of section 1297 and the taxable
years provided in Section 4 of this notice,
the income from Qualifying Government
Bonds held by an Active Bank qualifies for
the active banking exception.
For purposes of this notice, the follow-
ing terms have the meanings set forth be-
low:
Active Bank. For any taxable year set
forth in Section 4 of this notice, an Active
Bank is a foreign corporation that:
(i) would not be a PFIC for such taxable
year as a result of the application of the ac-
tive banking exception if the treatment of
Qualifying Government Bonds described
inthisSection3applied(andtakinginto
account, if applicable, section 1297(c));
(ii) was not in any prior taxable year
beginning in the preceding five calendar
years a PFIC, in each case as a result of
the application of the active banking ex-
ception (taking into account, if applicable,
the treatment of Qualifying Government
Bonds described in this Section 3 for tax-
able years set forth in Section 4 of this no-
tice and section 1297(c)); and
(iii) is, and was in each taxable year
beginning in the preceding five calendar
years, a publicly traded corporation. For
purposes of this notice, a corporation will
be treated as a publicly traded corpora-
tion if (1) one or more classes of stock is
regularly traded on a qualified exchange
or other market (within the meaning of
§ 1.1296–2), or (2) at least 50 percent of
the aggregate vote and value of the shares
in the corporation is owned directly or in-
directly by another corporation described
in clause (1) of this subparagraph.
Qualifying Government Bond. Quali-
fying Government Bond means a bond or
similar instrument that has been issued by
the government of the country (or any po-
litical subdivision, agency, instrumental-
ity, or local authority thereof) under the
laws of which the Active Bank is created
or organized.
SECTION 4. EFFECTIVE/
APPLICABILITY DATE
This notice shall apply to taxable years
of foreign corporations beginning in 2011,
2012, and 2013.
SECTION 5. DRAFTING
INFORMATION
The principal author of this notice
is Kristine Crabtree of the Office of
Associate Chief Counsel (International).
However, other personnel from the
IRS and the Treasury Department
participated in its development. For
further information regarding this notice,
contact Ms. Crabtree at (202) 622–3840
(not a toll-free call).
2012–29 I.R.B.59July 16, 2012

Part IV. Items o
fGeneralInterest
Notice of Proposed
Rulemaking
Reporting and Notice
Requirements for Deferred
Vested Benefits Under Section
6057
REG–153627–08
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations that would provide
guidance relating to automatic extensions
of time for filing certain employee plan
returns by adding the Form 8955–SSA,
“Annual Registration Statement Identify-
ing Separated Participants With Deferred
Vested Benefits,”to the list of forms that are
covered by the Income Tax Regulations on
automatic extensions. The proposed reg-
ulations would also provide guidance on
applicable reporting and participant notice
rules that require certain plan adminis-
trators to file registration statements and
provide notices that set forth information
for deferred vested participants. These
regulations would affect administrators
of, employers maintaining, participants in,
and beneficiaries of plans that are subject
to the reporting and participant notice re-
quirements.
DATES: Comments and requests for
a public hearing must be received by
September 19, 2012.
ADDRESSES: Send submissions to
CC:PA:LPD:PR(REG–153627–08),
room 5205, Internal Revenue Service,
PO Box 7604, Ben Franklin Station,
Washington D.C. 20044.Submis-
sions may be hand-delivered Monday
through Friday between the hours of
8 a.m. and 4 p.m. to CC:PA:LPD:PR
(REG–153627–08), Courier’s Desk,
Internal Revenue Service, 1111
Constitution Avenue, N.W., Washington,
DC, 20224, or sent electronically
viatheFederaleRulemaking
Portal atwww.regulations.gov(IRS
REG–153627–08).
FOR FURTHER INFORMATION
CONTACT: Concerning the pro-
posed regulations, William Gibbs,
Sarah Bolen, or Pamela Kinard at (202)
622–6060; concerning the submission of
comments or to request a public hearing,
Oluwafunmilayo Taylor, (202) 622–7180
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained
in this notice of proposed rulemaking has
been approved by the Office of Manage-
ment and Budget for review in accordance
with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)) under 1545–2187 and
1545–0212. Comments on the collection
of information should be sent to theOf-
fice of Management and Budget,Attn:
Desk Officer for the Department of the
Treasury, Office of Information and Reg-
ulatory Affairs, Washington D.C. 20503,
with copies to theInternal Revenue
Service, Attn: IRS Reports Clearance
Officer, SE:CAR:MP:T:M:S; Washington
DC 20224. Comments on the collec-
tion of information should be received
by August 20, 2012. Comments are
specifically requested concerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the Internal
Revenue Service, including whether the
information will have practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be en-
hanced;
How the burden of complying with the
proposed collection of information may be
minimized, including through the appli-
cation of automated collection techniques
or other forms of information technology;
and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of service to provide information.
The collection of information in these
proposed regulations is in §§301.6057–1
and 1.6081–11. This information is re-
quired in order to comply with the re-
porting and notice requirements of section
6057 and to provide automatic extensions
of time for filing certain employee plan re-
turns under section 6081. Information re-
lating to these proposed regulations will
be collected through Form 8955–SSA and
Form 5558. This information relates to
plan participants who separate from ser-
vice covered under the plan and who are
entitled to deferred vested retirement ben-
efits under the plan. Any burden relating
to these proposed regulations will be in-
cluded and reported in the next revisions
of Form 8955–SSA and Form 5558, after
these proposed regulations are accepted as
final.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information, unless it
displays a valid control number assigned
by the Office of Management and Budget.
Books or records relating to a 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
Section 6057(a) of the Internal Revenue
Code (Code) requires the administrator
of a plan that is subject to the vesting
standards of section 203 of the Employee
Retirement Income Security Act of 1974
(ERISA) to file, within the time prescribed
by regulations, a registration statement
with the Secretary of the Treasury. The
registration statement sets forth certain
information relating to the plan, plan
participants who separate from service
covered by the plan and are entitled to
deferred vested retirement benefits, and
the nature, amount, and form of deferred
vested retirement benefits to which the
plan participants are entitled.
Section 6057(b) provides that any plan
administrator required to register under
section 6057(a) shall, within the time
prescribed by regulations, also notify the
Secretary of any change in the name of the
plan or the name and address of the plan
administrator, the termination of the plan,
or the merger or consolidation of the plan
July 16, 2012602012–29 I.R.B.

with any other plan or its division into two
or more plans.
Section 6057(c) provides that, to the ex-
tent provided in regulations prescribed by
the Secretary, the administrator of a plan
not subject to the reporting requirements of
section 6057(a) (including a governmental
plan within the meaning of section 414(d)
orachurchplanwithinthemeaningofsec-
tion 414(e)) may at its option file such in-
formation as the plan administrator may
wish to file with respect to the deferred re-
tirement vested benefit rights of any plan
participant separated from service covered
by the plan.
Section 6057(d) requires the Secretary
to transmit copies of any statements, noti-
fications, reports, or other information ob-
tained by the Secretary under section 6057
to the Commissioner of Social Security.
Section 6057(e) of the Code and section
105(c) of ERISA require each plan admin-
istrator that is subject to the reporting re-
quirements of section 6057 to furnish to
each deferred vested participant an indi-
vidual statement setting forth the informa-
tion required by section 6057(a)(2). The
individual statement required by section
6057(e) must also notify each participant
of any benefits that are forfeitable if the
participant dies before a certain date. The
individual statement must be furnished no
later than the date for filing the registration
statement required under section 6057(a).
Section 6057(f)(1) provides that the
Secretary, after consultation with the Com-
missioner of Social Security, may issue
such regulations as may be necessary to
carry out the provisions of this section.
Since the enactment of ERISA, the
Schedule SSA, a schedule to the Form
5500,“Annual Return/Report of Em-
ployee Benefit Plan,”has been the form
used by plan administrators to comply
with the reporting requirements of section
6057. On July 21, 2006, the Department
of Labor (DOL) published a final rule
in theFederal Register(71 FR 41359)
requiring electronic filing of the Form
5500 series for plan years beginning after
January 1, 2008. On November 16, 2007,
the DOL published a final rule in theFed-
eral Register(72 FR 64710) postponing
the effective date of the electronic filing
mandate to apply to plan years beginning
on or after January 1, 2009. See 29 CFR
§2520.104a–2.
In order to implement the DOL’s man-
date for electronic filing of the Form 5500,
the IRS-only schedules to the Form 5500,
including the Schedule SSA, were elim-
inated from the Form 5500. One result
of the elimination of the Schedule SSA
is that Form 5500 filings that include
Schedule SSA information regarding par-
ticipants are now subject to rejection (even
for late or amended filings for plan years
before 2009). The Schedule SSA was
replaced by Form 8955–SSA,“Annual
Registration Statement Identifying Sepa-
rated Participants With Deferred Vested
Benefits,”an IRS-only stand-alone form.
Announcement 2011–21, 2011–12 I.R.B.
567, see §601.601(d)(2), designates Form
8955–SSA as the form to be used to sat-
isfy the reporting requirements of section
6057 for plan years beginning on or after
January 1, 2009. Announcement 2011–21
also established an annual due date for the
filing of the Form 8955–SSA. In general,
if a Form 8955–SSA must be filed for a
plan year, it must be filed by the last day
of the 7th month following the last day of
that plan year (plus extensions).
Section 6081(a) provides that the Sec-
retary may grant a reasonable extension of
time for filing any required return, declara-
tion, statement, or other document. Except
for certain taxpayers, the extension of time
shall not exceed 6 months.
Section 1.6081–1(a) of the Income Tax
Regulations provides that the Commis-
sioner is authorized to grant a reasonable
extension of time for filing any return, dec-
laration, statement, or other document that
relates to any tax imposed under subtitle
A of the Code. Under §1.6081–1(b), the
application must be in writing, be signed
by the taxpayer or his representative, and
set forth the reason for requesting an ex-
tension.
Section 1.6081–11 of the regulations
provides that a plan administrator or spon-
sor of an employee benefit plan required
to file a Form 5500 will be allowed an au-
tomatic extension of the time to file the
Form 5500. To receive an automatic ex-
tension of time to file, the plan administra-
tor or sponsor must complete a Form 5558,
“Application for Extension of Time to File
Certain Employee Plan Returns,”and file
the application with the Internal Revenue
Service on or before the date that the Form
5500 series return must be filed.
Form 5558 is used to request an auto-
matic extension of time to file a Form 5500
return or Form 8955–SSA. In accordance
with §1.6081–11 and Form 5558 (includ-
ing instructions), an application for an ex-
tension of time to file a Form 5500 series
return need not be signed. However, in ac-
cordance with §1.6081–1, Form 5558 pro-
vides that an application for an extension
of time to file Form 8955–SSA must be
signed.
Explanation of Provisions
After the current version of the Form
5558 was issued, several comments were
received that questioned the need for a sig-
nature to extend the time for filing Form
8955–SSA, particularly since a signature
is not required to extend the time to file
a Form 5500 series return. The commen-
tators noted that, like its predecessor, the
Schedule SSA, the Form 8955–SSA is
generally prepared in conjunction with the
preparation of a plan’s Form 5500. They
also stated that a signature requirement
for the Form 8955–SSA is likely to cause
confusion and missed deadlines because
of the different rule for the Form 5500.
Finally, the commentators contended that
the signature requirement is burdensome
for both filers and the IRS because the
requirement complicates the extension
request process.
The proposed regulations would amend
§1.6081–11, relating to automatic ex-
tensions of time for filing certain em-
ployee plan returns, by adding the Form
8955–SSA to the list of forms that are cov-
ered by the automatic 2
1
/2month extension
that applies by filing Form 5558. This
will permit a plan administrator to receive
an automatic extension of 2
1
/2months
by submitting, on or before the general
due date of the Form 8955–SSA, a Form
5558 indicating that an extension is being
requested for filing the Form 8955–SSA.
Thus, under the proposed regulations, the
same rules that apply to request an exten-
sion of time to file the Form 5500 series
wouldalsoapplytorequestanextension
of time to file Form 8955–SSA. In ad-
dition, the proposed regulations would
amend §1.6081–11 to provide that a sig-
nature would not be required to request
an extension of time to file Form 5500
and Form 8955–SSA. It is anticipated that
the Form 5558 and instructions will be
2012–29 I.R.B.61July 16, 2012

revised to reflect this change for the Form
8955–SSA.
In addition, pursuant to section 6011(a),
these proposed regulations would formally
designate the Form 8955–SSA as the form
used to satisfy the reporting requirements
of section 6057. These proposed regu-
lations would retain the general reporting
requirements that applied to the Schedule
SSA with certain minor modifications.
As discussed in the background sec-
tion of this preamble, section 6057(a) re-
quires the plan administrator (within the
meaning of section 414(g)) of a plan that
is subject to the vesting standards of sec-
tion 203 of ERISA to file, within the time
prescribed by regulations, a registration
statement that sets forth certain informa-
tion on deferred vested participants. Un-
der existing §301.6057–1(c)(1) of the Pro-
cedure and Administration regulations, the
plan administrator of an employee bene-
fit plan described in §301.6057–1(a)(3), or
any other employee retirement benefit plan
(including a governmental or church plan),
may at its option file on the Schedule SSA
information relating to the deferred vested
retirement benefit of any plan participant
who separates at any time from service
covered under the plan. These proposed
regulations would retain the ability of such
plans to report deferred vested informa-
tion on a voluntary basis but require that
the information be submitted to the IRS
on Form 8955–SSA. The proposed reg-
ulations would also delegate authority to
the Commissioner of the Internal Revenue
Service to provide special rules under sec-
tion 6057 (including designating the form
used to comply with section 6057) in rev-
enue rulings, notices, or other guidance
published in the Internal Revenue Bulletin
(see §601.601(d)(2)(ii)(b) of this chapter).
Finally, the proposed regulations would
delete certain obsolete transition rules and
update cross-references in §§1.6057–1 and
1.6057–2.
Proposed Effective Date
These regulations are generally pro-
posedtobeeffectiveonorafterJune21,
2012. Taxpayers may rely on these pro-
posed regulations for guidance pending
the issuance of final regulations. If, and to
the extent, the final regulations are more
restrictive than the guidance in these pro-
posed regulations, those provisions of the
final regulations will be applied without
retroactive effect.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It has been de-
termined that 5 U.S.C. 533(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these regulations.
It is hereby certified that the collection of
information in these proposed regulations
will not have a significant economic im-
pact on a substantial number of small en-
tities. This certification is based on the
fact that most small entities that maintain
employee retirement income benefit plans
use third party administrators to perform
their recordkeeping function. Therefore,
an analysis under the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) is not re-
quired. Pursuant to section 7805(f) of the
Internal Revenue Code, these regulations
have been submitted to the Office of Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comments on its
impact on small business.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are sub-
mitted timely to the IRS as prescribed in
this preamble under the “Addresses” head-
ing. The IRS and Treasury Department
request comments on all aspects of the
proposed rules. All comments are avail-
able atwww.regulations.govor upon re-
quest. A public hearing will be sched-
uled if requested in writing by any person
who timely submits written comments. If
a public hearing is scheduled, notice of the
date, time, and place of the public hearing
will be published in theFederal Register.
Drafting Information
The principal authors of these
regulations are Sarah R. Bolen and
Pamela R. Kinard, Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and the Treasury Department participated
in the development ofthese regulations.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 301
are proposed to be amended as follows:
Part 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6081–11 is amended
by:
1. Revising paragraph (a).
2. Adding paragraph (b)(3).
3. Revising the paragraph heading of
paragraph (d) and adding paragraph (d)(2).
4. Revising the paragraph heading of
paragraph (e) and adding paragraph (e)(2).
The revisions and additions read as fol-
lows:
§1.6081–11 Automatic extension of time
for filing certain employee plan returns.
(a)In general. An administrator or
sponsor of an employee benefit plan re-
quired to file a return under the provisions
of subpart E of part III of chapter 61
or the regulations under that chapter on
Form 5500 (series),“Annual Return/Re-
port of Employee Benefit Plan”or Form
8955–SSA,“Annual Registration State-
ment Identifying Separated Participants
with Deferred Vested Benefits,”will be
allowed an automatic extension of time
to file the return until the 15
th
day of the
third month following the date prescribed
for filing the return if the administrator
or sponsor files an application under this
section in accordance with paragraph (b)
of this section.
(b) * * *
(3) A signature is not required for an
automatic extension of time to file Form
5500 (series) and Form 8955–SSA.
*****
(d)Penalties—(1)Form 5500.***
(2)Form 8955–SSA. See section 6652
for penalties for failure to file a timely and
complete Form 8955–SSA.
(e)Effective/applicability dates—(1)
Form 5500. ***
July 16, 2012622012–29 I.R.B.

(2)Form 8955–SSA. This section is ap-
plicable for applications for an automatic
extension of time to file Form 8955–SSA
filed after June 21, 2012.
Part 301—PROCEDURE AND
ADMINISTRATION
Par. 3. The authority for part 301 con-
tinues to read in part as follows:
Authority: 26 U.S.C. 7508* * *
Par. 4. Section 301.6057–1 is amended
by:
1. Revising paragraphs (a)(4) and
(a)(5)(ii).
2. Removing paragraph (b)(2)(iii)
and redesignating paragraph (b)(2)(iv) as
(b)(2)(iii).
3. Revising newly designated para-
graph (b)(2)(iii).
4. Revising paragraphs (b)(3)(ii),
(b)(3)(iii), (c), (d), (f), and (g).
The revisions read as follows:
§301.6057–1 Employee retirement benefit
plans; identification of participant with
deferred vested retirement benefit.
(a) * * *
(4)Filing requirements—(i)In gen-
eral. Informationrelatingtothedeferred
vested retirement benefit of a plan partic-
ipant must be filed on Form 8955–SSA,
“Annual Registration Statement Identify-
ing Separated Participants With Deferred
Vested Benefits.” Form 8955–SSA shall be
filed on behalf of an employee retirement
benefit plan for each plan year for which
information relating to the deferred vested
retirement benefit of a plan participant
is filed under paragraph (a)(5) or (b)(2)
of this section. There shall be reported
on Form 8955–SSA the name and Social
Security number of the participant, a de-
scription of the nature, form and amount
of the deferred vested retirement benefit to
which the participant is entitled, and such
other information as is required by section
6057(a) or Form 8955–SSA and the ac-
companying instructions. The form of the
benefit reported on Form 8955–SSA shall
be the normal form of benefit under the
plan, or, if the plan administrator (within
the meaning of section 414(g)) considers
it more appropriate, any other form of
benefit.
(ii)General due date for filing.The
forms prescribed by section 6057(a), in-
cluding Form 8955–SSA, shall be filed in
the manner and at the time as required by
the forms and related instructions applica-
ble to the annual period.
(iii)Delegation of authority to Com-
missioner. The Commissioner may pro-
vide special rulesunder section 6057
(including designating the form used to
comply with section 6057) in revenue
rulings, notices, or other guidance pub-
lished in the Internal Revenue Bulletin
(see §601.601(d)(2)(ii)(b) of this chap-
ter) that the Commissioner determines to
be necessary or appropriate with respect
to the filing requirements under section
6057.
(5) * * *
(ii)Exception. Nothwithstanding para-
graph (a)(5)(i) of this section, no informa-
tion relating to the deferred vested retire-
ment benefit of a separated participant is
required to be filed on Form 8955–SSA if,
before the date such Form 8955–SSA is re-
quired to be filed (including any extension
of time for filing granted pursuant to sec-
tion 6081), the participant—
(A) Is paid some or all of the deferred
vested retirement benefit under the plan;
(B) Returns to service covered under
the plan; or
(C) Forfeits all of the deferred vested
retirement benefit under the plan.
(b) * * *
(2) * * *
(iii)Exception. Notwithstanding para-
graph (b)(2)(i) of this section, no infor-
mation relating to a participant’s deferred
vested retirement benefit is required to be
filed on Form 8955–SSA if, before the date
such Form 8955–SSA is required to be
filed (including any extension of time for
filing granted pursuant to section 6081),
the participant—
(A) Is paid some or all of the deferred
vested retirement benefit under the plan;
(B) Accrues additional retirement ben-
efits under the plan; or
(C) Forfeits all of the deferred vested
retirement benefit under the plan.
(3) * * *
(ii)Inability to determine correct
amount of participant’s deferred vested
retirement benefit. The plan administrator
must indicate on Form 8955–SSA that the
amount of a participant’s deferred vested
retirement benefit showed therein may be
other than that to which the participant is
actually entitled if such amount is com-
puted on the basis of plan records that
the plan administrator maintains and such
records—
(A) Are incomplete with respect to the
participant’s service covered by the plan
(as described in paragraph (b)(3)(i) of this
section); or
(B) Fail to account for the participant’s
servicenotcoveredbytheplanwhichis
relevant to a determination of the partic-
ipant’s deferred vested retirement benefit
under the plan (as described in paragraph
(b)(3)(i) of this section).
(iii)Inability to determine whether par-
ticipant vested in deferred retirement ben-
efit. Where, as described in paragraph
(b)(3)(i) of this section, information to be
reported on Form 8955–SSA is to be based
upon records which are incomplete with
respect to a participant’s service covered
by the plan or which fail to take into ac-
count relevant service not covered by the
plan, the plan administrator may be unable
to determine whether or not the participant
is vested in any deferred retirement bene-
fit. If, in view of information provided ei-
ther by the incomplete records or the plan
participant, there is a significant likelihood
that the plan participant is vested in a de-
ferred retirement benefit under the plan, in-
formation relating to the participant must
be filed on Form 8955–SSA with the nota-
tion that the participant may be entitled to a
deferred vested benefit under the plan, but
information relating to the amount of the
benefit may be omitted. This paragraph
(b)(3)(iii) does not apply in a case in which
it can be determined from plan records
maintained by the plan administrator that
the participant is vested in a deferred re-
tirement benefit. Paragraph (b)(3)(ii) of
this section, however, may apply in such
a case.
(c)Voluntary filing—(1)In general.
The plan administrator of an employee
retirement benefit plan described in para-
graph (a)(3) of this section, or any other
employee retirement benefit plan (in-
cluding a governmental plan within the
meaning of section 414(d) or a church plan
within the meaning of section 414(e)),
may, at its option, file on Form 8955–SSA
information relating to the deferred vested
retirement benefit of any plan participant
who separates at any time from service
covered by the plan.
(2)
Deleting previously filed informa-
tion. If, after information relating to the
deferred vested retirement benefit of a plan
2012–29 I.R.B.63July 16, 2012

participant is filed on Form 8955–SSA
(or a predecessor to Form 8955–SSA),
the plan participant is paid some or all of
the deferred vested retirement benefit un-
der the plan or forfeits all of the deferred
vested retirement benefit under the plan,
the plan administrator may, at its option,
file on Form 8955–SSA (or such other
form as may be provided for this purpose)
the name and Social Security number of
the plan participant with the notation that
information previously filed relating to the
participant’s deferred vested retirement
benefit should be deleted.
(d)Filing incident to cessation of pay-
ment of benefits—(1)In general.Noin-
formation relating to the deferred vested
retirement benefit of a plan participant is
required to be filed on Form 8955–SSA
if before the date such Form 8955–SSA
is required to be filed, some of the de-
ferred vested retirement benefit is paid to
the participant, and information relating
to a participant’s deferred vested retire-
ment benefit which was previously filed on
Form 8955–SSA (or a predecessor to Form
8955–SSA) may be deleted if the partic-
ipant is paid some of the deferred vested
retirement benefit. If payment of the de-
ferred vested retirement benefit ceases be-
fore all of the benefit to which the partic-
ipant is entitled is paid to the participant,
information relating to the deferred vested
retirement benefit to which the participant
remains entitled shall be filed on the Form
8955–SSA filed for the plan year follow-
ing the last plan year within which a por-
tion of the benefit is paid to the participant.
(2)Exception. Notwithstanding para-
graph (d)(1) of this section, no informa-
tion relating to the deferred vested retire-
ment benefit to which the participant re-
mains entitled is required to be filed on
Form 8955–SSA if, before the date such
Form 8955–SSA is required to be filed (in-
cluding any extension of time for filing
granted pursuant to section 6081), the par-
ticipant—
(i) Returns to service covered by the
plan;
(ii) Accrues additional retirement bene-
fits under the plan; or
(iii) Forfeits the benefit under the plan.
*****
(f)Penalties. For amounts imposed in
the case of failure to file the report of de-
ferred vested retirement benefits required
by section 6057(a) and paragraph (a) or (b)
of this section, see section 6652(d)(1).
(g)Effective/applicability date—(1)In
general. Except as otherwise provided in
this paragraph (g), this section is applica-
ble for filings on or after June 21, 2012.
(2)Special effective date rules for pe-
riods before the general effective date.
Section 301.6057–1 of this chapter, as
it appeared in the April 1, 2008 edition
of 26 CFR part 301, applies for periods
before the general effective date.
§301.6057–1 [Amended]
Par. 5. Section 301.6057–1 is amended
by removing the language “schedule SSA”
and adding “Form 8955–SSA” in its place.
Par. 6. Section 301.6057–2 is amended
by revising paragraph (c) as follows:
§301.6057–2 Employee retirement benefit
plans; notification of change in plan sta-
tus.
*****
(c)Penalty. For amounts imposed in
the case of failure to file a notification of
achangeinplanstatusrequiredbysec-
tion 6057(b) and this section, see section
6652(d)(2).
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on June 20, 2012,
8:45 a.m., and published in the issue of the Federal Register
for June 21, 2012, 77 F.R. 37352)
Notice of Proposed
Rulemaking
Overall Foreign Loss
Recapture on Property
Dispositions
REG–134935–11
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: These proposed regulations
provide guidance regarding the coordina-
tion of the rules for determining high-taxed
income with capital gains adjustments and
the allocation and recapture of overall for-
eign losses and overall domestic losses, as
well as the coordination of the recapture
of overall foreign losses on certain disposi-
tions of property and other rules concern-
ing overall foreign losses and overall do-
mestic losses. These regulations affect in-
dividuals and corporations claiming for-
eign tax credits.
DATES: Written or electronic comments
and requests for a public hearing must be
received by August 24, 2012.
ADDRESSES: Send submissions to
CC:PA:LPD:PR (REG–134935–11), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–134935–11),
Courier’s desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC 20044, or sent elec-
tronically, via the Federal eRulemak-
ing Portal atwww.regulations.gov(IRS
REG–134935–11).
FOR FURTHER INFORMATION
CONTACT: Concerning the regula-
tions, Jeffrey L. Parry, (202) 622–3850;
concerning submissions of comments,
Oluwafunmilayo (Funmi) Taylor, (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
1. High-taxed income
Section 904(d)(2)(F) of the Internal
Revenue Code (Code) provides that cer-
tain high-taxed income that would oth-
erwise be passive income will be treated
as general category income if the foreign
taxes paid or accrued, and deemed paid
or accrued, with respect to such income
exceeds the highest rate of tax specified
in section 1 or section 11, whichever ap-
plies, multiplied by the amount of such
income. Section 1.904–4(c) provides
detailed rules for determining whether
income is high-taxed, including rules for
testing income based on subgroups within
passive income and allocating expenses,
losses and other deductions to that income.
July 16, 2012642012–29 I.R.B.

Questions have arisen regarding the co-
ordination of these rules with the capi-
tal gains adjustments under section 904(b)
and loss allocationsand loss account re-
capture under section 904(f) and (g). The
proposed regulations at §1.904–4(c) clar-
ify that the determination as to whether
income is high-taxed is made before tak-
ing into account any adjustments under
section 904(b) or any allocation of losses
or recapture of loss accounts under sec-
tion 904(f) and (g). The Treasury Depart-
ment and the IRS believe these ordering
rules are consistent with the use in sec-
tion 904(d)(2)(F) of the highest statutory
U.S. tax rate, rather than the taxpayer’s
pre-credit effective U.S. tax rate, to deter-
mine whether income is high-taxed.
2. Dispositions of Property under Section
904(f)(3)
Section 904(f)(3) provides that if a tax-
payer disposes of certain property used
or held for use predominantly without the
United States in a trade or business, gain is
recognized on that disposition and treated
as foreign source income, regardless of
whether the gain would otherwise be rec-
ognized, to the extent of any overall for-
eign loss account in the separate category
of foreign source taxable income gener-
ated by the property. Section 1.904(f)–2(d)
provides separate rules for dispositions in
which gain is recognized irrespective of
section 904(f)(3) and dispositions in which
thegainwouldnototherwiseberecog-
nized.
Questions have arisen regarding the co-
ordination of overall foreign loss recapture
under section 904(f)(3) with other provi-
sions of section 904(f) and (g). Accord-
ingly, these proposed regulations revise the
ordering rules under §1.904(g)–3 that gen-
erally provide for the coordination of sec-
tion 904(f) and (g) to include specific ref-
erences for taking into account overall for-
eign loss recapture under section 904(f)(3).
In the case of dispositions in which
gain is recognized irrespective of section
904(f)(3), the overall foreign loss recap-
ture is included in Step Five along with
other general overall foreign loss recap-
ture.
Dispositions in which the gain would
not otherwise be recognized are addressed
separately. Section 1.904(f)–2(d)(4)(i)
provides, in part, that where gain would
not otherwise be recognized on a dispo-
sition, the amount of gain that will be
recognized under section 904(f)(3) is equal
to the balance in the applicable foreign
loss account after taking into account any
amounts recaptured from the account from
other recognized income for the year (as
well as certain other adjustments). In other
words, the additional amount of income
to be recognized can only be determined
after the first seven steps of the ordering
rules in §1.904(g)–3 have been completed.
Accordingly, a new Step Eight is added
to those ordering rules to address the
recognition of the additional income under
section 904(f)(3) and the corresponding
recapture of the applicable overall for-
eign loss account. New Step Eight also
provides that if the additional recognition
of gain increases the allowable amount
of the net operating loss deduction, then
the recapture of the overall foreign loss
account occurs first before the additional
net operating loss carryover is taken into
account to offset all or a portion of that
gain. The Treasury Department and the
IRS believe priority should be given to the
additional recapture ofthe overall foreign
loss account pursuant to section 904(f)(3)
before any net operating loss carryover
reduces that gain. This is because the
primary reason for recognizing the other-
wise unrecognized gain is to recapture the
overall foreign loss account.
Proposed Effective Date
The regulations, as proposed, will apply
to any taxable year ending on or after the
date of publication of a Treasury decision
adopting these rules as final regulations in
theFederal Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking 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) does not apply to these reg-
ulations, and because the regulations do
not impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
these regulations have been submitted
to the Chief Counsel for Advocacy of
the Small Business Administration for
comment on its impact on small business.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any electronic or writ-
ten comments (a signed original and eight
(8) copies) that are submitted timely to
the IRS. The Treasury Department and the
IRS request comments on all aspects of
the proposed rules. All comments will be
available for public inspection and copy-
ing. A public hearing will be scheduled
ifrequestedinwritingbyanypersonthat
timely submits comments. If a public hear-
ing is scheduled, notice of the date, time,
and place for the public hearing will be
published in theFederal Register.
Drafting Information
The principal author of these regula-
tions is Jeffrey L. Parry of the Office of
Chief Counsel (International). However,
other personnel from the IRS and the
Treasury Department participated in their
development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.904–4 is amended by
adding paragraph (c)(2)(iii) and by adding
a sentence at the end of paragraph (n) to
read as follows:
§1.904–4 Separate application of section
904 with respect to certain categories of
income.
*****
(c) * * *
(2) * * *
(iii)Coordination with section 904(b),
(f) and (g). The determination of
whether foreign-source passive income
is high-taxed is made before taking into
2012–29 I.R.B.65July 16, 2012

account any adjustments under section
904(b) or any allocation or recapture of
a separate limitation loss, overall foreign
loss or overall domestic loss under section
904(f) and (g).
*****
(n) * * * Paragraph (c)(2)(iii) of this
section applies to taxable years ending on
or after the date of publication of a Trea-
sury decision adopting these rules as final
regulations in theFederal Register.
Par. 3. Section 1.904(g)–3 is amended
by revising paragraph (f), adding para-
graph (i) and adding a sentence at the end
of paragraph (k) to read as follows:
§1.904(g)–3 Ordering rules for the
allocation of net operating losses, net
capital losses, U.S. source losses, and
separate limitation losses, and for the
recapture of separate limitation losses,
overall foreign losses, and overall
domestic losses.
*****
(f)Step Five: Recapture of overall for-
eign loss accounts. If the taxpayer’s sepa-
rate limitation income for the taxable year
(reduced by any losses carried over under
paragraph (b) of this section) exceeds the
sum of the taxpayer’s U.S. source loss and
separate limitation losses for the year, so
that the taxpayer has separate limitation
income remaining after the application of
paragraphs (d)(1) and (e) of this section,
then the taxpayer shall recapture prior year
overall foreign losses, if any, in accor-
dance with §1.904(f)–2, and reduce overall
foreign loss accounts in accordance with
§1.904(f)–2. Such recapture shall include
amounts determined under §1.904(f)–2(c)
and (d)(3) but not §1.904(f)–2(d)(4).
*****
(i)Step Eight: Dispositions under sec-
tion 904(f)(3) in which gain would not
otherwise be recognized. The taxpayer
shall determine the amount of gain that
would otherwise not be recognized but that
must be recognized in accordance with
§1.904(f)–2(d)(4) (not exceeding the tax-
payer’s applicable overall foreign loss ac-
count) and then apply §1.904(f)–2(a) and
(b) to recapture overall foreign loss ac-
counts in an amount equal to the gain rec-
ognized. To the extent this recognition of
gain in a taxable year increases the amount
of a net operating loss carryover to that tax-
able year, paragraphs (b) through (e) of this
section shall be applied to determine the
allocation of the additional net operating
loss, but only after the applicable overall
foreign loss account has been recaptured as
provided in this paragraph (i).
*****
(k)***Paragraphs(f)and(i)ofthis
section apply to taxable years ending on or
after the date of publication of a Treasury
decision adopting these rules as final reg-
ulations in theFederal Register.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on June 22, 2012,
8:45 a.m., and published in the issue of the Federal Register
for June 25, 2012, 77 F.R. 37837)
Notice of Proposed
Rulemaking and Notice of
Public Hearing
Amendment of Prohibited
Payment Option Under
Single-Employer Defined
Benefit Plan of Plan Sponsor
in Bankruptcy
REG–113738–12
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains
proposed regulations that would provide
guidance under the anti-cutback rules of
section 411(d)(6) of the Internal Rev-
enue Code, which generally prohibit plan
amendments eliminating or reducing ac-
crued benefits, early retirement benefits,
retirement-type subsidies, and optional
forms of benefit under qualified retire-
ment plans. These proposed regulations
would provide an additional limited ex-
ception to the anti-cutback rules to permit
a plan sponsor that is a debtor in a bank-
ruptcy proceeding to amend its single-em-
ployer defined benefit plan to eliminate
a single-sum distribution option (or other
optional form of benefit providing for
accelerated payments) under the plan if
certain specified conditions are satisfied.
These proposed regulations would affect
administrators, employers, participants,
and beneficiaries of such a plan. This
document also provides notice of a public
hearing on these proposed regulations.
DATES: Written or electronic comments
must be received by August 20, 2012. Out-
lines of topics to be discussed at the public
hearing scheduled for Friday, August 24,
2012, at 10 a.m. must also be received by
August 16, 2012.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–113738–12),
Room 5203, Internal Revenue Service, PO
Box7604,BenFranklinStation,Wash-
ington, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to: CC:PA:LPD:PR (REG–113738–12),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC, or sent electroni-
cally, via the Federal eRulemaking Por-
tal athttp://www.regulations.gov(IRS
REG–113738–12). The public hearing
will be held in the IRS Auditorium,
Internal Revenue Building, 1111
Constitution Avenue, NW, Washington,
DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
Neil S. Sandhu or Linda S.F. Marshall
at (202) 622–6090;concerning
submissions of comments, the hearing,
and/or being placed on the building
access list to attend the hearing,
Oluwafunmilayo (Funmi) Taylor at (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Income Tax Regu-
lations (26 CFR part 1) under section
411(d)(6) of the Internal Revenue Code
(Code). These proposed regulations would
amend §1.411(d)–4 of the Treasury regu-
lations.
Section 401(a)(7) provides that a trust
does not constitute a qualified trust unless
July 16, 2012662012–29 I.R.B.

its related plan satisfies the requirements
of section 411 (relating to minimum vest-
ing standards). Section 411(d)(6)(A) pro-
vides that a plan is treated as not satisfying
the requirements of section 411 if the ac-
crued benefit of a participant is decreased
by an amendment of the plan, other than an
amendment described in section 412(d)(2)
oftheCodeorsection4281oftheEm-
ployee Retirement Income Security Act of
1974, Public Law 93–406 (88 Stat. 829
(1974)), as amended (ERISA).
Section 411(d)(6)(B) provides that a
plan amendment that has the effect of
eliminating or reducing an early retire-
ment benefit or a retirement-type subsidy,
or eliminating an optional form of bene-
fit, with respect to benefits attributable to
service before the amendment is treated
as impermissibly reducing accrued ben-
efits. For a retirement-type subsidy, this
protection applies only with respect to a
participant who satisfies (either before or
after the amendment) the preamendment
conditions for the subsidy. The last sen-
tence of section 411(d)(6)(B) provides that
the Secretary may by regulations provide
that section 411(d)(6)(B) does not apply
to a plan amendment that eliminates an
optional form of benefit (other than a plan
amendment that has the effect of eliminat-
ing or reducing an early retirement benefit
or a retirement-type subsidy).
Section 436(d)(2) provides that a de-
fined benefit plan which is a single-em-
ployer plan must provide that, during any
period in which the plan sponsor is a debtor
in a case under title 11, United States Code,
or similar Federal or State law (a “bank-
ruptcy case”), the plan may not pay any
“prohibited payment.” However, that lim-
itation does not apply in a plan year on or
after the date on which the enrolled actu-
ary of the plan certifies that the adjusted
funding target attainment percentage (as
defined in section 436(j)(2)) of the plan for
the plan year is not less than 100 percent.
Section 436(d)(5) sets forth a defini-
tion of the term “prohibited payment.” Un-
der this definition, a “prohibited payment”
is : (1) any payment, in excess of the
monthly amount paid under a single life
annuity (plus any social security supple-
ments described in the last sentence of sec-
tion 411(a)(9)), to a participant or ben-
eficiary whose annuity starting date (as
defined in section 417(f)(2)) occurs dur-
ing any period a limitation under section
436(d)(1) or section 436(d)(2) is in effect;
(2) any payment for the purchase of an ir-
revocable commitment from an insurer to
pay benefits; and (3) any other payment
specified by the Secretary by regulations.
The term “prohibited payment” does not
include the payment of a benefit which un-
der section 411(a)(11) may be immediately
distributed without the consent of the par-
ticipant.
Section 1.411(d)–4, Q&A–1(a) pro-
vides that the term “section 411(d)(6)
protected benefit” includes: (1) bene-
fits described in section 411(d)(6)(A);
(2) early retirement benefits (as de-
fined in §1.411(d)–3(g)(6)(i)) and re-
tirement type subsidies (as defined in
§1.411(d)–3(g)(6)(iv)); and (3) optional
forms of benefit described in section
411(d)(6)(B)(ii).
Section 1.411(d)–4, Q&A–1(b)(1) pro-
vides that the term “optional form of ben-
efit” for purposes of §1.411(d)–4 has the
same meaning as in §1.411(d)–3(g)(6)(ii).
Section 1.411(d)–3(g)(6)(ii)(A) defines
the term “optional form of benefit” as
“a distribution alternative (including the
normal form of benefit) that is available
under the plan with respect to an accrued
benefit or a distribution alternative with
respect to a retirement-type benefit. Dif-
ferent optional forms of benefit exist if
a distribution alternative is not payable
on substantially the same terms as an-
other distribution alternative. The relevant
terms include all terms affecting the value
of the optional form, such as the method
of benefit calculation and the actuarial
factors or assumptions used to determine
the amount distributed. Thus, for exam-
ple, different optional forms of benefit
may result from differences in terms re-
lating to the payment schedule, timing,
commencement, medium of distribution
(for example, in cash or in kind), election
rights, differences in eligibility require-
ments, or the portion of the benefit to
which the distribution alternative applies.”
Section 1.411(d)–4, Q&A–2(a)(1)
provides that a plan is not permitted to
be amended to eliminate or reduce a
section 411(d)(6) protected benefit that
has already accrued, except as provided
in §1.411(d)–3 or §1.411(d)–4. Under
§1.411(d)–4, Q&A–2(b)(1), the Commis-
sioner is authorized to provide for the
elimination or reduction of an optional
form of benefit to the extent that plan par-
ticipants do not lose either a valuable right
or an employer-subsidized optional form
of benefit when a similar optional form
of benefit with a comparable subsidy is
not provided.
1
In addition, §1.411(d)–4,
Q&A–2(b)(2)(i) through (xi) sets forth
specific situations under which the elim-
ination or reduction of certain section
411(d)(6) protected benefits that have al-
ready accrued does not violate section
411(d)(6). These exceptions have been
included in regulations pursuant to the
Service’s authority under the last sentence
of section 411(d)(6)(B) to permit a plan
amendment that eliminates or reduces op-
tional forms of benefit (other than a plan
amendment that has the effect of eliminat-
ingorreducinganearly retirement benefit
or a retirement-type subsidy).
Section 1.436–1(d)(2) provides that a
plan satisfies the requirements of section
436(d)(2) and §1.436–1(d)(2) only if the
plan provides that a participant or benefi-
ciary is not permitted to elect an optional
form of benefit that includes a prohibited
payment, and the plan will not pay any pro-
hibited payment, with an annuity starting
date that occurs during any period in which
the plan sponsor is a debtor in a case un-
der title 11, United States Code, or sim-
ilar Federal or State law, except for pay-
ments made with an annuity starting date
that occurs on or after the date within the
plan year on which the enrolled actuary of
the plan certifies that the plan’s adjusted
funding target attainment percentage for
the plan year is not less than 100 percent.
Title IV of ERISA provides for a pen-
sion plan termination insurance program
that is administered by the Pension Bene-
fit Guaranty Corporation (PBGC). PBGC
guarantees nonforfeitable benefits, up
to specified limits, for defined benefit
pension plans that are covered under the
program.
2
If a single-employer plan ter-
minates in a distress termination under
section 4041(c) of ERISA or an invol-
untary termination under section 4042 of
ERISA, and the plan assets are not suffi-
1
Such an amendment can be authorized only through the publication of revenuerulings, notices, and other documents of general applicability. See §601.601(d)(2)(ii)(b).
2
See section 4021 of ERISA.
2012–29 I.R.B.67July 16, 2012

cient to provide all guaranteed benefits,
PBGC pays benefits to participants and
beneficiaries under the provisions of Ti-
tle IV and PBGC’s regulations.
3
PBGC
allows a participant who is not in pay
status at the time of the termination to
elect among the various annuity forms
described in 29 C.F.R. 4022.8. In addi-
tion, under 29 C.F.R. 4022.7, PBGC does
not pay benefits in a single sum in excess
of $5,000 (except under certain limited
circumstances).
Section 204(g) of ERISA contains rules
that are parallel to Code section 411(d)(6).
Under section 101 of Reorganization Plan
No. 4 of 1978 (43 FR 47713) and sec-
tion 204(g) of ERISA, the Secretary of the
Treasury has interpretive jurisdiction over
the subject matter addressed in these reg-
ulations for purposes of ERISA, as well
as the Code. Thus, these regulations is-
sued under section 411(d)(6) of the Code
would apply as well for purposes of sec-
tion 204(g) of ERISA.
Explanation of Provisions
These proposed regulations would pro-
vide a limited exception under section
411(d)(6)(B) to permit a plan sponsor that
is a debtor in a bankruptcy proceeding to
amend its single-employer defined benefit
plan to eliminate a single-sum distribution
option (or other optional form of benefit
providing for accelerated payments) if
certain conditions are satisfied.
In particular, the proposed regula-
tions would permit a single-employer
plan that is covered under section 4021
of ERISA to be amended, effective for
a plan amendment that is both adopted
and effective after August 31, 2012, to
eliminate an optional form of benefit that
includes a prohibited payment described
in section 436(d)(5), provided that four
conditions are satisfied on the later of the
date the amendment is adopted or effec-
tive (the applicable amendment date, as
defined in §1.411(d)–3(g)(4)). First, the
enrolled actuary of the plan has certified
that the plan’s adjusted funding target at-
tainment percentage (as defined in section
436(j)(2)) for the plan year that contains
the applicable amendment date is less
than 100 percent. Second, the plan is not
permitted to pay any prohibited payment,
due to application of the requirements of
section 436(d)(2) of the Code and sec-
tion 206(g)(3)(B) of ERISA, because the
plan sponsor is a debtor in a bankruptcy
case (that is, a case under title 11, United
States Code, or under similar Federal or
State law). Third, the court overseeing
the bankruptcy case has issued an order,
after notice to each affected party (within
the meaning of section 4001(a)(21) of
ERISA) and a hearing,
4
finding that the
adoption of the amendment eliminating
that optional form of benefit is necessary
to avoid a distress termination of the plan
pursuant to section 4041(c) of ERISA or
an involuntary termination of the plan pur-
suant to section 4042 of ERISA before the
plan sponsor emerges from bankruptcy (or
before the bankruptcy case is otherwise
completed). Fourth, PBGC has issued
a determination that the adoption of the
amendment eliminating that optional form
of benefit is necessary to avoid a distress
or involuntary termination of the plan
before the plan sponsor emerges from
bankruptcy (or before the bankruptcy case
is otherwise completed) and that the plan
is not sufficient for guaranteed benefits
within the meaning of section 4041(d)(2)
of ERISA.
These proposed regulations would ex-
ercise the Secretary’s authority under the
last sentence of section 411(d)(6)(B) in or-
der to permit this type of amendment that
eliminates an optional form of benefit in
these limited circumstances. The legisla-
tive history of section 411(d)(6)(B), which
was added by section 301(a) of the Re-
tirement Equity Act of 1984, Public Law
98–397, states the intent that Treasury reg-
ulations could permit the elimination of an
optional form of benefit if “(1) the elim-
ination of the option does not eliminate
a valuable right of a participant or ben-
eficiary, and (2) the option is not subsi-
dized or a similar benefit with a compara-
ble subsidy is provided.”
5
The legislative
history further states that the committee
“expects that the regulations will not per-
mit the elimination of a ‘lump-sum distri-
bution option’because, for a participant or
beneficiary with substandard mortality, the
elimination of that option could eliminate
a valuable right even if a benefit of equal
actuarial value (based on standard mortal-
ity) is available under the plan.”
6
If the four conditions set forth in the
regulations are satisfied, a single-sum dis-
tribution option or other optional form of
benefit that includes a prohibited payment
(generally a payment that is in excess of
the monthly amounts payable under a sin-
gle life annuity) would not currently be
available and would not be available in the
future. The plan would not currently be
permitted to pay that optional form of ben-
efit because section436(d)(2) (which im-
poses restrictions on the payment of pro-
hibited payments while the plan sponsor is
in bankruptcy) bars the payment of such an
optional form of benefit under these condi-
tions. Furthermore, the bankruptcy court
and the PBGC would each have issued a
determination that the plan would be ter-
minated in a distress or involuntary termi-
nation unless that optional form of bene-
fit were eliminated. In addition, the PBGC
would have determined that the plan is not
sufficient for guaranteed benefits. In such
a case, pursuant to §4022.7 and §4022.8 of
the PBGC regulations, the optional form of
benefit would not have been available af-
ter the plan termination. Accordingly, the
elimination of the optional form of benefit
would not result in the loss of a valuable
right of a participant or beneficiary.
In addition, the plan amendment would
not eliminate or reduce early retirement
benefits or retirement-type subsidies,
which would continue to be available un-
der the plan. Because the plan would not
be terminated in a distress or involuntary
termination, participants would continue
to be credited with additional service un-
der the plan and could become eligible
for early retirement benefits and retire-
ment-type subsidies, regardless of whether
participants received benefit accruals with
respect to the additional service. More-
over, because the plan would not be termi-
nated, the plan might have the opportunity
to recover from its underfunded status.
3
See section 4022 of ERISA.
4
See 11 U.S.C. 102(1).
5
S. Rep. No. 98–575, at 30 (1984).
6
Id.
July 16, 2012682012–29 I.R.B.

Under these proposed regulations, a ju-
dicial determination must be made, after
notice to each affected party (including
each plan participant, each employee or-
ganization representing plan participants,
and the PBGC) and a hearing, that the
amendment is necessary to avoid termi-
nation of the plan in a distress or invol-
untary termination before the plan spon-
sor emerges from bankruptcy. The pri-
mary purpose of this notice and hearing
requirement is to affordplanparticipants
who may be affected the opportunity to be
heard on whether the amendment is neces-
sary to avoid plan termination.
Effective/Applicability Dates
These regulations are proposed to apply
to plan amendments that are adopted and
effective after August 31, 2012.
Special Analyses
It has been determined that these pro-
posed regulations are not a significant reg-
ulatory action as defined in Executive Or-
der 12866. Therefore, a regulatory assess-
ment is not required. It also has been de-
termined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations, and
because the regulation does not impose a
collection of information on small entities,
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to sec-
tion 7805(f) of the Code, this regulation
has been submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies) or electronic com-
ments that are submitted timely to the IRS.
The Treasury Department and the IRS re-
quest comments on all aspects of the pro-
posed rules, including specifically whether
the regulations should impose additional
conditions on the prospective elimination
of the single-sum distribution option (or
other optional form of benefit that includes
a prohibited payment), such as a condition
that, after the amendment, the plan must
offer annuity distribution options that pro-
vide substantial survivor benefits, such as
both (1) a life annuity with a term certain
of 15 or more years and (2) a 100% joint
and survivor annuity, in order to give par-
ticipants who have substandard mortality
the opportunity to protect their survivors.
All comments will be available at
www.regulations.govor upon request.
A public hearing has been scheduled
for Friday, August 24, 2012, beginning
at 10 a.m. in the Auditorium, Internal
Revenue Service, 1111 Constitution
Avenue, NW, Washington, DC. Due to
building security procedures, visitors
must enter at the Constitution Avenue
entrance. In addition,all visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts. For
information about having your name
placed on the building access list to attend
the hearing, see theFOR FURTHER
INFORMATION CONTACTsection of
this preamble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written or electronic comments by
August 20, 2012, and submit an outline
of topics to be discussed and the amount
of time to be devoted to each topic (a
signed original and eight (8) copies) by
August 16, 2012.
A period of 10 minutes will be allot-
ted to each person for making comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has passed.
Copies of the agenda will be available free
of charge at the hearing.
Drafting Information
The principal authors of these
regulations are Neil S. Sandhu and
Linda S.F. Marshall,Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and the Treasury Department participated
in the development of these regulations.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.411(d)–4 is amended
by adding a new paragraph A–2(b)(2)(xii)
to read as follows:
§1.411(d)–4 Section 411(d)(6) protected
benefits.
*****
Q&A–2: * * *
(b) * * *
(2) * * *
(xii)Prohibited payment option un-
der single-employer defined benefit plan
of plan sponsor in bankruptcy.Asin-
gle-employer plan that is covered under
section 4021 of the Employee Retirement
Income Security Act of 1974, Public Law
93–406 (88 Stat. 829 (1974)), as amended
(ERISA), may be amended, effective for
a plan amendment that is both adopted
and effective after August 31, 2012, to
eliminate an optional form of benefit that
includes a prohibited payment described
in section 436(d)(5), provided that the
following conditions are satisfied on the
applicable amendment date (as defined in
§1.411(d)–3(g)(4)):
(A) The enrolled actuary of the plan has
certified that the plan’s adjusted funding
target attainment percentage (as defined in
section 436(j)(2)) for the plan year that
contains the applicable amendment date is
less than 100 percent;
(B) The plan is not permitted to pay
any prohibited payment, due to application
of the requirements of section 436(d)(2)
of the Internal Revenue Code and section
206(g)(3)(B) of ERISA, because the plan
sponsor is a debtor in a bankruptcy case
(that is, a case under title 11, United States
Code, or under similar Federal or State
law);
(C) The court overseeing the bank-
ruptcy case has issued an order, after notice
to each affected party (within the meaning
of section 4001(a)(21) of ERISA) and a
hearing, finding that the adoption of the
2012–29 I.R.B.69July 16, 2012

amendment eliminating that optional form
of benefit is necessaryto avoid a distress
termination of the plan pursuant to section
4041(c) of ERISA or an involuntary ter-
mination of the plan pursuant to section
4042 of ERISA before the plan sponsor
emerges from bankruptcy (or before the
bankruptcy case is otherwise completed);
and
(D) The Pension Benefit Guaranty Cor-
poration has issued a determination that—
(1) The adoption of the amendment
eliminating that optional form of benefit
is necessary to avoid a distress or invol-
untary termination of the plan before the
plan sponsor emerges from bankruptcy (or
before the bankruptcy case is otherwise
completed); and
(2) The plan is not sufficient for guaran-
teed benefits within the meaning of section
4041(d)(2) of ERISA.
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on June 20, 2012,
8:45 a.m., and published in the issue of the Federal Register
for June 21, 2012, 77 F.R. 37349)
July 16, 2012702012–29 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2012–29 I.R.B.iJuly 16, 2012

Numerical Finding List
1
Bulletins 2012–27 through 2012–29
Announcements:
2012-26, 2012-27 I.R.B.8
2012-27, 2012-27 I.R.B.10
2012-28, 2012-27 I.R.B.10
Notices:
2012-44, 2012-28 I.R.B.45
2012-45, 2012-29 I.R.B.59
Proposed Regulations:
REG-134042-07, 2012-27 I.R.B.5
REG-153627-08, 2012-29 I.R.B.60
REG-134935-11, 2012-29 I.R.B.64
REG-141832-11, 2012-28 I.R.B.54
REG-107889-12, 2012-28 I.R.B.53
REG-113738-12, 2012-29 I.R.B.66
Revenue Procedures:
2012-28, 2012-27 I.R.B.4
2012-29, 2012-28 I.R.B.49
Revenue Rulings:
2012-19, 2012-28 I.R.B.16
2012-20, 2012-27 I.R.B.1
Treasury Decisions:
9591, 2012-28 I.R.B.32
9592, 2012-28 I.R.B.41
9593, 2012-28 I.R.B.17
9594, 2012-29 I.R.B.57
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2012–1 through 2012–26 is in Internal Revenue Bulletin
2012–26, dated June 25, 2012.
July 16, 2012ii2012–29 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2012–27 through 2012–29
Proposed Regulations:
REG-100276-97
Withdrawn by
Ann. 2012-27, 2012-27 I.R.B.10
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2012–1 through 2012–26 is in Internal Revenue Bulletin 2012–26, dated June 25, 2012.
2012–29 I.R.B.iiiJuly 16, 2012

July 16, 20122012–29 I.R.B.

2012–29 I.R.B.July 16, 2012

July 16, 20122012–29 I.R.B.

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