Internal Revenue Bulletin 2013-12 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 201
3-12
March 18, 2013
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. 9609, page 655.
REG–140437–12, page 676.
Final regulations under section 1275 of the Code provide that
a taxpayer must use the coupon bond method described in
regulations section 1.1275–7(d) to account for Treasury Infla-
tion-Protected Securities issued with more than ade minimis
amount of premium. Temporary and proposed regulations un-
der section 171 of the Code provide guidance on the tax treat-
ment of a debt instrument with a bond premium carryforward
in the holder’s final accrual period, including a Treasury bill ac-
quired at a premium.
REG–140649–11, page 666.
Proposed regulations under section 367 of the Code, amends
the existing rules governing the consequences of failing to
file gain recognition agreements (“GRAs”), or to satisfy other
reporting obligations, associated with transfers of stock and
other property to foreign corporations. Under current law, a
taxpayer who transfers stock or securities to a foreign cor-
poration and seeks to avoid recognizing gain on the transfer
under section 367 generally must file a GRA. A taxpayer who
does not file a GRA with its timely filed tax return for the year
of the transfer, or otherwise fails to comply with the require-
ments of the GRA regulations, must recognize the full gain on
the transferred stock, unless the taxpayer receives a determi-
nation that the failure to comply was due to reasonable cause.
These regulations modify the standard that the taxpayer must
satisfy to avoid full gain recognition, such that a taxpayer may
avoid gain recognition by showing that its failure to file was
not willful. Similar changes are made to the rules governing
liquidating distributions to foreign corporations under section
367(e)(2).
Notice 2013–13, page 659.
This notice invites comments on whether equipment simultane-
ously held by a dealer for sale or lease (dual-use property) is
inventoriable property or depreciable property for purposes of
section 167 of the Code, and whether and under what circum-
stances the property is eligible for like-kind exchange treatment
under section 1031.
Rev. Proc. 2013–21, page 660.
This procedure provides the depreciation deduction limitations
for owners of passenger automobiles (including trucks and
vans) first placed in service during calendar year 2013 and
amounts to be included in income by lessees of passenger au-
tomobiles first leased during calendar year 2013.
Actions Relating to Court Decisions is on the page following the Introduction.
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.
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 in
cludes 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 and
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 co
ntents 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.
March 18, 20132013–12 I.R.B.

Actions Relati
ng to Decisions of the Tax Court
It is the policy
of the Internal Rev-
enue Service t
o announce at an early date
whether it wil
l follow the holdings in cer-
tain cases. An
Action on Decision is the
document maki
ng such an announcement.
An Action on De
cision will be issued at
the discreti
on of the Service only on unap-
pealed issue
s decided adverse to the gov-
ernment. Gen
erally, an Action on Decision
is issued whe
re its guidance would be help-
ful to Servi
ce personnel working with the
same or simi
lar issues. Unlike a Treasury
Regulation
or a Revenue Ruling, an Action
on Decision
is not an affirmative statement
of Service
position. It is not intended to
serve as pu
blic guidance and may not be
cited as pr
ecedent.
Actions on
Decisions shall be relied
upon withi
n the Service only as conclu-
sions appl
ying the law to the facts in the
particul
ar case at the time the Action on
Decision
was issued. Caution should be
exercise
d in extending the recommenda-
tion of th
e Action on Decision to similar
cases whe
re the facts are different. More-
over, th
e recommendation in the Action on
Decisio
n may be superseded by new legis-
lation,
regulations, rulings, cases, or Ac-
tions on
Decisions.
Prior to
1991, the Service published
acquies
cence or nonacquiescence only in
certain regula
r Tax Court opinions. The
Service has ex
panded its acquiescence
program to inc
lude other civil tax cases
where guidanc
e is determined to be help-
ful. Accordin
gly, the Service now may
acquiesce or n
onacquiesce in the holdings
of memorandu
m Tax Court opinions, as
well as those
of the United States District
Courts, Clai
ms Court, and Circuit Courts
of Appeal. Re
gardless of the court decid-
ing the case
, the recommendation of any
ActiononDe
cision will be published in
the Interna
l Revenue Bulletin.
The recomme
ndation in every Action
on Decision
will be summarized as ac-
quiescence
, acquiescence in result only,
or nonacqu
iescence. Both “acquiescence”
and “acqui
escence in result only” mean
that the Se
rvice accepts the holding of
the court i
n a case and that the Service
will foll
ow it in disposing of cases with
thesamec
ontrolling facts. However, “ac-
quiescen
ce” indicates neither approval
nor disap
proval of the reasons assigned
by the cou
rt for its conclusions; whereas,
“acquie
scence in result only” indicates
disagre
ement or concern with some or all
of those
reasons. “Nonacquiescence” sig-
nifies t
hat, although no further review was
sought,
the Service does not agree with
the hol
ding of the court and, generally,
will not follow
the decision in disposing
of cases invol
ving other taxpayers. In
reference to a
n opinion of a circuit court
of appeals, a “
nonacquiescence” indicates
that the Servi
ce will not follow the hold-
ingonanation
wide basis. However, the
Service will
recognize the precedential
impact of the
opinion on cases arising
within the ve
nue of the deciding circuit.
The Actions o
n Decisions published in
the weekly In
ternal Revenue Bulletin are
consolidate
d semiannually and appear in
the first Bu
lletin for July and the Cumula-
tive Bullet
in for the first half of the year. A
semiannual
consolidation also appears in
the first Bu
lletin for the following January
andintheC
umulative Bulletin for the last
half of the
year.
The Commis
sioner does NOT AC-
QUIESE in t
he following decision:
Zapara v. C
ommissioner
1
652 F.3d 10
42 (9th cir. 2011), No.
08–74173,
aff’g126 T
.C. 215,
denying re
consideration124 T.C. 223
(2005), No
. 9480–02
1
Nonacquiescence as to whether in a post-jeopardy levy Collection Due Process hearing, the Tax Court has the authority to order a credit to the taxpayerfor the Service’s failure to comply
with section 6335(f) of the Code.
2013–12 I.R.B.March 18, 2013

March 18, 20132013–12 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 1275.
—Other
Definitions a
nd Special
Rules
26 CFR 1.171–2T: Amortization of bond premium
(temporary).
T.D. 9609
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Treasury Inflation-Protected
Securities Issued at a
Premium; Bond Premium
Carryforward
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains final
regulations that provide guidance on the
tax treatment of Treasury Inflation-Pro-
tected Securities issued with more than
ade minimisamount of premium. This
document also contains temporary regula-
tions that provide guidance on the tax treat-
ment of a debt instrument with a bond pre-
mium carryforward in the holder’s final ac-
crual period, including a Treasury bill ac-
quired at a premium. The regulations in
this document provideguidance to hold-
ers of Treasury Inflation-Protected Securi-
ties and other debt instruments. The text
of the temporary regulations in this docu-
ment also serves as the text of the proposed
regulations (REG–140437–12) set forth in
this issue of the Bulletin.
DATES:Effective Date:These regulations
are effective on January 4, 2013.
ApplicabilityDates:For
the dates of applicability, see
§§1.171–2T(a)(4)(i)(C)(2)and
1.1275–7(h)(2).
FOR F
URTHER INFORMATION
CON
TACT: William E. Blanchard, (202)
622
–3900 (not a toll-free number).
SUPPLEMENTAR
Y INFORMATION:
Background
On December 5,
2011, temporary reg-
ulations (T.D
. 9561, 2012–5 I.R.B. 341)
relating to th
e federal income tax treat-
ment of Treas
ury Inflation-Protected Se-
curities iss
ued with more than ade min-
imisamount o
f premium were published in
theFederal R
egister(76 FR 75781).See
§1.1275–7T.
A notice of proposed rule-
making (REG
–130777–11, 2012–5 I.R.B.
347) cross-
referencing the temporary reg-
ulations wa
s published in theFederal Reg-
isterfor th
e same day (76 FR 75829). No
comments w
ere received on the notice of
proposed r
ulemaking. No public hearing
was reques
ted or held.
The propos
ed regulations are adopted
without su
bstantive change by this Trea-
sury decis
ion, and the corresponding tem-
porary re
gulations are removed.
Explanat
ion of provisions
1.Final R
egulations — Treasury
Inflatio
n-Protected Securities (TIPS)
issued wi
th more than a de minimis
amount of
premium
The follo
wing is a general explanation
of the pr
ovisions in the final regulations,
which ar
ethesameastheprovisionsin
the temp
orary regulations. However, the
provisi
ons that were in the temporary
regulat
ions are now contained in newly
designa
ted paragraphs (g)(2) and (h)(2) of
§1.127
5–7 of the final regulations.
TIPS ar
e securities issued by the De-
partme
nt of the Treasury. The principal
amount
of a TIPS is adjusted for any in-
flatio
n or deflation that occurs over the
term of
the security. The rules for the
taxati
on of inflation-indexed debt instru-
ments
, including TIPS, are contained in
§1.12
75–7 of the Income Tax Regulations.
See al
so§1.171–3(b) (rules for inflation-
index
ed debt instruments with bond pre-
mium)
.
Under
§1.1275–7(d)(2)(i), the coupon
bond m
ethod described in §1.1275–7(d)
is no
t available with respect to inflation-
inde
xed debt instruments that are issued
with
more than ade minimisamount of
premium (that
is, an amount greater than
.0025 times th
e stated principal amount of
the security t
imes the number of complete
years to the s
ecurity’s maturity). Prior
to 2011, TIPS
had not been issued with
more than ade
minimisamount of pre-
mium, and the
coupon bond method had
applied to T
IPS rather than the more com-
plex discou
nt bond method described in
§1.1275–7(
e).
In 2011, the
Treasury Department an-
ticipated t
hat TIPS might be issued with
more than ad
e minimisamount of pre-
mium. As a r
esult, in Notice 2011–21,
2011–19 I.
R.B. 761, to provide a more
uniform me
thod for the federal income
taxation o
f TIPS, the Treasury Department
and the IRS
announced that regulations
would be i
ssued to provide that taxpayers
must use t
he coupon bond method de-
scribed i
n §1.1275–7(d) for TIPS issued
with more
than ade minimisamount of
premium.
As a result, the discount bond
method d
escribed in §1.1275–7(e) would
not appl
ytoTIPSissuedwithmorethan
ade mini
misamount of premium. No-
tice 201
1–21 provided that the regulations
would b
eeffectiveforTIPSissuedon
or afte
r April 8, 2011. On December 5,
2011, t
he Treasury Department and the
IRS pub
lished the temporary regulations
in theF
ederal Register.These temporary
regul
ations contained the rules described
in Not
ice 2011–21 and applied to TIPS
issue
d on or after April 8, 2011. As noted
earli
er in this preamble, the final regu-
latio
ns are substantively the same as the
temp
orary regulations.
Under
the final regulations, a taxpayer
must
use the coupon bond method de-
scri
bed in §1.1275–7(d) for a TIPS that
is is
sued with more than ade minimis
amou
nt of premium. The final regulations
incl
ude the example from the temporary
regu
lations illustrating how to apply the
cou
pon bond method to a TIPS issued
wit
h more than ade minimisamount of
pre
mium and a negative yield. As stated
in N
otice 2011–21, the final regulations
app
ly to TIPS issued on or after April 8,
20
11.See§601.601(d)(2)(ii)(b).
2013–12 I.R.B.655March 18, 2013

2.Temporary Regulations — Treatment of
bond premium carryforward in a holder’s
final accrual period
During the consideration of the final
regulations relating to TIPS issued with
more than ade minimisamount of pre-
mium, the Treasury Department and the
IRS received questions about the holder’s
treatment of a taxable zero coupon debt
instrument, including a Treasury bill, ac-
quired at a premium and a negative yield.
In this situation, as described in more detail
below, under §§1.171–2 and 1.1016–5(b)
of the current regulations, a holder that
elected to amortize the bond premium gen-
erally would have a capital loss upon the
sale, retirement, or other disposition of the
debt instrument rather than an ordinary de-
duction under section 171(a)(1) for all or a
portion of the bond premium. This situa-
tion, which has arisen as a result of recent
market conditions, was not contemplated
when the current regulations were adopted
in 1997.
Under section 171 and §1.171–2 of
the current regulations, an electing holder
amortizes bond premium by offsetting
the qualified stated interest (as defined
in §1.1273–1(c)) allocable to an accrual
period with the bond premium allocable
to the period. If the bond premium al-
locable to an accrual period exceeds the
qualified stated interest allocable to the
accrual period, the excess is treated by
the holder as a bond premium deduction
under section 171(a)(1) for the accrual
period. However, the amount treated as a
bond premium deduction is limited to the
amount by which the holder’s total interest
inclusions on the bond in prior accrual
periods exceed the total amount treated by
the holder as a bond premium deduction
on the bond in prior accrual periods. If
the bond premium allocable to an accrual
period exceeds the sum of the qualified
stated interest allocable to the accrual pe-
riod and the amount treated as a deduction
under section 171(a)(1), the excess is car-
ried forward to the next accrual period and
is treated as bond premium allocable to
that period.See§1.171–2(a)(4). Under
§1.1016–5(b) of the current regulations, a
holder’s basis in a bond is reduced by the
amount of bond premium used to offset
qualified stated interest on the bond and
the amount of bond premium allowed as a
deduction under section 171(a)(1).
In the case of a zero coupon debt in-
strument, including a Treasury bill, there
is no qualified stated interest. Therefore,
under §1.171–2, the amount of bond pre-
mium allocable to an accrual period will
always exceed the qualified stated inter-
est allocable to the accrual period (zero)
and, because there will be no bond pre-
mium deductions in any prior accrual pe-
riods, such amount will be carried forward
to the next accrual period. As a result,
upon the sale, retirement, or other disposi-
tion of the debt instrument, there will be a
bond premium carryforward determined as
of the end of the holder’s final accrual pe-
riod in an amount equal to the total amount
of bond premium allocable to the holder’s
final accrual period, which includes the
bond premium allocable by the holder to
each prior accrual period. In this situation,
because there is no qualified stated interest
to offset the bond premium carryforward
and because the holder’s basis in the bond
has not been reduced, under the current
regulations, the holder would have a capi-
tal loss in an amount at least equal to the
bond premium carryforward. The Trea-
sury Department and the IRS, however,
believe that the amount of the bond pre-
mium carryforward in this situation should
be treated as a bond premium deduction
under section 171(a)(1) rather than as a
capital loss for the holder’s taxable year in
which the sale, retirement, or other dispo-
sition occurs.
In order to provide immediate guidance
to investors, the temporary regulations in
this document and the notice of proposed
rulemaking that cross-references these
temporary regulations (REG–140437–12)
address this issue by adding a specific
rule for the treatment of a bond premium
carryforward determined as of the end of
the holder’s final accrual period for any
taxable bond for which the holder has
elected to amortize bond premium. Thus,
for example, under §1.171–2T(a)(4)(i)(C),
an electing holder that purchases a taxable
zero coupon debt instrument at a premium
deducts all or a portion of the premium un-
der section 171(a)(1) when the instrument
is sold, retired, or otherwise disposed of
rather than as a capital loss.
In addition, because the rules in
§1.171–3 for inflation-indexed debt instru-
ments, including TIPS, generally treat a
bond premium carryforward as a deflation
adjustment, §1.171–3 is amended to apply
the rule in §1.171–2T(a)(4)(i)(C)(1)toany
remaining deflation adjustment attribut-
able to bond premium as of the end of the
holder’s accrual period in which the bond
is sold, retired, or otherwise disposed of.
Section 1.171–2T(a)(4)(i)(C)(1)ap-
plies to a debt instrument (bond) acquired
on or after January 4, 2013. A taxpayer,
however,mayrelyonthissectionfora
debt instrument (bond) acquired before
that date.
Special Analyses
It has been determined that this Trea-
sury decision is not asignificant regula-
tory action as defined in Executive Order
12866, as supplemented by Executive Or-
der 13563. Therefore, a regulatory assess-
ment is not required. It has also 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 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 sec-
tion 7805(f) of the Code, the proposed reg-
ulations preceding these final regulations
were submitted to the Chief Counsel for
Advocacy of the Small Business Admin-
istration for comment on their impact on
small business. No comments were re-
ceived. In addition, pursuant to section
7805(f) of the Code, the temporary reg-
ulations in this document have been sub-
mitted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on their impact on small busi-
ness.
Drafting Information
The principal author of these regu-
lations is William E. Blanchard, Office
of Associate Chief Counsel (Financial
Institutions and Products). However,
other personnel from the IRS and the
Treasury Department participated in their
development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
March 18, 20136562013–12 I.R.B.

PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by removing the entry
for §1.1275–7T and by adding an entry in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.171–2T also issued under
26 U.S.C. 171(e). * * *
Par. 2. Section 1.171–2T is added to
read as follows:
§1.171–2T Amortization of bond premium
(temporary).
(a)(1) through (a)(4)(i)(B) [Reserved].
For further guidance,see §1.171–2(a)(1)
through (a)(4)(i)(B).
(C)Carryforward in holder’s final
accrual period—(1)Ifthereisabond
premium carryforward determined under
§1.171–2(a)(4)(i)(B) as of the end of the
holder’s accrual period in which the bond
is sold, retired, or otherwise disposed of,
the holder treats the amount of the car-
ryforward as a bond premium deduction
under section 171(a)(1) for the holder’s
taxable year in which the sale, retirement,
or other disposition occurs. For purposes
of §1.1016–5(b), the holder’s basis in the
bond is reduced by the amount of bond
premium allowed as a deduction under
this paragraph (a)(4)(i)(C)(1).
(2)Effective/applicability date.
Notwithstanding §1.171–5(a)(1), para-
graph (a)(4)(i)(C)(1) of this section applies
to a bond acquired on or after January 4,
2013. A taxpayer, however, may rely on
paragraph (a)(4)(i)(C)(1)ofthissection
for a bond acquired before that date.
(ii) through (c) [Reserved]. For further
guidance, see §1.171–2(a)(4)(ii) through
(c).
(d)Expiration date. The applicability
of this section expires on or before Decem-
ber 31, 2015.
Par. 3. Section 1.171–3 is amended by
adding a new sentence before the last sen-
tence in paragraph (b) to read as follows:
§1.171–3 Special rules for certain bonds.
*****
(b)***However,therulesin
§1.171–2T(a)(4)(i)(C) apply to any re-
maining deflation adjustment attributable
to bond premium as of the end of the
holder’s accrual period in which the bond
is sold, retired, or otherwise disposed of.
***
*****
Par. 4. Section 1.1271–0(b) is amended
by revising the entries for §1.1275–7(g)
and (h) to read as follows:
§1.1271–0 Original issue discount;
effective date; table of contents.
*****
(b)*****
*****
§1.1275–7 Inflation-indexed debt
instruments.
*****
(g) TIPS.
(1) Reopenings.
(2) TIPS issued with more than ade
minimisamount of premium.
(h) Effective/applicability dates.
(1) In general.
(2) TIPS issued with more than ade
minimisamount of premium.
Par. 5. Section 1.1275–7 is amended as
follows:
1. Revising the last sentence of para-
graph (b)(1).
2. Adding a new sentence at the end of
paragraph (d)(2)(i).
3. Revising paragraph (g).
4. Revising paragraph (h).
The revisions and addition read as fol-
lows:
§1.1275–7 Inflation-indexed debt
instruments.
*****
(b) * * *
(1) * * * For example, this section ap-
pliestoTreasuryInflation-Protected Secu-
rities (TIPS).
*****
(d) * * *
(2) * * *
(i) * * * See paragraph (g)(2) of this
section, however, for the treatment of TIPS
issued with more than ade minimisamount
of premium.
*****
(g)TIPS—(1)Reopenings.Forrules
concerning a reopening of TIPS, see para-
graphs (d)(2), (k)(3)(iii), and (k)(3)(v) of
§1.1275–2.
(2)TIPS issued with more than a de
minimis amount of premium—(i)Coupon
bond method. Notwithstanding paragraph
(d)(2)(i) of this section, the coupon bond
method described in paragraph (d) of
this section applies to TIPS issued with
more than ade minimisamount of pre-
mium. For this purpose, thede minimis
amount is determined using the principles
of §1.1273–1(d).
(ii)Example. The following example
illustrates the application of the bond pre-
mium rules to a TIPS issued with bond pre-
mium:
Example.(i)Facts. X, a calendar year taxpayer,
purchases at original issuance TIPS with a stated prin-
cipal amount of $100,000 and a stated interest rate
of .125 percent, compounded semiannually. For pur-
poses of this example, assume that the TIPS are is-
sued in Year 1 on January 1, stated interest is payable
on June 30 and December 31 of each year, and that
the TIPS mature on December 31, Year 5. X pays
$102,000 for the TIPS, which is the issue price for
the TIPS as determined under §1.1275–2(d)(1). As-
sume that the inflation-adjusted principal amount for
the first coupon in Year 1 is $101,225 (resulting in
an interest payment of $63.27) and for the second
coupon in Year 1 is $102,500 (resulting in an inter-
est payment of $64.06). X elects to amortize bond
premium under §1.171–4. (For simplicity, contrary
to actual practice, the TIPS in this example were is-
sued on the date with respect to which the calculation
of the first coupon began.)
(ii)Bond premium. The stated interest on the
TIPS is qualified stated interest under §1.1273–1(c).
X acquired the TIPS with bond premium of $2,000
(basis of $102,000 minus the TIPS’ stated principal
amount of $100,000).See§§1.171–1(d), 1.171–3(b),
and paragraph (f)(3) of this section. The $2,000 is
more than thede minimisamount of premium for
the TIPS of $1,250 (.0025 times the stated principal
amount of the TIPS ($100,000) times the number of
complete years to the TIPS’maturity (5 years)). Un-
der paragraph (g)(2)(i) of this section, X must use the
coupon bond method to determine X’s income from
the TIPS.
(iii)Allocation of bond premium.Under
§1.171–3(b), the bond premium of $2,000 is allocable
to each semiannual accrual period by assuming that
there will be no inflation or deflation over the term
of the TIPS. Moreover, for purposes of §1.171–2, the
yield of the securities is determined by assuming that
there will be no inflation or deflation over their term.
Based on this assumption, for purposes of section
171, the TIPS provide for semiannual interest pay-
ments of $62.50 and a $100,000 payment at maturity.
As a result, the yield of the securities for purposes of
section 171 is -0.2720 percent, compounded semian-
nually. Under §1.171–2, the bond premium allocable
to an accrual period is the excess of the qualified
stated interest allocable to the accrual period ($62.50
for each accrual period) over the product of the tax-
payer’s adjusted acquisition price at the beginning
of the accrual period (determined without regard to
any inflation or deflation) and the taxpayer’s yield.
Therefore, the $2,000 of bond premium is alloca-
2013–12 I.R.B.657March 18, 2013

ble to each semiannual accrual period in Year 1 as
follows: $201.22 to the accrual period ending on
June 30, Year 1 (the excess of the stated interest of
$62.50 over ($102,000 x -0.002720/2)); and $200.95
to the accrual period ending on December 31, Year
1 (the excess of the stated interest of $62.50 over
($101,798.78 x -0. 002720/2)). The adjusted acqui-
sition price at the beginning of the accrual period
ending on December 31, Year 1 is $101,798.78 (the
adjusted acquisition price of $102,000 at the begin-
ning of the accrual period ending on June 30, Year 1
reduced by the $201.22 of premium allocable to that
accrual period).
(iv)Income determined by applying the coupon
bond method and the bond premium rules. Under
paragraph (d)(4) of this section, the application of the
coupon bond method to the TIPS results in a posi-
tive inflation adjustment in Year 1 of $2,500, which
is includible in X’s income for Year 1. However, be-
cause X acquired the TIPS at a premium and elected
to amortize the premium, the premium allocable to
Year 1 will offset the income on the TIPS as follows:
The premium allocable to the first accrual period of
$201.22 first offsets the interest payable for that pe-
riod of $63.27. The remaining $137.95 of premium
is treated as a deflation adjustment that offsets the
positive inflation adjustment.See§1.171–3(b). The
premium allocable to the second accrual period of
$200.95 first offsets the interest payable for that pe-
riod of $64.06. The remaining $136.89 of premium
is treated as a deflation adjustment that further off-
sets the positive inflation adjustment. As a result, X
does not include in income any of the stated inter-
est received in Year 1 and includes in Year 1 income
only $2,225.16 of the positive inflation adjustment
for Year 1 ($2,500 - $137.94 - $136.89).
(h)Effective/applicability dates—(1)In
general. This section applies to an infla-
tion-indexed debt instrument issued on or
after January 6, 1997.
(2)TIPS issued with more than a de
minimis amount of premium. Notwith-
standing paragraph (h)(1) of this section,
paragraph (g)(2) of this section applies to
TIPS issued with more than ade minimis
amount of premium on or after April 8,
2011.
§1.1275–7T [Removed]
Par. 6. Section 1.1275–7T is removed.
Par. 7. Section 1.1286–2 is amended
by removing the language “Inflation-In-
dexed” and adding the language “Infla-
tion-Protected” in its place.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved December 20, 2012.
Mark J. Mazur,
Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on January 3,
2013, 8:45 a.m., and published in the issue of the Federal
Register for January 4, 2013, 78 F.R. 666)
March 18, 20136582013–12 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Request for Comments on
Property Simultaneously Held
forSaleorLease(“Dual-Use
Property”)
Notice 2013–13
I. PURPOSE
This notice invites comments regard-
ing whether construction and agricultural
equipment held simultaneously for sale or
lease to customers (“dual-use property”)
by a dealer in such equipment is properly
treated as inventoriable property or as de-
preciable property for purposes of § 167
of the Internal Revenue Code. This no-
tice also invites comments on whether, and
under what circumstances, dual-use prop-
erty may be eligible for like-kind exchange
treatment under § 1031.
II. BACKGROUND
Dealers in construction and agricul-
tural equipment purchase equipment from
a manufacturer and generally seek to re-
sell the equipment to customers as soon
as possible. However, to accommodate
particular needs of its customers, a dealer
may lease equipment to a customer prior
to selling it. Ordinarily, dealers reacquire
their leased equipment upon termination
of the lease and thereafter hold the equip-
ment for varying periods before re-leasing
or selling it. Alternatively, the lessee may
purchase the leased equipment rather than
return it to the dealer upon termination of
the lease. Dealers ultimately dispose of all
construction and agricultural equipment
by sales, exchanges, or abandonment.
Section 167(a) allows, as a deprecia-
tion deduction, a reasonable allowance for
the exhaustion, wear and tear, and obsoles-
cence of property used in a trade or busi-
ness or held for the production of income.
Section 1.167(a)–2 of the Income Tax
Regulations provides that no depreciation
deduction may be taken with respect to
inventories or stock in trade.
Section 1031(a)(1) provides that no
gain or loss is recognized on the exchange
of property held for productive use in a
trade or business or for investment if such
property is exchanged solely for property
of like kind that is to be held either for
productive use in a trade or business or for
investment.
Section 1031(a)(2)(A) provides that
like-kind exchange treatment is not al-
lowed for any exchange of property that
is stock in trade or other property held
primarily for sale.
The Internal Revenue Service has pre-
sumptively treated dual-use property held
by a dealer as inventoriable property that
is not eligible for depreciation deductions.
Rev. Rul. 75–538, 1975–2 C.B. 35. To
rebut this presumption, the IRS has re-
quired the dealer to show that the prop-
erty was actually used in the dealer’s busi-
ness and that the dealer looks to consump-
tion through use of the property in the or-
dinary course of business operation to re-
cover the dealer’s cost. Rev. Rul. 75–538;
see alsoRev. Rul. 89–25, 1989–1 C.B.
79. As a factual matter, it can be diffi-
cult to discern whether dual-use property is
held primarily for sale to customers in the
ordinary course of business or as an asset
used in a trade or business.Compare La-
timer-Looney Chevrolet, Inc. v. Commis-
sioner, 19 T.C. 120 (1952),acq. 1953–1
C.B. 5 (new automobiles were “held for
use in a trade or business” where auto-
mobile dealer provided them to employees
for use in the business prior to sale),with
Duval Motor Co. v. Commissioner,264
F.2d 548 (5th Cir. 1959), aff’g 28 T.C. 42
(1957), andJohnson-McReynolds Chevro-
let Corporation v. Commissioner,27T.C.
300 (1956) (new automobiles were “prop-
erty held for sale to customers” where au-
tomobile dealer temporarily removed them
from inventory for use by employees).
Construction and agricultural equip-
ment that is treated as inventoriable
dual-use property under the presumption
is not eligible for § 1031 like-kind ex-
change treatment because it is property
held primarily for sale within the meaning
of § 1031(a)(2)(A). Conversely, if the pre-
sumption is rebutted and the construction
and agricultural equipment is treated as
depreciable dual-use property, it may be
eligible for § 1031 like-kind exchange
treatment if the requirements of § 1031 are
satisfied, including the requirement that
the property is not held primarily for sale
at the time of disposition.
III. REQUEST FOR COMMENTS
To minimize disputes between the IRS
and dealers in construction and agricul-
tural equipment, the Treasury Department
and the IRS are considering issuing guid-
ance that clarifies the circumstances under
which construction and agricultural equip-
ment that is dual-use property is properly
treated either as inventoriable property or
as depreciable property. Guidance is also
being considered concerning whether ex-
changes of construction and agricultural
equipment that is dual-use property are el-
igible for § 1031 like-kind exchange treat-
ment or whether these exchanges are inel-
igible for § 1031 because the equipment is
treated as “stock in trade or other property
held primarily for sale” within the mean-
ing of § 1031(a)(2)(A).
The Treasury Department and the IRS
request public comments to assist in de-
veloping this guidance. Specifically, com-
ments are requested regarding the follow-
ing items:
1. Factors that are relevant in determin-
ing whether construction and agricultural
dual-use property is inventoriable or de-
preciable property, or eligible for § 1031
like-kind exchange treatment. For exam-
ple, the following factors have previously
been considered by the Service to be rele-
vant:
(a) The dealer’s prior business expe-
rience with dual-use property, including
the proportion of the dealer’s total dual-
use property that is leased and the num-
ber of times the same property is leased or
re-leased by the dealer prior to disposition;
(b) Whether dual-use property may be
leased (or held for subsequent lease) for
a period exceeding its recovery period for
depreciation purposes;
(c) The proportion of annual lease rev-
enue to total revenue, the proportion of an-
nual lease revenue to revenue from sales of
leased property, and the proportion of rev-
enue from sales of leased property to an-
nual sales revenue;
(d) Whether lease agreements custom-
arily allow the dealer to terminate the lease
and reacquire the property at any time
without penalty (and, if so, the frequency
with which the dealer exercises this op-
tion);
2013–12 I.R.B.659March 18, 2013

(e) For lease agreements that provide
a purchase option,the frequency with
which the lessee exercises this option and
whether the lessee receives a price reduc-
tion;
(f) The manner in which dual-use prop-
erty is typically disposed of (e.g.soldto
lessee, at auction, or through a third-party);
and
(g) The dealer’s initial classification of
dual-use property (as inventoriable or de-
preciable property) for federal income tax
and financial accounting purposes.
Comments are also requested on
whether any such factors should be eval-
uated separately for different classes or
product lines of equipment.
2. Whether a safe harbor or bright-line
test would be helpful in resolving these is-
sues, and if so what methodology or cri-
teria should be incorporated in such a safe
harbor or bright-line test.
3. Whether guidance is needed for deal-
ers of dual-use property, other than deal-
ers in the construction and agriculture in-
dustries, regarding whether dual-use prop-
erty is inventoriable or depreciable prop-
erty, or eligible for § 1031 like-kind ex-
change treatment.
4. Whether the Industry Issue Res-
olution (IIR) process (see Rev. Proc.
2003–36, 2003–1 C.B. 859) would be a
useful approach to resolving these issues.
Written comments should be submitted
by June 16, 2013. Send submissions to
CC:PA:LPD:PR (Notice 2013–13), Room
5203, Internal Revenue Service, P.O. 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 (Notice 2013–13),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, N.W., Wash-
ington, DC 20224. Alternatively, com-
ments may be submitted electronically to
the IRSviathe following e-mail address:
Notice.Comments@irscounsel.treas.gov.
Please include “Notice 2013–13” in the
subject line of any electronic communica-
tion. All comments will be available for
public inspection and copying.
IV. DRAFTING INFORMATION
The principal author of this notice
is Cheryl Oseekey of the Office of
Associate Chief Counsel (Income Tax
and Accounting). For further information
regarding this notice, contact Ms. Oseekey
at (202) 622–4970 (not a toll-free call).
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also: Part I, §§ 280F; 1.280F–7.)
Rev. Proc. 2013–21
SECTION 1. PURPOSE
This revenue procedure provides: (1)
limitations on depreciation deductions
for owners of passenger automobiles first
placed in service by the taxpayer during
calendar year 2013, including separate
tables of limitations on depreciation de-
ductions for trucks and vans; and (2) the
amounts that must be included in income
by lessees of passenger automobiles first
leased by the taxpayer during calendar
year 2013, including a separate table of
inclusion amounts for lessees of trucks
and vans. The tables detailing these de-
preciation limitations and lessee inclusion
amounts reflect the automobile price infla-
tion adjustments required by § 280F(d)(7)
of the Internal Revenue Code.
SECTION 2. BACKGROUND
.01 For owners of passenger automo-
biles, § 280F(a) imposes dollar limitations
on the depreciation deduction for the year
the taxpayer places the passenger auto-
mobile in service and for each succeeding
year. For passenger automobiles placed in
service after 1988, § 280F(d)(7) requires
the Internal Revenue Service to increase
the amounts allowable as depreciation de-
ductions by a price inflation adjustment
amount. The method of calculating this
price inflation amount for trucks and vans
placed in service in or after calendar year
2003 uses a different CPI “automobile
component” (the “new trucks” compo-
nent) than that used in the price inflation
amount calculation for other passenger
automobiles (the “new cars” component),
resulting in somewhat higher deprecia-
tion deductions for trucks and vans. This
change reflects the higher rate of price
inflation for trucks and vans since 1988.
.02 Section 331(a) of the American
Taxpayer Relief Act of 2012, Pub. L. No.
112–240, 126 Stat. 2313 (Jan. 2, 2013)
(the “Act”) extended the 50 percent ad-
ditional first year depreciation deduction
under § 168(k) to qualified property ac-
quired by the taxpayer after December 31,
2007, and before January 1, 2014, if no
written binding contract for the acquisition
of the property existed before January 1,
2008, and if the taxpayer places the prop-
erty in service generally before January 1,
2014.
Section 168(k)(2)(F)(i) increases the
first year depreciation allowed under
§ 280F(a)(1)(A)(i) by $8,000 for pas-
senger automobiles to which the addi-
tional first year depreciation deduction
under § 168(k) (hereinafter, referred to as
Ҥ 168(k) additional first year depreciation
deduction”) applies.
.03 Section 168(k)(2)(D)(i) provides
that the § 168(k) additional first year de-
preciation deduction does not apply to
any property required to be depreciated
under the alternative depreciation system
of § 168(g), including property described
in § 280F(b)(1). Section 168(k)(2)(D)(iii)
permits a taxpayer to elect out of the
§ 168(k) additional first year deprecia-
tion deduction for any class of property.
Section 168(k)(4), as amended by the
Act, permits a corporation to elect to
increase the alternative minimum tax
(“AMT”) credit limitation under § 53(c),
instead of claiming the § 168(k) addi-
tional first year depreciation deduction for
all eligible qualified property placed in
service after December 31, 2012, that is
round 3 extension property (as defined in
§ 168(k)(4)(J)(iv)).
Accordingly, this revenue procedure
provides tables for passenger automobiles
for which the § 168(k) additional first
year depreciation deduction applies. This
revenue procedure also provides tables
for passenger automobiles for which the
§ 168(k) additional first year depreciation
deduction does not apply, either because
taxpayer: (1) purchased the passenger
automobile used; (2) did not use the pas-
senger automobile during 2013 more than
50 percent for business purposes; (3)
elected out of the § 168(k) additional first
year depreciation deduction pursuant to
§ 168(k)(2)(D)(iii); or (4) elected to in-
crease the § 53 AMT credit limitation in
lieu of claiming § 168(k) additional first
year depreciation.
March 18, 20136602013–12 I.R.B.

.04 Section 280F(c) requires a reduc-
tion in the deduction allowed to the lessee
of a leased passenger automobile. The re-
duction must be substantially equivalent to
the limitations on the depreciation deduc-
tions imposed on owners of passenger au-
tomobiles. Under § 1.280F–7(a) of the In-
come Tax Regulations, this reduction re-
quires a lessee to include in gross income
an amount determined by applying a for-
mula to the amount obtained from a table.
One table applies to lessees of trucks and
vans and another table applies to all other
passenger automobiles. Each table shows
inclusion amounts for a range of fair mar-
ket values for each taxable year after the
passenger automobile is first leased.
SECTION 3. SCOPE
.01 The limitations on depreciation de-
ductions in section 4.01(2) of this revenue
procedure apply to passenger automobiles
(other than leased passenger automobiles)
that are placed in service by the taxpayer
in calendar year 2013, and continue to ap-
ply for each taxable year that the passenger
automobile remains in service.
.02 The tables in section 4.02 of this
revenue procedure apply to leased passen-
ger automobiles for which the lease term
begins during calendar year 2013. Lessees
of these passenger automobiles must use
these tables to determine the inclusion
amount for each taxable year during which
the passenger automobile is leased. See
Rev. Proc. 2008–22, 2008–1 C.B. 658, for
passenger automobiles first leased during
calendar year 2008; Rev. Proc. 2009–24,
2009–17 I.R.B. 885, for passenger auto-
mobiles first leased during calendar year
2009; Rev. Proc. 2010–18, 2010–09
I.R.B. 427, as amplified and modified
by section 4.03 of Rev. Proc. 2011–21,
2011–12 I.R.B. 560, for passenger auto-
mobiles first leased during calendar year
2010; Rev. Proc. 2011–21, for passenger
automobiles first leased during calendar
year 2011; and Rev. Proc. 2012–23,
2012–14 I.R.B. 712, for passenger auto-
mobiles first leased during calendar year
2012.
SECTION 4. APPLICATION
.01Limitations on Depreciation
Deductions for Certain Automobiles.
(1)Amount of the inflation adjustment.
(a)Passenger automobiles (other than
trucks or vans). Under § 280F(d)(7)(B)(i),
the automobile price inflation adjustment
for any calendar year is the percentage
(if any) by which the CPI automobile
component for October of the preceding
calendar year exceeds the CPI automobile
component for October 1987. Section
280F(d)(7)(B)(ii) defines the term “CPI
automobile component” as the automobile
component of the Consumer Price Index
for all Urban Consumers published by the
Department of Labor. The new car compo-
nent of the CPI was 115.2 for October 1987
and 143.787 for October 2012. The Octo-
ber 2012 index exceeded the October 1987
index by 28.587. Therefore, the automo-
bile price inflation adjustment for 2013 for
passenger automobiles (other than trucks
and vans) is 24.8 percent (28.587/115.2 x
100%). The dollar limitations in § 280F(a)
are multiplied by a factor of 0.248, and
the resulting increases, after rounding to
the nearest $100, are added to the 1988
limitations to give the depreciation limita-
tions applicable to passenger automobiles
(other than trucks and vans) for calendar
year 2013. This adjustment applies to all
passenger automobiles (other than trucks
and vans) that are first placed in service in
calendar year 2013.
(b)Trucks and vans. To determine the
dollar limitations for trucks and vans first
placed in service during calendar year
2013, the Service uses the new truck com-
ponent of the CPI instead of the new car
component. The new truck component
of the CPI was 112.4 for October 1987
and 149.386 for October 2012. The Oc-
tober 2012 index exceeded the October
1987 index by 36.986. Therefore, the
automobile price inflation adjustment for
2013 for trucks and vans is 32.9 percent
(36.986/112.4 x 100%). The dollar lim-
itations in § 280F(a) are multiplied by
a factor of 0.329, and the resulting in-
creases, after rounding to the nearest $100,
are added to the 1988 limitations to give
the depreciation limitations for trucks and
vans. This adjustment applies to all trucks
and vans that are first placed in service in
calendar year 2013.
(2)Amount of the limitation.Tables
1 through 4 contain the dollar amount of
the depreciation limitation for each taxable
year for passenger automobiles a taxpayer
places in service in calendar year 2013.
Use Table 1 for a passenger automobile
(other than a truck or van), and Table 2 for
a truck or van, placed in service in calen-
dar year 2013 for which the § 168(k) ad-
ditional first year depreciation deduction
applies. Use Table 3 for a passenger au-
tomobile (other than a truck or van), and
Table 4 for a truck or van, placed in ser-
vice in calendar year 2013 for which the
§ 168(k) additional first year depreciation
deduction does not apply.
REV. PROC. 2013–21 TABLE 1
DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES
(THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR
2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION
DEDUCTION APPLIES
TaxYearAmount
1st Tax Year
$11,160
2nd Tax Year
$5,100
3rd Tax Year
$3,050
Each Succeeding Year
$1,875
2013–12 I.R.B.661March 18, 2013

REV. PROC. 2013–21 TABLE 2
DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN
SERVICE IN CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR
DEPRECIATION DEDUCTION APPLIES
TaxYearAmount
1st Tax Year
$11,360
2nd Tax Year
$5,400
3rd Tax Year
$3,250
Each Succeeding Year
$1,975
REV. PROC. 2013–21 TABLE 3
DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES
(THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR
2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION
DEDUCTION DOES NOT APPLY
TaxYearAmount
1st Tax Year
$3,160
2nd Tax Year
$5,100
3rd Tax Year
$3,050
Each Succeeding Year
$1,875
REV. PROC. 2013–21 TABLE 4
DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN
CALENDAR YEAR 2013 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR
DEPRECIATION DEDUCTION DOES NOT APPLY
TaxYearAmount
1st Tax Year
$3,360
2nd Tax Year
$5,400
3rd Tax Year
$3,250
Each Succeeding Year
$1,975
.02Inclusions in Income of Lessees of
Passenger Automobiles.
A taxpayer must follow the procedures
in § 1.280F–7(a) for determining the inclu-
sion amounts for passenger automobiles
first leased in calendar year 2013. In ap-
plying these procedures, lessees of passen-
ger automobiles other than trucks and vans
should use Table 5 of this revenue pro-
cedure, while lessees of trucks and vans
should use Table 6 of this revenue proce-
dure.
REV. PROC. 2013–21 TABLE 5
DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES
(THATARENOTTRUCKSORVANS)
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013
Fair Market Value of Passenger
AutomobileTax Year During Lease
OverNot Over1st2nd3rd4th5th & later
$19,000$19,500
24678
19,500
20,0002
5
699
20,000
20,500
2
5
8911
20,500
21,0003681012
21,000
21,500
36101113
21,500
22,00037101314
22,00023,00048111416
March 18, 20136622013–12 I.R.B.

REV. PROC. 2013–21 TABLE 5
DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES
(THATARENOTTRUCKSORVANS)
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013
Fair Market Value of Passenger
AutomobileTax Year During Lease
OverNot Over1st2nd3rd4th5th & later
23,00024,00049141618
24,000
25,0005
10
15
1821
25,000
26,000
5
12162123
26,00027,0006121923
25
27,00028,00061420
25
28
28,00029,0007
15
222730
29,00030,000716242933
30,00031,0008172631
35
31,00032,000819273338
32,00033,00092029
35
40
33,00034,0001021313743
34,000
35,000
10223339
45
35,000
36,0001123
35
4148
36,00037,00011
25
3643
50
37,00038,000122638
4553
38,00039,00012274047
55
39,00040,00013284249
58
40,00041,000132944
5259
41,00042,0001430
4554
63
42,00043,000143247
56
64
43,00044,000
15
3348
59
67
44,000
45,00015
34
51
6069
45,000
46,00016
3552
6372
46,00047,0001736
5465
74
47,00048,0001738
55
6777
48,00049,0001839
57
6979
49,000
50,000
1840
59
7182
50,00051,000
1941617384
51,00052,000
194263
75
87
52,00053,000
2043
65
7789
53,00054,000
20
45
667992
54,00055,000
2146688194
55,00056,000
2147708496
56,00057,000
224872
85
99
57,00058,000
22
50
7388101
58,00059,000
23
5175
90103
59,000
60,00024
52
7692106
60,00062,00024
54
79
95
110
62,00064,000
2556
8399
115
64,00066,00027
58
87103120
66,00068,000286090108
125
68,00070,000296393112130
70,00072,00030
65
97117134
72,00074,0003168100121139
74,00076,0003270104
125
144
76,00078,0003373107129149
78,00080,00034
75
111133
154
80,000
85,000
3679117141162
85,000
90,00039
85
126
151
174
90,000
95,000
4191
135
162186
95,000
100,0004497144172199
100,000110,00048106
157
188217
110,000120,000
53
118174210241
120,000130,000
59
129193230266
2013–12 I.R.B.663March 18, 2013

REV. PROC. 2013–21 TABLE 5
DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES
(THATARENOTTRUCKSORVANS)
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013
Fair Market Value of Passenger
AutomobileTax Year During Lease
OverNot Over1st2nd3rd4th5th & later
130,000140,00064141210
252
290
140,000
150,000
70
153
227273
315
150,000
160,000
75165245
294339
160,000170,00080177263
315
363
170,000180,00086189280336388
180,000190,00091201298
357
412
190,000200,00097212316378436
200,000210,000102224333400461
210,000220,000107236
351
420486
220,000230,000113248368442
509
230,000240,000118260386463
534
240,000And up124272403484
558
REV. PROC. 2013–21 TABLE 6
DOLLAR AMOUNTS FOR TRUCKS AND VANS
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013
Fair Market Value of Truck or VanTax Year During Lease
OverNot Over1st2nd3rd4th5th & later
$19,000$19,500
134
5
6
19,500
20,00023
5
67
20,000
20,500
24678
20,500
21,0002
5
789
21,000
21,500
2
5
8911
21,500
22,0003681012
22,00023,00037101114
23,00024,00048111416
24,000
25,000
49141618
25,000
26,000
5
10
15
1821
26,00027,000
5
12172023
27,00028,0006131823
25
28,00029,00061420
25
28
29,00030,0007
15
222730
30,00031,000716242933
31,00032,0008172631
35
32,00033,000819273338
33,00034,00092029
35
41
34,000
35,000
1021313743
35,000
36,0001022333946
36,00037,0001123
35
4148
37,00038,00011
25
3643
51
38,00039,000122638
4553
39,00040,00012274048
55
40,00041,00013284249
58
41,00042,000132944
52
60
42,00043,000143046
54
62
43,00044,000143247
5665
44,000
45,00015
3348
59
67
45,000
46,000
15
34
51
6070
46,00047,00016
3552
6372
47,00048,0001736
5465
74
March 18, 20136642013–12 I.R.B.

REV. PROC. 2013–21 TABLE 6
DOLLAR AMOUNTS FOR TRUCKS AND VANS
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2013
Fair Market Value of Truck or VanTax Year During Lease
OverNot Over1st2nd3rd4th5th & later
48,00049,0001738
55
6777
49,000
50,000
1839
57
6979
50,00051,000
1840
59
7182
51,00052,000
1941617384
52,00053,000
194263
75
87
53,00054,000
2043
65
7789
54,00055,000
20
45
668091
55,00056,000
2146688194
56,00057,000
2147708496
57,00058,000
2248728698
58,00059,000
22
50
7388101
59,000
60,00023
5175
90103
60,00062,00024
52
7893108
62,00064,000
2555
8197113
64,00066,00026
5785
101118
66,00068,000276088106122
68,00070,000286292110127
70,00072,000296496114132
72,00074,000306799118137
74,00076,0003169103122142
76,00078,0003272
105
127147
78,00080,0003473110131
151
80,000
85,00035
78116138160
85,000
90,0003884124149172
90,000
95,000
4190133160184
95,000
100,00044
95
142171196
100,000110,00048104
156
186214
110,000120,000
53
116173207240
120,000130,000
58
128191228264
130,000140,00064140208249288
140,000
150,000
69
152
226270313
150,000
160,000
75
164243292336
160,000170,00080176261312361
170,000180,000
85
188278334386
180,000190,00091199296
355
410
190,000200,00096211314376434
200,000210,000101223332397
459
210,000220,000107
235
349418483
220,000230,000112247367439
507
230,000240,000118
259
384460
532
240,000And up123271401482
556
SECTION 5. EFFECTIVE DATE
This revenue procedure applies to pas-
senger automobiles that a taxpayer first
places in service or first leases during cal-
endar year 2013.
SECTION 6. DRAFTING
INFORMATION
The principal author of this rev-
enue procedure is Bernard P. Harvey of
the Office of Associate Chief Counsel
(Income Tax & Accounting). For further
information regarding this revenue
procedure, contact Mr. Harvey at (202)
622–4930 (not a toll-free call).
2013–12 I.R.B.665March 18, 2013

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Failure to Fil
eGain
Recognition A
greements
and Other Req
uired Filings
REG–140649–
11
AGENCY: Inte
rnal Revenue Service
(IRS), Treas
ury.
ACTION: Noti
ce of proposed rulemaking.
SUMMARY: Thi
s document contains
proposed re
gulations that would amend
the existin
g rules governing the conse-
quences to U
.S. persons for failing to
file gain re
cognition agreements (GRAs)
and related
documents, or to satisfy other
reporting
obligations, associated with
certain tr
ansfers of property to foreign
corporati
ons in nonrecognition exchanges.
These regu
lations affect U.S. persons that
transfer
property to foreign corporations.
DATES: Wr
itten or electronic comments
and reque
sts for a public hearing must be
received
by April 1, 2013.
ADDRESSE
S: Send submissions to
CC:PA:LP
D:PR (REG–140649–11), room
5203, Int
ernal Revenue Service, P.O. Box
7604, Be
n Franklin Station, Washing-
ton, DC 2
0044. Submissions may be
hand-de
livered Monday through Friday
between
the hours of 8 a.m. and 4 p.m.
to CC:PA
:LPD:PR (REG–140649–11),
Courie
r’s Desk, Internal Revenue Ser-
vice, 1
111 Constitution Avenue, NW,
Washin
gton, DC 20224, or sent elec-
tronic
ally via the Federal Rulemaking
Portal
athttp://www.regulations.gov(IRS
REG–1
40649–11).
FOR FU
RTHER INFORMATION
CONTA
CT: Concerning the proposed
regul
ations, Mary W. Lyons, (202)
622–3
860; concerning submission of
comme
nts and to request a hearing,
Oluwa
funmilayo (Funmi) Taylor, (202)
622–
7180 (not toll-free numbers).
SUPPLEMENTAR
Y INFORMATION:
Paperwork Red
uction Act
The collecti
ons of information con-
tained in the
regulations have been re-
viewed and ap
proved by the Office of
Management
and Budget in accordance
with the Pap
erwork Reduction Act of 1995
(44 U.S.C. 3
507(d)) under control number
1545–1487.
The collect
ions of information are
in §§1.367(
a)–3(f)(2), 1.367(a)–8(p)(2),
1.367(e)–
2(f)(2), 1.6038B–1(c)(4)(ii),
and 1.6038
B–1(e)(4). The collections of
informati
on are mandatory. The likely
responden
ts are domestic corporations.
An agency m
ay not conduct or sponsor,
and a perso
n is not required to respond to, a
collectio
n of information unless it displays
a valid co
ntrol number.
Books and
records relating to a collec-
tion of in
formation must be retained as
long as th
eir contents might become ma-
terial in
the administration of any internal
revenue l
aw. Generally, tax returns and tax
return i
nformation are confidential, as re-
quired b
y26U.S.C.6103.
Backgr
ound
A. Sect
ions 367(a) and 6038B
Secti
on 367(a)(1) provides that if, in
conne
ction with any exchange described
in sec
tion 332, 351, 354, 356, or 361,
aUnit
ed States person (U.S. transferor)
trans
fers property to a foreign corporation
(tra
nsferee foreign corporation), the trans-
fere
e foreign corporation shall not, for pur-
pose
s of determining the extent to which
gain
shall be recognized on such transfer,
be co
nsidered to be a corporation. Sections
367
(a)(2), (3), and (6) provide exceptions
to t
he general rule of section 367(a)(1)
and
grant regulatory authority to the Sec-
ret
ary to provide additional exceptions and
to l
imit the statutory exceptions.
Sec
tion 1.367(a)–3 provides exceptions
to t
he general rule of section 367(a)(1) for
ce
rtain transfers by a U.S. transferor of
st
ock or securities to a foreign corporation.
In
some cases, these exceptions require
th
e U.S. transferor to file a GRA and
ot
her related documents under the provi-
si
ons of §1.367(a)–8 (section 367(a) GRA
regulations)
in order to avoid the recogni-
tion of gain un
der section 367(a)(1). See
§1.367(a)–3(
b), (c), and (e) (addressing
transfers of f
oreign stock or securities,
transfers of d
omestic stock or securities,
and transfer
s in certain section 361 ex-
changes, res
pectively). Under the terms
of a GRA, the U
.S. transferor agrees to
include in in
come the gain realized but
not recogni
zed on the initial transfer of the
stock or sec
urities and pay interest on any
additional
tax due if a gain recognition
event, as de
fined in §1.367(a)–8(b)(1)(iv),
occurs dur
ing the term of the GRA (gener-
ally 60 mon
ths following the close of the
taxable ye
ar in which the initial transfer
occurs). S
ee §1.367(a)–8(c)(1)(i) and (v).
One of the g
ain recognition events enu-
merated is
a failure to comply in any ma-
terial res
pect with any requirement of the
section 3
67(a) GRA regulations or with the
terms of a
n existing GRA (failure to com-
ply). See
§1.367(a)–8(j)(8). An example
of such a f
ailure to comply is the failure
to file a
n annual certification. The sec-
tion 367
(a) GRA regulations provide that
if there
is a failure to comply, the U.S.
transfe
ror must recognize the full amount
of gain r
ealized on the initial transfer of
stock o
r securities unless the U.S. trans-
feror d
emonstrates that the failure was due
to reas
onable cause and not willful neglect
under t
he procedure that is described in
§1.367
(a)–8(p). Similarly, if there is a fail-
ure to
timely file a GRA in connection with
the in
itial transfer, the U.S. transferor must
recog
nize gain with respect to the trans-
fer un
less the reasonable cause exception
is sat
isfied.
In add
ition to the section 367(a) GRA
regul
ations, other regulations under sec-
tion
367(a) require certain other statements
to be
filed in connection with a transfer
of st
ockorsecuritiesbyaU.S.personto
afor
eign corporation. A domestic tar-
get c
orporation in certain cases must file
sta
tements in connection with the transfer
by i
ts shareholders or security holders of
sto
ck or securities in the domestic target
cor
poration to a foreign corporation un-
der
§1.367(a)–3(c). See §1.367(a)–3(c)(6)
and
(7). Also, a domestic target corpo-
ra
tion must file a statement when its as-
se
ts are transferred to a foreign acquiring
co
rporation in a section 361 exchange and
March 18, 20136662013–12 I.R.B.

all or a portion of those assets are sub-
sequently transferred to a domestic sub-
sidiary of the foreign acquiring corpora-
tion in a transaction treated as an indirect
stock transfer under §1.367(a)–3(d). See
§1.367(a)–3(d)(2)(vi)(B)(1)(ii).
In addition, a U.S. person who trans-
fers certain property to a foreign corpora-
tion in certain nonrecognition transactions
is subject to the reporting requirements of
section 6038B and the regulations. See
§§1.6038B–1 and –1T. In general, the U.S.
transferor must file IRS Form 926,Return
byaU.S.TransferorofPropertytoaFor-
eign Corporation, identifying the trans-
feree foreign corporation and describing
the property transferred. The penalty for
failure to satisfy the section 6038B report-
ing requirement is equal to ten percent of
the fair market value of the property at the
time of the exchange, but not to exceed
$100,000 unless the failure was due to in-
tentional disregard of the reporting obli-
gation. If, however, the U.S. transferor
demonstrates that the failure was due to
reasonable cause and not willful neglect,
no penalty is imposed.
Section 1.6038B–1T(c)(4)(ii) provides
that if stock or securities are transferred,
the U.S. transferor must provide informa-
tion about the stock or securities on Form
926. Section 1.6038B–1(f)(2)(i) provides
that a failure to comply with the reporting
requirements of the regulations includes
the failure to provide material information
about the property transferred. Thus, the
failure to provide the required information
about the stock or securities transferred
could result in a section 6038B penalty.
The current section 6038B regulations
have a rule coordinating the obligations
to file a GRA and complete Form 926.
Specifically, §1.6038B–1(b)(2) relieves a
U.S. transferor of the obligation to report a
transfer of stock or securities on Form 926
and from the section 6038B penalty if the
U.S transferor has properly filed a GRA.
On the other hand, a U.S. transferor
who transfers stock or securities for which
a GRA must be properly filed to avoid rec-
ognizing gain under section 367(a)(1) and
who neither properly files a GRA nor a
Form 926 with respect to the transfer is po-
tentially subject both to the penalty under
section 6038B and full gain recognition
under section 367(a)(1). Both of these pro-
visions have a reasonable cause exception
for a failure to file, and a U.S. transferor
who cannot establish reasonable cause is
subject to both provisions.
The Deficit Reduction Act of 1984
(1984 Act) (Public Law 98–369, 98 Stat
494 (1984)) amended section 367(a) and
enacted section 6038B. The legislative
history to the 1984 Act indicates that Con-
gress intended sections 367 and 6038B
to operate in tandem, with section 6038B
serving as a notification requirement for
transfers under section 367(a). H.R. Rep.
No. 432, Pt. 2, 98th Cong., 2d Sess.,
March 5, 1984 at 1325; S. Rep. No. 169,
Vol. 1, 98th Cong., 2d Sess., Apr. 2, 1984
at 370.
Temporary regulations were published
on May 16, 1986 (T.D. 8087, 1986–1 C.B.
175, 51 FR 17936), addressing GRAs and
reporting under section 6038B (1986 tem-
porary regulations). The 1986 temporary
regulations imposed both full gain recog-
nition under section 367(a)(1) for failure
to comply with the regulations under sec-
tion 367(a) as well as the penalty under
section 6038B for failure to comply with
the section 6038B reporting requirements.
Both rules have been retained in later-is-
sued guidance under sections 367(a) and
6038B.
In addition, the current final regula-
tions under §1.367(a)–8(p)(1) allow a U.S.
transferor to obtain relief from gain recog-
nitioncausedbyafailuretofileaGRA
or a failure to comply in any material re-
spect with the regulations by requesting re-
lief and establishing that a failure to file or
comply was due to reasonable cause and
not willful neglect. When a U.S. trans-
feror requests relief from full gain recog-
nition under this section, the regulations
provide that the appropriate IRS examina-
tion official (Director) shall notify the U.S.
transferor in writing if it is determined that
the U.S. transferor’s failure was not due
to reasonable cause, or if additional time
will be needed to make a determination.
This notification is to be made within the
120-day period that begins on the date that
the IRS notifies the U.S. transferor in writ-
ing that its request for relief has been re-
ceived and assigned for review. If the U.S.
transferor is not so notified before the close
of this 120-day period, the U.S. transferor
is deemed to have established that the fail-
ure to file or failure to comply was due to
reasonable cause and not willful neglect.
B. Section 367(e)(2)
Section 367(e)(2) provides generally
that in a liquidation to which section 332
applies, except as provided in regulations,
subsections (a) and (b)(1) of section 337
shall not apply when the 80-percent dis-
tributee (as defined in section 337(c)) is
a foreign corporation. As a result, if a
domestic liquidating corporation liqui-
dates into a foreign parent corporation (an
outbound liquidation), or if a foreign liqui-
dating corporation liquidates into a foreign
parent corporation (a foreign-to-foreign
liquidation), the liquidating corporation
generally must recognize gain or loss on
the distribution as if such property were
sold to the distributee at its fair market
value. Section 1.367(e)–2(b)(1) provides
that a domestic liquidating corporation
must recognize gain or loss on an out-
bound liquidation, subject to an overall
loss limitation, except to the extent it satis-
fies one of the exceptions provided under
§1.367(e)–2(b)(2). These exceptions are
for distributions of: (i) property used in
the conduct of a trade or business in the
United States (a U.S. trade or business);
(ii) a U.S. real property interest; or (iii)
stock of a domestic subsidiary corporation
that is at least 80-percent owned by the
domestic liquidating corporation.
The regulations also address foreign-to-
foreign liquidations and provide that a for-
eign liquidating corporation generally is
not required to recognize gain or loss on
the distribution, except in the case of cer-
tain distributions of property used in a U.S.
trade or business or formerly used in a U.S.
trade or business. See §1.367(e)–2(c).
Other than the exception for a distri-
bution of a U.S. real property interest, the
exceptions provided under §1.367(e)–2
require the filing of certain statements
or schedules by the liquidating corpo-
ration and the distributee corporation.
In addition, a domestic liquidating cor-
poration that distributes property to a
foreign corporation in a transaction sub-
ject to section 367(e)(2) must file a Form
926 with respect to the distribution. See
§1.6038B–1(e).
2013–12 I.R.B.667March 18, 2013

Explanation of Provisions
A. Proposed Amendments to the Section
367(a) GRA Regulations
Under current law, if a U.S. transferor
fails to timely file an initial GRA, or fails
to comply in any material respect with the
section 367(a) GRA regulations with re-
spect to an existing GRA (for example,
because it fails to timely file an annual
certification), the U.S. transferor is sub-
ject to full gain recognition under section
367(a)(1) unless the U.S. transferor later
discovers the failure, promptly files the
GRA or other required information with
the IRS, and demonstrates that its fail-
ure was due to reasonable cause and not
willful neglect. Theexisting reasonable
cause standard, given its interpretation un-
der the case law, may not be satisfied by
U.S. transferors in many common situa-
tions even though the failure was not in-
tentional and not due to willful neglect.
Based on the current operation of the sec-
tion 367(a) GRA regulations, the Inter-
nal Revenue Service (IRS) and the De-
partment of the Treasury (Treasury De-
partment) believe that full gain recogni-
tion under section 367(a)(1) should apply
only if a failure to timely file an initial
GRA or a failure to comply with the sec-
tion 367(a) GRA regulations with respect
to an existing GRA is willful. The IRS
and the Treasury Department believe that
the penalty imposed by section 6038B gen-
erally should be sufficient to encourage
proper reporting and compliance.
Accordingly, the proposed regulations
would revise the section 367(a) GRA reg-
ulations to provide that a U.S. transferor
seeking either to (i) avoid recognizing gain
under section 367(a)(1) on the initial trans-
fer as a result of a failure to timely file an
initial GRA, or (ii) avoid triggering gain
as a result of a failure to comply in all
material respects with the section 367(a)
GRA regulations or the terms of an exist-
ing GRA, must demonstrate that the failure
was not a willful failure. For this purpose,
willful is to be interpreted consistent with
the meaning of that term in the context of
other civil penalties (for example, section
6672), which would include a failure due
to gross negligence, reckless disregard, or
willful neglect.
Whether a failure is willful will be de-
termined based on all the relevant facts and
circumstances. The proposed regulations
illustrate the application of this standard
through a series of examples. For exam-
ple, the section 367(a) GRA regulations re-
quire a GRA to include information about
the adjusted basis and fair market value of
the property transferred. Filing a GRA and
intentionally not providing such informa-
tion, including noting on the GRA that this
information is “available upon request,”
would be a willful failure.
In addition, the proposed regulations
modify the process through which requests
for relief from a failure to file or a failure
to comply are evaluated by eliminating the
requirement for the IRS to respond to such
relief requests within 120 days. While the
IRS is committed to processing requests
promptly, the IRS and the Treasury De-
partment do not believe that the IRS’s pro-
cessing time with respect to a relief request
should be determinative of whether a U.S.
transferor has satisfied its obligations un-
der the section 367(a) GRA regulations.
The proposed regulations also provide
guidance clarifying when an initial GRA
is considered timely filed, and what gives
rise to a failure to comply in any material
respect with the requirements of the sec-
tion 367(a) GRA regulations or the terms
of an existing GRA. In general, an initial
GRA is timely filed only if each document
that is required to be filed as part of an ini-
tial GRA is timely filed and completed in
all material respects.Similarly, in general,
thereisafailuretocomplyinamaterial
respect with the section 367(a) GRA reg-
ulations or the terms of an existing GRA
if a document (such as an annual certifi-
cation) that is required to be filed is not
timely filed, or is not completed in all ma-
terial respects. The examples provided in
the proposed regulations also illustrate the
application of the “completed in all mate-
rial respects” requirement of the current fi-
nal regulations.
The proposed regulations also clarify
that the section 6038B penalty will apply
to a failure to comply in any material re-
spect with the section 367(a) GRA regula-
tions or the terms of an existing GRA, such
as a failure to properly file a gain recogni-
tion agreement document (including an an-
nual certification or new GRA). Under the
proposed regulations, a failure to comply
has the same meaning for purposes of the
section 367(a) GRA regulations and the
section 6038B regulations; however, the
current reasonable cause standard contin-
ues to apply to U.S. transferors seeking re-
lief from the section 6038B penalty.
In addition, the section 6038B penalty
continues to apply, as provided under the
current section 6038B regulations, if both
a Form 926 is not filed with respect to the
initial transfer and there is a failure to file
an initial GRA. In this case, the current rea-
sonable cause standard continues to apply
to U.S. transferors seeking relief from the
section 6038B penalty.
The proposed regulations modify the
information that must be reported with re-
spect to a transfer of stock or securities
on Form 926. Specifically, the U.S. trans-
feror must include on Form 926 the basis
and fair market value of the property trans-
ferred. Finally, the proposed regulations
require that a Form 926 be filed in all cases
in which a GRA is filed, but provide that
only Part I and Part II of the Form 926 must
be completed if the only asset transferred is
stock or securities.
B. Proposed Amendments to the Section
367(e)(2) Regulations
The section 367(e)(2) regulations gov-
erning liquidating distributions to foreign
parent corporations contain several rules
that condition nonrecognition treatment
upon the timely filing of statements or
other documents, or complying with the
requirements of those regulations. These
documents are functionally similar to
GRAs in certain respects. The current
section 367(e)(2) regulations provide no
explicit guidance regarding the treatment
of taxpayers who fail to file these docu-
ments or report the required information,
and also provide no mechanism to obtain
relief for such failures. As discussed in
this preamble, the section 6038B regula-
tions also require that a Form 926 be filed
with respect to liquidating distributions by
a domestic corporation to a foreign parent
corporation.
The IRS and the Treasury Department
believe that the changes made by the pro-
posed regulations in the case of section
367(a) transfers are also appropriate for
failures to file or failures to comply for
purposes of the section 367(e)(2) regula-
tions and the related section 6038B reg-
ulations. Accordingly, the proposed reg-
ulations provide rules similar to the rules
under the section 367(a) GRA regulations
March 18, 20136682013–12 I.R.B.

and related section 6038B regulations for
failures to file the required documents or
statements and failures to comply under
the section 367(e)(2) regulations and re-
lated section 6038B regulations. Finally,
the proposed regulations modify the infor-
mation that must be reported with respect
to one or more liquidating distributions of
property, including the addition of the re-
quirement to report the basis and fair mar-
ket value of the property distributed.
C. Other Reporting Under Section
1.367(a)–3
The section 367(a) regulations cur-
rently do not address a taxpayer’s failure
to file certain other statements required un-
der §1.367(a)–3 in connection with certain
transfers of stock or securities. These in-
clude the statements required to be filed by
a domestic target corporation in connec-
tion with a transfer of stock or securities
of such corporation to a foreign corpo-
ration as described in §§1.367(a)–3(c)(6)
and (7), and the statement required to be
filed by a domestic target corporation in
connection with the transfer of its assets
to a foreign corporation in an exchange
described in section 361 and the subse-
quent transfer of those assets to a domestic
subsidiary in a transaction described in
§1.367(a)–3(d)(2)(vi)(B)(1)(ii). The IRS
and the Treasury Department believe that
failures to timely file these statements or
failures to comply in all material respects
with these regulations should be treated
similarly to failures to file or failures to
comply with the section 367(a) GRA reg-
ulations. Accordingly, these proposed
regulations incorporate similar rules with
respect to these other filing obligations.
Proposed Effective/Applicability Date
These regulations are proposed to ap-
ply with respect to documents or state-
ments required under the section 367(a)
GRA regulations, §1.367(a)–3(c) or (d) of
the regulations, or the section 367(e) regu-
lations that are required to be filed with a
timely filed return on or after the date that
final regulations are published in theFed-
eral Register, as well as with respect to
any requests for relief for failures to file
documents and statements required under
these regulations, or failures to comply, if
such requests are submitted on or after the
date that final regulations are published in
theFederal Register.
Special Analyses
It has been determined that this pro-
posed regulation is not a significant regu-
latory action as defined in Executive Or-
der 12866, as supplemented by Executive
Order 13563. Therefore, a regulatory as-
sessment is not required. It also has been
determined that section 553(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 these regulations
will not have a significant impact on a sub-
stantial number of small entities. This cer-
tification is based on the fact that these
regulations merely provide for a change
in the standard, or clarify or provide the
standard, that will be used to determine
whether a taxpayer that has failed to file, or
comply with the termsof, a gain recogni-
tion agreement or other related document,
a §1.367(a)–3 statement, or a document
or statement required under §1.367(e)–2
will be entitled to avoid full gain recogni-
tion under section 367(a)(1) or 367(e)(2),
as applicable. Accordingly, a Regulatory
Flexibility Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is not
required. Pursuant to section 7805(f) of
the Code, these regulations have been sub-
mitted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on their impact on small busi-
ness.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments (a
signed original and eight (8) copies) or
electronic comments that are submitted
timely to the IRS. The IRS and the Trea-
sury Department request comments on the
clarity of the proposed regulations and
how they may be made easier to under-
stand. All comments will be available for
public inspection and copying. A public
hearing may be scheduled if requested in
writing by any person who timely sub-
mits written or electronic comments. If a
public hearing is scheduled, notice of the
date, time, and place of the hearing will be
published in theFederal Register.
Drafting Information
The principal author of these pro-
posed regulations is Mary W. Lyons of
the Office of Associate 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 1.367(a)–3 is amended:
1. By revising paragraph (c)(6)(ii).
2. In paragraph (d)(2)(vi)(B)(1)(ii)by
removing the language “its U.S. income
tax return” and adding the language “its
timely filed U.S. income tax return” in its
place.
3. By adding paragraph (f).
4. By adding paragraph (g)(1)(ix).
The additions and revisions read as fol-
lows:
§1.367(a)–3. Treatment of transfers of
stock or securities to foreign corporations.
*****
(c) * * *
(6) * * *
(ii) Except as provided in paragraph (f)
of this section, for purposes of this para-
graph (c)(6), an income tax return will be
considered timely filed if such return is
filed, together with the statement required
by this paragraph (c)(6), on or before the
last date for filing a Federal income tax re-
turn (taking into account any extensions of
time therefor) for the taxable year in which
the transfer occurs.
*****
(f)Failure to file statements—(1)Con-
sequences of a failure to file. Except as
provided in paragraph (f)(2) of this sec-
tion, if there is a failure to file a state-
ment described in paragraph (c)(6), (c)(7),
or (d)(2)(vi)(C) of this section, then the
exceptions to the application of section
367(a)(1) provided in paragraphs (c) and
2013–12 I.R.B.669March 18, 2013

(d)(2)(vi)(B)(1)(ii) of this section will not
apply. For this purpose, there is a failure
to file the statement if the statement is not
filed with a timely filed return or is not
completed in all material respects.
(2)Relief for certain failures to file that
are not willful—(i)In general. A failure
to file described in paragraph (f)(1) of this
section will be deemed not to have oc-
curred for purposes of satisfying the re-
quirements of the applicable regulation if
the taxpayer is able to demonstrate that
the failure was not willful using the pro-
cedure set forth in this paragraph (f)(2).
For this purpose, willful is to be inter-
preted consistent with the meaning of that
term in the context of other civil penal-
ties, which would include a failure due
to gross negligence, reckless disregard, or
willful neglect. Whether a failure to file
was a willful failure will be determined by
the Director of Field Operations Interna-
tional, Large Business & International (or
any successor to the roles and responsibil-
ities of such position, as appropriate) (Di-
rector) based on all the facts and circum-
stances.
The taxpayer shall submit a request for
reliefandanexplanationasprovidedin
paragraph (f)(2)(ii) of this section. Al-
though a taxpayer whose failure to file is
determined not to be willful will avoid gain
recognition under this section, the taxpayer
will be subject to a penalty under section
6038B if the taxpayer fails to satisfy the
reporting requirements, if any, under that
section and does not demonstrate that the
failure was due to reasonable cause and not
willful neglect. See §1.6038B–1(f). The
determination of whether the failure to file
was willful under this section has no ef-
fect on any request for relief made under
§1.6038B–1(f).
(ii)Time of submission. A taxpayer’s
statement that the failure to file was not
willful will be considered only if, promptly
after the taxpayer becomes aware of the
failure, an amended return is filed for the
taxable year to which the failure relates
that includes the required statement and
a written statement explaining the reasons
for the failure. The amended return must
be filed with the applicable Internal Rev-
enue Service Center with which the tax-
payer filed its original return for such tax-
able year. The taxpayer may also submit a
request for relief from the penalty of sec-
tion 6038B as part of the same submission.
(iii)Notice requirement. In addition
to the requirements of paragraph (f)(2)(ii)
of this section, the taxpayer must comply
with the notice requirements of this para-
graph (f)(2)(iii). If any taxable year of
the taxpayer is under examination when
the amended return is filed, a copy of the
amended return and any information re-
quired to be included with such return must
be delivered to the Internal Revenue Ser-
vice personnel conducting the examina-
tion. If no taxable year of the taxpayer
is under examination when the amended
return is filed, a copy of the amended re-
turn and any information required to be in-
cluded with such return must be delivered
to the Director.
(3) For illustrations of the application of
the willfulness standard, see the examples
in §1.367(a)–8(p)(3).
(g) * * *
(1) * * *
(ix) Paragraphs (c)(6)(ii), (d)(2)(vi)
(B)(1)(ii)and(f)ofthissectionwill
apply to statements that are required to be
filed with a timely filed U.S. income tax
return on or after the date of publication
of the Treasury decision adopting these
rules as final regulations in theFederal
Register,aswellastoanyrequestsfor
relief for failures to file statements, if such
requests are submitted on or after the date
of publication of the Treasury decision
adopting these rules as final regulations in
theFederal Register.
*****
Par. 3. Section 1.367(a)–8 is amended:
1. By revising the eleventh sentence of
paragraph (a).
2. In paragraph (b)(1) by
a. Redesignating definitions (xii)
through (xv) as (xiv) through (xvii).
b. Redesignating definition (xi) as
(xiii).
c.Redesignating definitions (v)
through (x) as (vii) through (xii).
d. Redesignating definition (iv) as (v).
e. Adding new definitions (iv) and (vi).
f. Revising redesignated definitions
(xiii), (xiv), and (xv).
3. By revising paragraph (d)(1).
4. By revising paragraph (j)(8).
5. By revising paragraph (p).
6. By adding a sentence at the end of
paragraph (r)(1)(i).
The revisions and addition read as fol-
lows:
§1.367(a)–8 Gain recognition agreement
requirements—(a)Scope.* * *
Paragraph (p) of this section provides
relief for certain failures to file an ini-
tial gain recognition agreement or to com-
ply with the requirements of this section
with respect to an existing gain recognition
agreement. * * *
(b) * * *
(1) * * *
(iv) Again recognition agreement doc-
umentmeans any agreement, statement,
schedule, or form required to be filed under
this section, including an initial gain recog-
nition agreement, a new gain recognition
agreement described in paragraph (c)(5) of
this section, a Form 8838 extending the pe-
riod of limitations on assessment of tax de-
scribed in paragraph (f) of this section, and
an annual certification described in para-
graph (g) of this section.
*****
(vi) Aninitial gain recognition agree-
mentmeans the gain recognition agree-
ment entered into under paragraph (c) of
this section with respect to the initial trans-
fer.
*****
(xiii) Atimely filed returnis a Federal
income tax return filed by the due date
set forth in section 6072(a) or (b), plus
any extension of time to file such return
granted under section 6081.
(xiv)Transferee foreign corporation.
Except as provided in this paragraph
(b)(1)(xiv), thetransferee foreign corpo-
rationis the foreign corporation to which
the transferred stock or securities are trans-
ferred in an initial transfer. In the case of
an indirect stock transfer, the transferee
foreign corporation has the meaning set
forth in §1.367(a)–3(d)(2)(i). The trans-
feree foreign corporation also includes a
corporation designated as the transferee
foreign corporation in the case of a new
gain recognition agreement entered into
under this section.
(xv)Transferred corporation. Except
as provided in this paragraph (b)(1)(xv),
thetransferred corporationis the cor-
poration the stock or securities of which
are transferred in the initial transfer. In
the case of an indirect stock transfer, the
transferred corporation has the meaning
set forth in §1.367(a)–3(d)(2)(ii). The
transferred corporation also includes a
March 18, 20136702013–12 I.R.B.

corporation designated as the transferred
corporation in the case of a new gain
recognition agreement entered into under
this section.
*****
(d)Filing requirements—(1)General
rule. An initial gain recognition agree-
ment must be timely filed in order for the
U.S. transferor to avoid recognizing gain
under section 367(a)(1) with respect to the
transferred stock or securities by reason of
the applicable exceptions provided under
§1.367(a)–3. Except as provided in para-
graph (p) of this section, an initial gain
recognition agreement is timely filed only
if—
(i) The initial gain recognition agree-
ment and any other gain recognition agree-
ment document required to be filed with
the initial gain recognition agreement are
included with a timely filed return of the
U.S. transferor for the taxable year during
which the initial transfer occurs; and
(ii) Each gain recognition agreement
document identified in paragraph (d)(1)(i)
of this section is completed in all material
respects.
*****
(j) * * *
(8)Failure to comply.AU.S.trans-
feror fails to comply in any material re-
spect with any requirement of this section,
or the terms of the gain recognition agree-
ment as described in paragraph (c)(1) of
this section. A failure to comply under
this paragraph (j)(8) will extend the period
of limitations on assessment of tax until
the close of the third full taxable year end-
ing after the date on which the Director
of Field Operations International, Large
Business & International (or any succes-
sor to the roles and responsibilities of such
person) (Director) receives actual notice of
the failure to comply from the U.S. trans-
feror. Except as providedinparagraph(p)
of this section, for purposes of this para-
graph (j)(8), a failure to comply includes—
(i) If there is a gain recognition event in
a taxable year, a failure to report gain or
pay any additional tax or interest due un-
der the terms of the gain recognition agree-
ment; and
(ii) A failure to file a gain recognition
agreement document, other than an initial
gain recognition agreement or a document
required to be filed with the initial gain
recognition agreement. For this purpose,
there is a failure to file a gain recognition
agreement document if—
(A) The gain recognition agreement
document is not timely filed as required
under this section, or
(B) The gain recognition agreement
document is not completed in all material
respects.
*****
(p)Relief for certain failures to file or
failures to comply that are not willful—(1)
In general. This paragraph (p) provides
relief if there is a failure to file an initial
gain recognition agreement as required un-
der paragraph (d)(1) of this section (fail-
ure to file), or a failure to comply that is a
triggering event under paragraph (j)(8) of
this section (failure to comply). A failure
to file or failure to comply will be deemed
not to have occurred for purposes of para-
graph (d)(1) of this section or paragraph
(j)(8) of this section if the U.S. transferor
is able to demonstrate that the failure was
not willful using the procedure set forth in
this paragraph (p). For this purpose, will-
ful is to be interpreted consistent with the
meaning of that term in the context of other
civil penalties, which would include a fail-
ure due to gross negligence, reckless disre-
gard, or willful neglect. Whether a failure
to file or failure to comply was willful will
be determined by the Director based on all
the facts and circumstances.
The taxpayer shall submit a request for
relief and an explanation as provided in
paragraph (p)(2)(i) of this section. Al-
though a U.S. transferor whose failure to
file or failure to comply, as applicable, is
determined not to be willful will avoid gain
recognition under paragraph (b), (c), or (e)
of §1.367(a)–3, or paragraph (c)(1) of this
section, as applicable, the U.S. transferor
will be subject to a penalty under section
6038B if the U.S. transferor fails to satisfy
the reporting requirements under that sec-
tion and does not demonstrate that the fail-
ure was due to reasonable cause and not
willful neglect. See§1.6038B–1(b)(2) and
(f). The determination of whether the fail-
ure to file or failure to comply was willful
under this section has no effect on any re-
quest for relief made under §1.6038B–1(f).
(2)Procedures for establishing that a
failure to file or failure to comply was not
willful—(i)Time of submission.AU.S.
transferor’s statement that a failure to file
or failure to comply was not willful will
be considered only if, promptly after the
U.S. transferor becomes aware of the fail-
ure, an amended return is filed for the tax-
able year to which the failure relates that
includes the information that should have
been included with the original return for
such taxable year or that otherwise com-
plies with the rules of this section, and that
includes a written statement explaining the
reasons for the failure to file or failure to
comply. The U.S. transferor must file, with
the amended return, a Form 8838 extend-
ing the period of limitations on assessment
of tax with respect to the gain realized but
not recognized on the initial transfer to the
later of (1) the close of the eighth full tax-
able year following the taxable year dur-
ing which the initial transfer occurred, or
(2) three years from the date the required
information is provided to the IRS. The
amended return and Form 8838 must be
filed with the applicable Internal Revenue
Service Center with which the U.S. trans-
feror filed its original return for such tax-
able year. The U.S. transferor may submit
a request for relief from the penalty under
section 6038B as part of the same submis-
sion. See §1.6038B–1(f).
(ii)Notice requirement. In addition to
the requirements of paragraph (p)(2)(i) of
this section, the U.S. transferor must com-
ply with the noticerequirements of this
paragraph (p)(2)(ii). If any taxable year
of the U.S. transferor is under examina-
tion when the amended return is filed, a
copy of the amended return and any infor-
mationrequiredtobeincludedwithsuch
return must be delivered to the Internal
Revenue Service personnel conducting the
examination. If no taxable year of the
U.S. transferor is under examination when
the amended return is filed, a copy of the
amended return and any information re-
quired to be included with such return must
be delivered to the Director.
(3)Examples. The following exam-
ples illustrate the application of this para-
graph (p). All of the examples are based
solely on the following facts and any ad-
ditional facts stated in the particular exam-
ple. DC, a domestic corporation, wholly
owns FS and FA, each a foreign corpora-
tion. In Year 1, pursuant to a transaction
qualifying both as a reorganization under
section 368(a)(1)(B) and an exchange un-
der section 351, DC transferred all the FS
stock to FA solely in exchange for voting
stock of FA (FS Transfer). The fair mar-
2013–12 I.R.B.671March 18, 2013

ket value of the FS stock exceeded DC’s
tax basis in the stock. Absent the applica-
tion of section 367 to the transaction, DC’s
exchange of the FS stock for the stock of
FA qualified as a tax-free exchange under
section 354. Immediately after the trans-
action, both FA and FS were controlled
foreign corporations (as defined in section
957). Furthermore, DC was a section 1248
shareholder (as defined in §1.367(b)–2(b))
with respect to FA and FS, and a 5-percent
shareholder with respect to FA for pur-
poses of §1.367(a)–3(b)(ii). Thus, DC was
required to recognize gain under section
367(a)(1) by reason of the FS Transfer un-
less DC timely filed an initial gain recog-
nition agreement (GRA) as required by
paragraph (d)(1) of this section and com-
plied in all material respects with the re-
quirements of this section throughout the
term of the GRA. Theapplication of sec-
tion 6038B is not addressed in these ex-
amples. DC may be subject to a penalty
under section 6038B even if DC demon-
strates under this section that a failure to
file or failure to comply was not willful.
See §§1.6038B–1(b) and (f) for the appli-
cation of section 6038B.
Example 1.Taxpayer failed to file a GRA due to
accidental oversight.(i)Additional facts. DC filed its
tax return for the year of the FS Transfer, reporting no
gain with respect to the exchange of the FS stock. DC,
through its tax department, was aware of the require-
ment to file a GRA in order for DC to avoid recogniz-
inggainwithrespecttotheFSTransferundersection
367(a)(1), and had the experience and competency to
properly prepare the GRA. DC had filed many GRAs
over the years and had never failed to timely file a
GRA. However, although DC prepared the GRA with
respect to the FS Transfer, it was not filed with DC’s
tax return for the year of the FS Transfer due to an
accidental oversight. During the preparation of the
following year’s tax return, DC discovered that the
GRA was not filed. DC filed an amended return to
file the GRA and complied with the procedures set
forth under paragraph (p)(2) of this section promptly
after it became aware of the failure.
(ii)Result. Because DC failed to file a GRA with
its timely filed tax return for the year of the FS Trans-
fer, there is a failure to timely file the GRA as re-
quired by paragraph (d)(1) of this section. However,
based on the facts of thisExample 1, including that
the failure to timely file the GRA was an isolated
oversight, the failure to timely file is not a willful fail-
ure to file. Accordingly, the timely filed requirement
of paragraph (d)(1) of this section is considered to be
satisfied, and DC is not required to recognize the gain
realized on the FS Transfer under section 367(a)(1).
Example 2.Taxpayer’s course of conduct is taken
into account in determination.(i)Additional facts.
DC filed its tax return for the year of the FS Trans-
fer, reporting no gain with respect to the exchange of
the FS stock, but failed to file a GRA. DC, through its
tax department, was aware of the requirement to file a
GRAinorderforDCtoavoidrecognizinggainwith
respect to the FS Transfer under section 367(a)(1).
DC had not consistently and in a timely manner filed
GRAs in the past, and also had an established his-
tory of failing to timely file other tax and informa-
tion returns for which it was subject to penalties. In
a year subsequent to Year 1, DC transferred stock
of another foreign subsidiary with respect to which
DC had a built-in gain (FS2) to FA in a transaction
that qualified as both a reorganization under section
368(a)(1)(B) and an exchange described under sec-
tion 351 (FS2 Transfer). DC was required to recog-
nize gain on the FS2 Transfer under section 367(a)(1)
unless DC timely filed a GRA as required by para-
graph (d)(1) of this section and complied with the
requirements of this section during the term of the
GRA. DC reported no gain on the FS2 Transfer on
its tax return, but failed to file a GRA. At the time of
the FS2 Transfer, DC was already aware of its failure
to file the GRA required for the prior FS Transfer, but
had not implemented any safeguards to ensure that it
would timely file GRAs for future transactions. DC
filedanamendedreturntofiletheGRAfortheFS2
Transfer and complied with the procedures set forth
under paragraph (p)(2) of this section promptly after
it became aware of the failure. DC asserts that its
failure to timely file a GRA with respect to the FS2
Transfer was due to an isolated oversight similar to
the one that occurred with respect to the FS Transfer.
At issue is DC’s failure to timely file a GRA for the
FS2 Transfer.
(ii)Result. Because DC failed to file a GRA with
its timely filed tax return for the year of the FS2
Transfer, there is a failure to timely file the GRA as
required by paragraph (d)(1) of this section. DC’s
course of conduct is taken into account in determining
whether its failure to timely file a GRA for the FS2
Transfer was willful. Based on the facts of thisExam-
ple 2, including DC’s history of failing to file required
tax and information returns in general and GRAs in
particular, and its failure to implement safeguards to
ensure that it would timely file GRAs, the failure to
timely file a GRA with respect to the FS2 Transfer
rises to the level of a willful failure to timely file. Ac-
cordingly, the timely filed requirement of paragraph
(d)(1) of this section is not satisfied, and DC must rec-
ognize the full amount of the gain realized on the FS2
Transfer.
Example 3.GRA not completed in all material re-
spects.(i)Additional facts. DC timely filed its tax re-
turn for the year of the FS Transfer, reporting no gain
with respect to the exchange of the FS stock. DC was
aware of the requirement to file a GRA to avoid rec-
ognizing gain under section 367(a)(1), including the
requirement to provide the basis and fair market value
of the transferred stock. However, DC filed a pur-
ported GRA that did not contain the fair market value
of the FS stock. Instead, the GRA was filed with the
statement that the fair market value information was
“available upon request.” Other than the omission of
the fair market value of the FS stock, the GRA con-
tained all other information required by this section.
(ii)Result. Because DC omitted the fair market
value of the FS stock from the GRA, the GRA was not
completed in all material respects. Accordingly, there
is a failure to timely file the GRA. Furthermore, be-
cause DC knowingly omitted such information, DC’s
omission is a willful failure to timely file a GRA. Ac-
cordingly, the GRA is not considered timely filed for
purposes of paragraph (d)(1) of this section, and DC
must recognize the full amount of the gain realized on
the FS Transfer. A similar result would arise if DC
had included the fair market value of the FS stock,
but omitted its tax basis from the GRA.
Example 4.GRA filed as a result of hindsight.
(i)Additional facts. At the time that DC filed its tax
return for the tax year of the FS Transfer, DC antic-
ipated selling Business A in the following tax year,
which was expected to produce a capital loss that
could be carried back to fully offset the gain recog-
nized on the FS Transfer. DC chose not to file a GRA
but to recognize the gain from the FS Transfer under
section 367(a)(1), which it reported on its timely filed
tax return. However, a large class action lawsuit was
filed against Business A at the end of the following
year, and DC was unable to sell the business. As a re-
sult, DC did not realize the expected capital loss, and
was not able to offset the gain from the FS Transfer.
DC now seeks to file a GRA for the FS Transfer.
(ii)Result. Because DC failed to file a GRA with
its timely filed tax return for the year of the FS Trans-
fer, there is a failure to timely file the GRA as re-
quired by paragraph (d)(1) of this section. Further-
more, because DC knowingly chose not to file a GRA
for the FS Transfer, its actions constitute a willful fail-
ure to timely file a GRA. Accordingly, the GRA is
not considered timely filed for purposes of paragraph
(d)(1) of this section, and DC must recognize the full
amount of the gain realized on the FS Transfer.
*****
(r)Effective/applicability date—(1)
General rule—(i)Transfers occurring
on or after March 13, 2009.***
The eleventh sentence of paragraph (a)
and paragraphs (b)(1)(iv), (b)(1)(vi),
(b)(1)(xiii), (d)(1), (j)(8), and (p) of this
section will apply to gain recognition
agreement documents that are required to
be filed with a timely filed return on or
after the date of publication of the Trea-
sury decision adopting these rules as final
regulations in theFederal Register,as
well as to any requests for relief for fail-
ures to file gain recognition agreement
documents, or failures to comply, if such
requests are submitted on or after the date
of publication of the Treasury decision
adopting these rules as final regulations in
theFederal Register.
*****
Par. 4. Section 1.367(e)–2 is amended:
1. By revising the ninth sentence and
adding two new sentences before the last
sentence of paragraph (a).
2. By revising paragraph (b)(1)(i).
3. In paragraph (b)(2)(i)(A)(2)byre-
moving the language “its U.S. income
tax returns” and adding the language “its
timely filed U.S. income tax returns” in its
place.
March 18, 20136722013–12 I.R.B.

4. In paragraph (b)(2)(i)(A)(3)byre-
moving the language “its U.S. income tax
return” and adding the language “its timely
filed U.S. income tax return” in its place.
5. In the first sentence of paragraph
(b)(2)(i)(E)(3) by removing the language
“its U.S. income tax return” and adding the
language “its timely filed U.S. income tax
return” in its place.
6. In paragraph (b)(2)(i)(E)(4)(ii)by
removing the language “its U.S. income
tax return” and adding the language “its
timely filed U.S. income tax return” in its
place.
7. In paragraph (b)(2)(i)(E)(5)(ii)by
removing the language “its U.S. income
tax return” and adding the language “its
timely filed U.S. income tax return” in its
place.
8. In the first sentence of paragraph
(b)(2)(iii)(A) by removing the language
“its U.S. income tax return” and adding the
language “its timely filed U.S. income tax
return” in its place.
9. In paragraph (c)(2)(i)(B)(3)byre-
moving the language “their U.S. income
tax returns” and adding the language “their
timely filed U.S. income tax returns” in its
place.
10. By revising paragraph (e).
11. By adding paragraphs (f) and (g).
The revisions and additions read as fol-
lows:
§1.367(e)–2. Distributions described
in section 367(e)(2)—(a)Purpose and
scope—(1)In general.***
Paragraph (e) of this section provides
rules regarding failures to file statements
or other documents required under this
sectionorfailurestocomplywiththe
requirements of this section. Paragraph
(f) of this section provides relief for cer-
tain failures to file or comply. Finally,
paragraph (g) of this section specifies the
effective/applicability date for the rules of
this section. * * *
*****
(b)Distribution by a domestic corpora-
tion—(1)General rule—(i)Recognition of
gain and loss. If a domestic corporation
(domestic liquidating corporation) makes
a distribution of property in complete liq-
uidation under section 332 to a foreign cor-
poration (foreign distributee corporation)
that meets the stock ownership require-
ments of section 332(b) with respect to
stock in the domestic liquidating corpora-
tion, then—
(A) Pursuant to section 367(e)(2), sec-
tion 337(a) and (b)(1) shall not apply; and
(B) The domestic liquidating corpora-
tion shall recognize gain or loss on the
distributionofpropertytotheforeigndis-
tributee corporation, except as provided in
paragraph (b)(2) of this section.
*****
(e)Failures to file or failures to com-
ply—(1)Scope. This paragraph (e) pro-
vides rules regarding a failure to file an
initial liquidation document with respect
to one or more liquidating distributions by
a domestic liquidating corporation that,
absent such failure, would qualify for
nonrecognition treatment under paragraph
(b)(2)(i) or (iii) of this section, or with
respect to one or more liquidating distribu-
tions by a foreign liquidating corporation
that, absent such failure, would qualify for
nonrecognition treatment under paragraph
(c)(2)(i)(B) of this section (failure to file).
This paragraph (e) also provides rules re-
gardingfailurestocomplyinallmaterial
respects with the terms of this section with
respect to one or more liquidating distribu-
tions for which nonrecognition treatment
was initially claimed under paragraph
(b)(2)(i), (b)(2)(iii), or (c)(2)(i)(B) of this
section, as applicable(failure to comply).
(2)Definitions. The following defini-
tions apply for purposes of this section.
(i) Aninitial liquidation document
means any statement, schedule, or form
required to be filed under this section in
order for the domestic liquidating corpo-
ration or foreign liquidating corporation,
as applicable, to initially qualify to claim
nonrecognition treatment with respect to
one or more liquidating distributions de-
scribed in this section, including—
(A) The statement and attachments de-
scribed in paragraph (b)(2)(i)(C) of this
section;
(B) The statement described in para-
graph (b)(2)(iii)(D) of this section; and
(C) The statement and attachments de-
scribed in paragraph (c)(2)(i)(C) of this
section.
(ii) Asubsequent liquidation document
means any statement, schedule, or form
(other than an initial liquidation document)
required to be filed under this section in
order for the domestic liquidating corpora-
tion or foreign liquidating corporation, as
applicable, to continue to qualify for non-
recognition treatment with respect to one
or more liquidating distributions described
in this section, including—
(A) The schedule described in para-
graph (b)(2)(i)(E)(3) of this section;
(B) The schedule described in para-
graph (b)(2)(i)(E)(4)(ii)ofthissection;
and
(C) The statement and attachments de-
scribed in paragraph (b)(2)(i)(E)(5
)ofthis
section.
(iii) Atimely filed U.S. income tax re-
turnmeans a Federal income tax return
filedbytheduedatesetforthinsection
6072, plus any extension of time to file
such return granted under section 6081.
(3)Failure to file—(i)General rule.
For purposes of this section and except as
provided in paragraph (e)(5) or (f) of this
section, there is a failure to file an initial
liquidation document if—
(A) An initial liquidation document is
not filed with the timely filed U.S. income
tax return specified under this section, or
(B) An initial liquidation document is
not completed in all material respects.
(ii)Consequences of a failure to file.If
there is a failure to file an initial liquida-
tion document, then nonrecognition treat-
ment under paragraph (b)(2)(i), (b)(2)(iii),
or (c)(2)(i)(B) of this section (as appropri-
ate) will not apply.
(4)Failure to comply—(i)General rule.
For purpose of this section and except as
provided in paragraph (e)(5) or (f) of this
section, a failure to comply includes—
(A) A failure to report gain, or pay
any additional tax or interest due, in ac-
cordance with the requirements under this
section; and
(B) A failure to file a subsequent liqui-
dation document, as determined applying
paragraph (e)(3)(i) of this section, but re-
placing the term “initial liquidation docu-
ment” with the term “subsequent liquida-
tion document.”
(ii)Consequences of a failure to com-
ply. If there is a failure to comply in any
material respect with the terms of para-
graph (b)(2)(i), (b)(2)(iii), or (c)(2)(i) of
this section, as applicable, then—
(A) Any gain (but not loss) that was
not previously recognized by the domestic
liquidating corporation or foreign liquidat-
ing corporation, as applicable, under para-
graph (b)(2)(i), (b)(2)(iii), or (c)(2)(i)(B)
of this section must be recognized; and
2013–12 I.R.B.673March 18, 2013

(B) The period of limitations on assess-
ment of tax is extended until the close of
the third full taxable year ending after the
date on which the Director of Field Oper-
ations International, Large Business & In-
ternational (or any successor to the roles
and responsibilities of such position, as
appropriate) (Director) is provided written
notification that specifically references the
failure to comply, or a tax return is filed
reporting the gain that was not recognized
by the domestic liquidating corporation or
the foreign liquidating corporation, as ap-
plicable, by reason of paragraph (b)(2)(i),
(b)(2)(iii), or (c)(2)(i)(B) of this section.
(f)Relief for certain failures to file or
failures to comply that are not willful—(1)
In general. This paragraph (f) provides
relief if there is a failure to file an initial
liquidation document as described in para-
graph (e)(3)(i) of this section (failure to
file), or a failure tocomply in any mate-
rial respect with the terms of this section
as described in paragraph (e)(4)(i) of this
section (failure to comply), respectively.
The failure to file or a failure to comply,
as applicable, is deemed not to have oc-
curred for purposes of paragraph (e)(3)(ii)
or (e)(4)(ii) of this section if the taxpayer
is able to demonstrate that the failure was
not willful using the procedure set forth in
this paragraph (f). For this purpose, will-
ful is to be interpreted consistent with the
meaning of that term in the context of other
civil penalties, which would include a fail-
ure due to gross negligence, reckless dis-
regard, or willful neglect. Whether a fail-
ure to file or failure to comply, as applica-
ble, was willful will be determined by the
Director based on all the facts and circum-
stances.
The taxpayer shall submit a request for
reliefandanexplanationasprovidedin
paragraph (f)(2)(i) of this section. Al-
though a taxpayer whose failure to file or
failure to comply, as applicable, is deter-
mined not to be willful will avoid gain or
loss recognition under this section, the tax-
payer will be subject to a penalty under
section 6038B if the taxpayer fails to sat-
isfy the reporting requirements under that
section and does not demonstrate that the
failure was due to reasonable cause and not
willful neglect. See §1.6038B–1(e)(4) and
(f). The determination of whether the fail-
ure to file or failure to comply was willful
under this section has no effect on any re-
quest for relief made under §1.6038B–1(f).
(2)Procedures for establishing that
a failure to file or comply was not will-
ful—(i)Time of submission. A taxpayer’s
statement that the failure to file or failure
to comply, as applicable, was not willful
will be considered only if, promptly after
the taxpayer becomes aware of the failure,
an amended return is filed for the taxable
year to which the failure relates that in-
cludes the information that should have
been included with the original return for
such taxable year or that otherwise com-
plies with the rules of this section, and that
includes a written statement explaining
the reasons for the failure. In the case
of a liquidating distribution described in
paragraph (b)(2)(i) or (c)(2)(i)(B) of this
section, the taxpayer must file, with the
amended return, a Form 8838 extending
the period of limitations on the assessment
of tax with respect to the gain realized
but not recognized with respect to the
liquidating distribution to the later of the
date provided in paragraph (b)(2)(i)(C)(5),
taking into account paragraph (c)(2)(i)(C)
and (D), as applicable, or three years from
the date the required information is pro-
vided to, or the required gain or loss is
reported to, as applicable, the IRS. In the
case of a liquidating distribution described
in paragraph (b)(2)(iii) of this section,
the taxpayer must file, with the amended
return, a Form 8838 extending the period
of limitations on assessment of tax with
respect to the gain realized but not rec-
ognized with respect to the liquidating
distribution to three years from the date
the required information is provided to
the IRS, or the required gain or loss is
reported to the IRS. The amended return
and Form 8838 must be filed with the ap-
plicable Internal Revenue Service Center
with which the taxpayer filed its original
return for such taxable year. The taxpayer
may also submit a request for relief from
the penalty of section 6038B as part of the
same submission.
(ii)Notice requirement. In addition
to the requirements of paragraph (f)(2)(i)
of this section, the taxpayer must com-
ply with the notice requirements of this
paragraph (f)(2)(ii). If any taxable year of
the taxpayer is under examination when
the amended return is filed, a copy of
the amended return and any information
requiredtobeincludedwithsuchreturn
must be delivered to the Internal Revenue
Service personnel conducting the exami-
nation. If no taxable year of the taxpayer
is under examination when the amended
return is filed, a copy of the amended re-
turnandanyinformationrequiredtobe
included with such return must be deliv-
ered to the Director.
(3) For an illustration of the application
of the willfulness standard, see the exam-
ples in §1.367(a)–8(p)(3).
(g)Effective/applicability dates.The
ninth, tenth, and eleventh sentences
of paragraph (a) of this section, and
paragraphs (b)(1)(i), (b)(2)(i)(A)(2),
(b)(2)(i)(A)(3),(b)(2)(i)(E)(3),
(b)(2)(i)(E)(4)(ii),(b)(2)(i)(E)(5)(ii),
(b)(2)(iii)(A), (c)(2)(i)(B)(3), (e), and (f)
of this section will apply to liquidation
documents that are required to be filed
with a timely filed U.S. income tax return
on or after the date of publication of the
Treasury decision adopting these rules as
final regulations in theFederal Register,
as well as to any requests for relief for
failures to file liquidation documents, or
failures to comply, if such requests are
submitted on or after the date of publi-
cation of the Treasury decision adopting
these rules as final regulations in the
Federal Register.
Par. 5. Section 1.6038B–1 is amended
by:
1. Adding a sentence after the first sen-
tence in paragraph (b)(1)(i).
2. Revising paragraph (b)(2)(i)(B)(1).
3. Adding paragraph (b)(2)(iii).
4. Adding paragraph (b)(2)(iv).
5. Revising paragraph (c).
6. Revising paragraph (e)(4).
7. Adding paragraph (f)(2)(iii).
8. Adding paragraph (f)(2)(iv).
9. Adding paragraph (g)(5).
The revisions and additions read as fol-
lows:
§1.6038B–1. Reporting of certain
transfers to foreign corporations.
*****
(b)Time and manner of reporting—(1)
In general—(i)Reporting procedure.*
* * In addition, if the U.S. person files a
statement under §1.367(a)–3(d)(2)(vi)(C),
a gain recognition agreement under
§1.367(a)–8, or a liquidation document
under §1.367(e)–2(b), such person must
comply in all material respects with the re-
quirements of such section pursuant to the
terms of the statement, gain recognition
March 18, 20136742013–12 I.R.B.

agreement, or liquidation document, as
applicable, in order to satisfy a reporting
obligation under section 6038B. * * *
*****
(2) * * *
(i) * * *
(B) * * *
(1) Except as provided in paragraph
(b)(2)(iii) of this section, the U.S. trans-
feror (or one or more successors) filed an
initial gain recognition agreement under
§1.367(a)–8, and filed Form 926 in ac-
cordance with paragraph (b)(2)(iv) of this
section; or
*****
(ii) * * *
(iii)Timely filed initial gain recognition
agreement. Paragraph (b)(2)(i)(B)(1)of
this section will not apply unless the initial
gain recognition agreement is timely filed
as determined under §1.367(a)–8(d)(1),
but for purposes of this section, deter-
mined without regard to §1.367(a)–8(p).
However, see paragraph (f)(3) of this sec-
tion for certain relief that may be available.
(iv)Satisfaction of section 6038B re-
porting if a gain recognition agreement is
filed. If the U.S. transferor is described
in paragraph (b)(2)(i)(B)(1)ofthissec-
tion and is not otherwise required to file a
Form 926 with respect to a transfer of as-
sets other than the stock or securities to the
transferee foreign corporation, the require-
ments of this section are satisfied with re-
spect to the transfer of the stock or secu-
rities by completing Part I and Part II of
Form 926, noting in Part III that the in-
formation required by Form 926 with re-
spect to the transfer of stock or securities is
contained in a gain recognition agreement
filed pursuant to §1.367(a)–8, and attach-
ing a signed copy of the Form 926 to its
U.S. income tax return for the year of the
transfer. If the U.S. transferor is required
to file Form 926 with respect to a transfer
of assets in addition to the stock or secu-
rities, the requirements of this section are
satisfied with respect to the transfer of the
stock or securities by noting in Part III that
the information required by Form 926 with
respect to the transfer of stock or securities
is contained in a gain recognition agree-
ment filed pursuant to §1.367(a)–8.
*****
(c) * * *
(1) through (4)(i) [Reserved]. For fur-
ther guidance, see §1.6038B–1T(c)(1)
through (4)(i).
(ii)Stock or securities. Describe any
stock or securities that are transferred, in-
cluding the adjusted tax basis and fair mar-
ket value of the stock or securities, the
class or type, amount, and characteristics
of the stock or securities, and the name,
address, place of incorporation, and gen-
eral description of the corporation issu-
ing the stock or securities. In addition, if
any provision of §1.367(a)–3 applies to ex-
cept the transfer of the stock or securities
from section 367(a)(1), provide informa-
tion supporting the claimed application of
such provision. However, see paragraph
(b)(2) of this section for certain exceptions
and special rules for reporting transfers of
stock or securities under section 367(a).
(5) [Reserved]. For further guidance,
see §1.6038B–1T(c)(5).
*****
(e) * * *
(4)Reporting rules for section
367(e)(2) distributions by domestic liq-
uidating corporations—(i)General rule.
Except as provided in paragraph (e)(4)(ii)
of this section, if the distributing corpo-
ration makes a distribution of property in
complete liquidation under section 332
to a foreign distributee corporation that
meets the stock ownership requirements
of section 332(b) with respect to the stock
of the distributing corporation, then the
distributing corporation shall complete a
Form926andattachasignedcopyofsuch
form to its timely filed U.S. income tax
return for the taxable years that include
one or more liquidating distributions. The
property description contained in Part III
of the Form 926 shall contain a descrip-
tion, including the adjusted tax basis and
fair market value, of all property dis-
tributed by the distributing corporation
(regardless of whetherthe distribution of
the property qualifies for nonrecognition
treatment). The description shall also
identify the items of property for which
nonrecognition treatment is claimed under
§1.367(e)–2(b)(2)(ii) or (iii), as applica-
ble.
(ii)Special rule. Except as provided in
paragraph (e)(4)(iii) of this section, if the
distributing corporation distributes items
of property that will be used by the for-
eign distributee corporation in the conduct
of a trade or business in the United States
and the distributing corporation does not
recognize gain or loss on such distribu-
tion under §1.367(e)–2(b)(2)(i) with re-
spect to such property, then the distribut-
ing corporation may satisfy the require-
ments of this section by completing Part
I and Part II of Form 926, noting in Part
IIIthattheinformationrequiredbyForm
926 is contained in a statement required
by §1.367(e)–2(b)(2)(i)(C)(2), and attach-
ing a signed copy of Form 926 to its timely
filed U.S. income tax return for the tax-
able years that include one or more distri-
butions in liquidation. In addition, if the
distributing corporation distributes stock
of a domestic subsidiary corporation and
does not recognize gain or loss on such dis-
tribution under §1.367(e)–2(b)(2)(iii) with
respect to such stock, then the distribut-
ing corporation may satisfy the require-
ments of this section by completing Part
I and Part II of Form 926, noting in Part
IIIthattheinformationrequiredbyForm
926 is contained in a statement required
by §1.367(e)–2(b)(2)(iii)(D), and attach-
ing a signed copy of Form 926 to its timely
filed U.S. income tax return for the tax-
able years that include one or more distri-
butions of domestic subsidiary stock.
(iii)Properly filed statement. Para-
graph (e)(4)(ii) will not apply if there
is a failure to file an initial liquida-
tion document as determined under
§1.367(e)–2(e)(3)(i), but for purposes of
this section, determined without regard to
§1.367(e)–2(f). However, see paragraph
(f)(3) of this section for certain relief that
may be available.
(f) * * *
(2) * * *
(iii) With respect to an initial gain
recognition agreement filed under
§1.367(a)–8, a failure to comply as de-
termined under §1.367(a)–8(j)(8), but
for purposes of this section, determined
without regard to the application of
§1.367(a)–8(p).
(iv) With respect to an initial liquidation
document filed under §1.367(e)–2(b)(1),
a failure to comply as determined under
§1.367(e)–2(e)(4)(i), but for purposes of
this section, determined without regard to
the application of §1.367(e)–2(f).
*****
(g) * * *
2013–12 I.R.B.675March 18, 2013

(5) The second sentence of paragraph
(b)(1)(i) and paragraphs (b)(2)(i)(B)(1),
(b)(2)(iii), (b)(2)(iv), (c), (e)(4), (f)(2)(iii),
and (f)(2)(iv) of this section will apply
to documents required to be filed with
a timely filed return on or after the date
of publication of the Treasury decision
adopting these rules as final regulations
in theFederal Register,aswellasto
any requests for relief for failures to file
documents, or failures to comply, if such
requests are submitted on or after the date
of publication of the Treasury decision
adopting these rules as final regulations in
theFederal Register.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on January 30,
2013, 8:45 a.m., and published in the issue of the Federal
Register for January 31, 2013, 77 F.R. 6772)
Notice of Proposed
Rulemaking by
Cross-Reference to
Temporary Regulations
Bond Premium Carryforward
REG–140437–12
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions.
SUMMARY: In this issue of the Bulletin,
the IRS is issuing temporary regulations
that provide guidance on the tax treatment
of a debt instrument with a bond premium
carryforward in the holder’s final accrual
period, including a Treasury bill acquired
at a premium. The text of those regulations
also serves as the text of these proposed
regulations.
DATES: Written or electronic comments
must be received by April 4, 2013.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–140437–12),
room 5203, Internal Revenue Service,
PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand-delivered Monday through Friday
betweenthehoursof8a.m. and4p.m.
to CC:PA:LPD:PR (REG–140437–12),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, N.W.,
Washington, DC, or sent electronically
viatheFederaleRulemaking
Portal atwww.regulations.gov(IRS
REG–140437–12).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, William E. Blanchard,
(202)622–3900;concerning
submissionsofcomments,
Oluwafunmilayo (Funmi) Taylor, (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Temporary regulations in this issue of
the Bulletin amend the Income Tax Reg-
ulations (26 CFR part 1) relating to sec-
tion 171. The temporary regulations pro-
vide guidance on the tax treatment of a
taxable debt instrument with a bond pre-
mium carryforward in the holder’s final ac-
crual period, including a Treasury bill ac-
quired at a premium. In general, the tem-
porary regulations provide that, upon the
sale, retirement, or other disposition of a
taxable bond, the holder treats the amount
of any bond premium carryforward deter-
mined as of the end of the accrual period
under §1.171–2(a)(4)(i)(B) as a bond pre-
mium deduction under section 171(a)(1)
for the holder’s taxable year in which the
sale, retirement, or other disposition oc-
curs. The text of the temporary regulations
also serves as the text of these proposed
regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866, as supplemented by Execu-
tive Order 13563. Therefore, a regulatory
assessment is not required. 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 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 Internal
Revenue Code, this notice of proposed
rulemaking has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small businesses.
Comments
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies)orelectroniccom-
ments that are submitted timely to the IRS
as prescribed in the preamble under the
“Addresses” heading. The Treasury De-
partment and the IRS welcome comments
on the clarity of the proposed rules and
how they can be made easier to under-
stand. All comments will be available at
www.regulations.govfor public inspection
and copying. A public hearing may be
scheduled if requested in writing by any
person that timely submits written com-
ments. If a public hearing is scheduled, no-
tice of the date, time, and place for a pub-
lic hearing will be published in theFederal
Register.
Drafting Information
The principal author of these regu-
lations is William E. Blanchard, Office
of Associate Chief Counsel (Financial
Institutions and Products). 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:
March 18, 20136762013–12 I.R.B.

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 1.171–2 is amended
by adding a new paragraph (a)(4)(i)(C) to
read as follows:
§1.171–2 Amortization of bond premium.
(a) * * *
(4) * * *
(i) * * *
(C) [The text of the proposed amend-
ment to §1.171–2(a)(4)(i)(C) is the same
as the text for §1.171–2T(a)(4)(i)(C) pub-
lished elsewhere in this issue of the Bul-
letin].
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on January 3,
2013, 8:45 a.m., and published in the issue of the Federal
Register for January 4, 2013, 78 F.R. 687)
2013–12 I.R.B.677March 18, 2013

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.
March 18, 2013i2013–12 I.R.B.

Numerical Finding List
1
Bulletins 2013–1 through 2013–12
Announcements:
2013-1, 2013-1 I.R.B.251
2013-2, 2013-2 I.R.B.271
2013-3, 2013-2 I.R.B.271
2013-4, 2013-4 I.R.B.440
2013-5, 2013-3 I.R.B.306
2013-6, 2013-3 I.R.B.307
2013-7, 2013-3 I.R.B.308
2013-8, 2013-4 I.R.B.440
2013-9, 2013-4 I.R.B.441
2013-10, 2013-3 I.R.B.311
2013-11, 2013-6 I.R.B.483
2013-12, 2013-11 I.R.B.651
2013-13, 2013-9 I.R.B.532
2013-14, 2013-11 I.R.B.651
2013-15, 2013-11 I.R.B.652
Notices:
2013-1, 2013-3 I.R.B.281
2013-2, 2013-6 I.R.B.473
2013-3, 2013-7 I.R.B.484
2013-4, 2013-9 I.R.B.527
2013-5, 2013-9 I.R.B.529
2013-6, 2013-10 I.R.B.540
2013-7, 2013-6 I.R.B.477
2013-8, 2013-7 I.R.B.486
2013-9, 2013-9 I.R.B.529
2013-10, 2013-8 I.R.B.503
2013-11, 2013-11 I.R.B.610
2013-12, 2013-10 I.R.B.543
2013-13, 2013-12 I.R.B.659
Proposed Regulations:
REG-155929-06, 2013-11 I.R.B.650
REG-141066-09, 2013-3 I.R.B.289
REG-148873-09, 2013-7 I.R.B.494
REG-102966-10, 2013-10 I.R.B.579
REG-140649-11, 2013-12 I.R.B.666
REG-122707-12, 2013-5 I.R.B.450
Revenue Procedures:
2013-1, 2013-1 I.R.B.1
2013-2, 2013-1 I.R.B.92
2013-3, 2013-1 I.R.B.113
2013-4, 2013-1 I.R.B.126
2013-5, 2013-1 I.R.B.170
2013-6, 2013-1 I.R.B.198
2013-7, 2013-1 I.R.B.233
2013-8, 2013-1 I.R.B.237
2013-9, 2013-2 I.R.B.255
2013-10, 2013-2 I.R.B.267
2013-11, 2013-2 I.R.B.269
Revenue Procedures— Continued:
2013-12, 2013-4 I.R.B.313
2013-13, 2013-6 I.R.B.478
2013-14, 2013-3 I.R.B.283
2013-15, 2013-5 I.R.B.444
2013-16, 2013-7 I.R.B.488
2013-17, 2013-11 I.R.B.612
2013-18, 2013-8 I.R.B.503
2013-19, 2013-11 I.R.B.648
2013-21, 2013-12 I.R.B.660
Revenue Rulings:
2013-1, 2013-2 I.R.B.252
2013-2, 2013-10 I.R.B.533
2013-3, 2013-8 I.R.B.500
2013-4, 2013-9 I.R.B.520
2013-5, 2013-9 I.R.B.525
2013-7, 2013-11 I.R.B.608
Treasury Decisions:
9601, 2013-10 I.R.B.535
9603, 2013-3 I.R.B.273
9605, 2013-11 I.R.B.587
9606, 2013-11 I.R.B.586
9607, 2013-6 I.R.B.469
9608, 2013-3 I.R.B.274
9609, 2013-12 I.R.B.655
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2012–27 through 2012–52 is in Internal Revenue Bulletin
2012–52, dated December 27, 2012.
2013–12 I.R.B.iiMarch 18, 2013

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2013–1 through 2013–12
Notices:
2011-14
Amplified and supplemented by
Notice 2013-7, 2013-6 I.R.B.477
2011-38
Obsoleted by
REG-148873-09, 2013-7 I.R.B.494
2012-60
Superseded by
Notice 2013-1, 2013-3 I.R.B.281
Proposed Regulations:
REG-140668-07
Corrected by
Ann. 2013-6, 2013-3 I.R.B.307
Revenue Procedures:
87-57
Modified by
Rev. Proc. 2013-13, 2013-6 I.R.B.478
2004-66
Modified and superseded by
Rev. Proc. 2013-11, 2013-2 I.R.B.269
2008-35
Modified and superseded by
Rev. Proc. 2013-14, 2013-3 I.R.B.283
2008-50
Modified and superseded by
Rev. Proc. 2013-12, 2013-4 I.R.B.313
2011-49
Modified by
Rev. Proc. 2013-6, 2013-1 I.R.B.198
2011-52
Modified and partly superseded by
Rev. Proc. 2013-15, 2013-5 I.R.B.444
2011-55
Amplified and supplemented by
Notice 2013-7, 2013-6 I.R.B.477
2011-61
Superseded by
Rev. Proc. 2013-17, 2013-11 I.R.B.612
2011-62
Superseded by
Rev. Proc. 2013-18, 2013-8 I.R.B.503
2012-1
Superseded by
Rev. Proc. 2013-1, 2013-1 I.R.B.1
Revenue Procedures— Continued:
2012-2
Superseded by
Rev. Proc. 2013-2, 2013-1 I.R.B.92
2012-3
Superseded by
Rev. Proc. 2013-3, 2013-1 I.R.B.113
2012-4
Superseded by
Rev. Proc. 2013-4, 2013-1 I.R.B.126
2012-5
Superseded by
Rev. Proc. 2013-5, 2013-1 I.R.B.170
2012-6
Superseded by
Rev. Proc. 2013-6, 2013-1 I.R.B.198
2012-7
Superseded by
Rev. Proc. 2013-7, 2013-1 I.R.B.233
2012-8
Superseded by
Rev. Proc. 2013-8, 2013-1 I.R.B.237
2012-9
Superseded by
Rev. Proc. 2013-9, 2013-2 I.R.B.255
2012-10
Superseded by
Rev. Proc. 2013-10, 2013-2 I.R.B.267
2012-30
Corrected and clarified by
Ann. 2013-3, 2013-2 I.R.B.271
Updated by
Ann. 2013-10, 2013-3 I.R.B.311
2012-46
Corrected by
Ann. 2013-11, 2013-6 I.R.B.483
2013-1
Corrected by
Ann. 2013-9, 2013-4 I.R.B.441
2013-6
Revised by
Ann. 2013-15, 2013-11 I.R.B.652
Corrected by
Ann. 2013-13, 2013-9 I.R.B.532
2013-14
Modified by
Rev. Proc. 2013-19, 2013-11 I.R.B.648
Revenue Rulings:
92-19
Supplemented in part by
Rev. Rul. 2013-4, 2013-9 I.R.B.520
Treasury Decisions:
9564
Corrected by
Ann. 2013-4, 2013-4 I.R.B.440
Amended by
Ann. 2013-7, 2013-3 I.R.B.308
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2012–27 through 2012–52 is in Internal Revenue Bulletin 2012–52, dated December 27,
2012.
March 18, 2013iii2013–12 I.R.B.

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ashington,DC20224
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