Internal Revenue Bulletin 2015-26 (PDF rendition): IRS Revenue Procedures

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# INTERNAL REVENUE BULLETIN

IRS

## 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

### REG-101652-10, page 1197.

These amendments would revise the rules concerning the use
of a consolidated group's losses attributable to a subsidiary in
a consolidated return year in which stock of that subsidiary is
disposed of.

### REG-138759-14, page 1209.

Proposed regulations that would allow consolidated group
members that are partners in the same partnership to aggre-
gate their bases in stock distributed by the partnership for the
purpose of limiting the application of rules that might otherwise
cause basis reduction or gain recognition. The proposed reg-
ulations would also require certain corporations that engage in
gain elimination transactions to reduce the basis of corporate
assets or to recognize gain.

### REG-149518-03, page 1213.

Proposed regulations that prevent a corporate partner from
avoiding corporate-level gain through transactions with a part-
nership involving equity interests of the partner. These regula-
tions apply when a corporate partner acquires or increases its
interest in its own stock held by a partnership in exchange for
appreciated property, and also addresses partnership distribu-
tions of corporate partner stock to the corporate partner.

### Rev. Rul. 2015-12, page 1080.

Interest rates: underpayment and overpayments. The rates for
interest determined under section 6621 of the code for the
calendar quarter beginning July 1, 2015, will be 3 percent for
overpayments (2 percent in the case of a corporation), 3
percent for the underpayments, and 5 percent for large cor-
poration underpayments. The rate of interest paid on the por-
tion of a corporation overpayment exceeding $10,000 will be
0.5 percent.

Bulletin No.

2015-26

June

29, 2015

### Rev. Proc. 2015-35, page 1142.

This procedure provides specifications for the private printing
of red-ink substitutes for the 2015 revisions of certain infor-
mation returns. This procedure will be reproduced as the next
revision of Publication 1179. Rev. Proc. 2014-44 is super-
seded.

### Notice 2015-44, page 1140.

2015 Section 45Q Inflation Adjustment Factor. This notice
publishes the inflation adjustment factor for the carbon dioxide
(CO2) sequestration credit under § 45Q for calendar year
2015. The notice also includes a statement of the amount of
qualified CO2 that has been taken into account for purposes of
the § 45Q credit by taxpayers filing an annual report pursuant
to section 6 of Notice 2009-83, 2009-2 C.B. 588.

### Notice 2015-45, page 1140.

2014 Section 45K(d)(2)(C) Reference Price. This notice pub-
lishes the reference price under § 45K(d)(2)(C) of the Internal
Revenue Code for calendar year 2014. The reference price
applies in determining the amount of the enhanced oil recovery
credit under § 43, the marginal well production credit under
§ 45I, and the percentage depletion in case of oil and natural
gas produced from marginal properties under § 613A.

### T.D. 9722, page 1094.

Final and temporary regulations that prevent a corporate part-
ner from avoiding corporate-level gain through transactions
with a partnership involving equity interests of the partner.
These regulations apply when a corporate partner acquires or
increases its interest in its own stock held by a partnership in
exchange for appreciated property, and also addresses part-
nership distributions of corporate partner stock to the corpo-
rate partner.

(Continued on the next page)

Finding Lists begin on page ii.

## EMPLOYEE PLANS

### Notice 2015-42, page 1137.

This notice sets forth updates on the corporate bond monthly
yield curve, the corresponding spot segment rates for June
2015 used under § 417(e)(3)(D), the 24-month average seg-
ment rates applicable for June 2015, and the 30-year Treasury
rates. These rates reflect the application of § 430(h)(2)(C)(iv),
which was added by the Moving Ahead for Progress in the 21 st
Century Act, Public Law 112-141 (MAP-21) and amended by
section 2003 of the Highway and Transportation Funding Act of
2014 (HATFA).

### T.D. 9724, page 1105.

This document contains final regulations regarding disclosure
of the summary of benefits and coverage and the uniform
glossary for group health plans and health insurance coverage
in the group and individual markets under the Patient Protection
and Affordable Care Act. These final rules amend the 2012 final
regulations to incorporate guidance, concerning document re-
quirements and safe harbors, that was issued by the Depart-
ments of Labor, HHS and IRS/Treasury subsequent to the
publication of the 2012 final regulations.

## ESTATE TAX

### Rev. Proc. 2015-37, page 1196.

Revenue Procedure 2015-37 amplifies section 5.01 of Reve-
nue Procedure 2015-3 and provides that, until the Service
resolves the issue through publication of a revenue ruling,
revenue procedure, regulations, or otherwise, the Service will
not issue rulings to taxpayers concerning whether the assets in
a grantor trust receive a § 1014 basis step-up at the death of
the deemed owner of the trust for income tax purposes when
those assets are not includible in the gross estate of that
owner under chapter 11 of subtitle B of the Internal Revenue
Code.

### T.D. 9725, page 1122.

These final regulations provide rules for determining the appli-
cable credit amount and applicable exclusion amount allowed
to the estate of a decedent against the gift or estate tax. In
addition, these final regulations provide rules for electing por-
tability of a deceased spousal unused exclusion amount to the
surviving spouse and rules regarding the surviving spouse's
use of this amount. Portability of a deceased spousal unused
exclusion amount is available where the death of the first
spouse to die occurs on or after January 1, 2011.

## GIFT TAX

### T.D. 9725, page 1094.

## EXCISE TAX

### T.D. 9724, page 1105.

## ADMINISTRATIVE

### REG-101652-10, page 1197.

These amendments would revise the rules concerning the use of a
consolidated group's losses attributable to a subsidiary in a consoli-
dated return year in which stock of that subsidiary is disposed of.

### Rev. Proc. 2015-35, page 1142.

This procedure provides specifications for the private printing of
red-ink substitutes for the 2014 revisions of certain information
returns. This procedure will be reproduced as the next revision of
Publication 1179. Rev. Proc. 2014-44 is superseded.

### Rev. Proc. 2015-37, page 1196.

Revenue Procedure 2015-37 amplifies section 5.01 of Revenue
Procedure 2015-3 and provides that, until the Service resolves
the issue through publication of a revenue ruling, revenue proce-
dure, regulations, or otherwise, the Service will not issue rulings to
taxpayers concerning whether the assets in a grantor trust re-
ceive a § 1014 basis step-up at the death of the deemed owner
of the trust for income tax purposes when those assets are not
includible in the gross estate of that owner under chapter 11 of
subtitle B of the Internal Revenue Code.

## The IRS Mission

Provide America's taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with 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.

It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal 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, identify-
ing 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 .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal 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, Legisla-
tion 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 Sec-
retary (Enforcement).

### Part IV .- Items of General Interest.

This part 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 contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

## Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

### Section 6621 .- Determination of Rate of Interest

26 CFR 301.6621-1: Interest rate.

### Rev. Rul. 2015-12 ISSUE

Section 6621 of the Internal Revenue
Code establishes the interest rates on
overpayments and underpayments of tax.
Under section 6621(a)(1), the overpay-
ment rate is the sum of the federal short-
term rate plus 3 percentage points (2 per-
centage points in the case of a
corporation), except the rate for the por-
tion of a corporate overpayment of tax
exceeding $10,000 for a taxable period is
the sum of the federal short-term rate plus
0.5 of a percentage point. Under section
6621(a)(2), the underpayment rate is the
sum of the federal short-term rate plus 3
percentage points.

Section 6621(c) provides that for pur-
poses of interest payable under section
6601 on any large corporate underpay-
ment, the underpayment rate under section
6621(a)(2) is determined by substituting
"5 percentage points" for "3 percentage
points."

See section 6621(c) and section
301.6621-3 of the Regulations on Proce-
dure and Administration for the definition
of a large corporate underpayment and for
the rules for determining the applicable
date. Section 6621(c) and section

301.6621-3 are generally effective for pe-
riods after December 31, 1990.

Section 6621(b)(1) provides that the
Secretary will determine the federal short-
term rate for the first month in each cal-
endar quarter. Section 6621(b)(2)(A) pro-
vides that the federal short-term rate
determined under section 6621(b)(1) for
any month applies during the first calen-
dar quarter beginning after that month.
Section 6621(b)(3) provides that the fed-
eral short-term rate for any month is the
federal short-term rate determined during
that month by the Secretary in accordance
with section 1274(d), rounded to the near-
est full percent (or, if a multiple of 1/2 of
1 percent, the rate is increased to the next
highest full percent).

Notice 88-59, 1988-1 C.B. 546, an-
nounced that in determining the quarterly
interest rates to be used for overpayments
and underpayments of tax under section
6621, the Internal Revenue Service will
use the federal short-term rate based on
daily compounding because that rate is
most consistent with section 6621 which,
pursuant to section 6622, is subject to
daily compounding.

The federal short-term rate determined
in accordance with section 1274(d) during
April 2015 is the rate published in Reve-
nue Ruling 2015-8, 2015-18 IRB 945 to
take effect beginning May 1, 2015. The
federal short-term rate, rounded to the
nearest full percent, based on daily com-
pounding determined during the month of
April 2015 is 0 percent. Accordingly, an
overpayment rate of 3 percent (2 percent

in the case of a corporation) and an un-
derpayment rate of 3 percent are estab-
lished for the calendar quarter beginning
July 1, 2015. The overpayment rate for the
portion of a corporate overpayment ex-
ceeding $10,000 for the calendar quarter
beginning July 1, 2015 is 0.5 percent. The
underpayment rate for large corporate un-
derpayments for the calendar quarter be-
ginning July 1, 2015, is 5 percent. These
rates apply to amounts bearing interest
during that calendar quarter.

The 3 percent rate also applies to esti-
mated tax underpayments for the third cal-
endar quarter in 2015.

Interest factors for daily compound in-
terest for annual rates of 0.5 percent are
published in Appendix A of this Revenue
Ruling. Interest factors for daily com-
pound interest for annual rates of 2 per-
cent, 3 percent and 5 percent are published
in Tables 9, 11, and 15 of Rev. Proc.
95-17, 1995-1 C.B. 563, 565, and 569.

Annual interest rates to be com-
pounded daily pursuant to section 6622
that apply for prior periods are set forth
in the tables accompanying this revenue
ruling.

## DRAFTING INFORMATION

The principal author of this revenue
ruling is Deborah Colbert-James of the
Office of Associate Chief Counsel (Proce-
dure & Administration). For further infor-
mation regarding this revenue ruling, con-
tact Ms. Colbert-James at (202) 317-3400
(not a toll-free number).

## APPENDIX A

365 Day Year

Days

0.5% Compound Rate 184 Days

Factor

Days

Factor

Days

0.000013699

0.000863380

125

0.001713784

0.000027397

0.000877091

126

0.001727506

0.000041096

0.000890801

127

0.001741228

0.000054796

0.000904512

128

0.001754951

0.000068495

0.000918223

129

0.001768673

0.000082195

0.000931934

130

0.001782396

365 Day Year
0.5% Compound Rate 184 Days

Days

Factor

Days

Factor

Days

Factor

0.000095894

0.000945646

131

0.001796119

0.000109594

0.000959357

132

0.001809843

0.000123294

0.000973069

133

0.001823566

0.000136995

0.000986781

134

0.001837290

0.000150695

0.001000493

135

0.001851013

0.000164396

0.001014206

136

0.001864737

0.000178097

0.001027918

137

0.001878462

0.000191798

0.001041631

138

0.001892186

0.000205499

0.001055344

139

0.001905910

0.000219201

0.001069057

140

0.001919635

0.000232902

0.001082770

141

0.001933360

0.000246604

0.001096484

142

0.001947085

0.000260306

0.001110197

143

0.001960811

0.000274008

0.001123911

144

0.001974536

0.000287711

0.001137625

145

0.001988262

0.000301413

0.001151339

146

0.002001988

0.000315116

0.001165054

147

0.002015714

0.000328819

0.001178768

148

0.002029440

0.000342522

0.001192483

149

0.002043166

0.000356225

0.001206198

150

0.002056893

0.000369929

0.001219913

151

0.002070620

0.000383633

0.001233629

152

0.002084347

0.000397336

0.001247344

153

0.002098074

0.000411041

0.001261060

154

0.002111801

0.000424745

0.001274776

155

0.002125529

0.000438449

0.001288492

156

0.002139257

0.000452154

0.001302208

157

0.002152985

0.000465859

0.001315925

158

0.002166713

0.000479564

0.001329641

159

0.002180441

0.000493269

0.001343358

160

0.002194169

0.000506974

0.001357075

161

0.002207898

0.000520680

100

0.001370792

162

0.002221627

0.000534386

101

0.001384510

163

0.002235356

0.000548092

102

0.001398227

164

0.002249085

0.000561798

103

0.001411945

165

0.002262815

0.000575504

104

0.001425663

166

0.002276544

0.000589211

105

0.001439381

167

0.002290274

0.000602917

106

0.001453100

168

0.002304004

0.000616624

107

0.001466818

169

0.002317734

0.000630331

108

0.001480537

170

0.002331465

0.000644039

109

0.001494256

171

0.002345195

0.000657746

110

0.001507975

172

0.002358926

0.000671454

111

0.001521694

173

0.002372657

0.000685161

112

0.001535414

174

0.002386388

365 Day Year
0.5% Compound Rate 184 Days

Days

Factor

Days

Factor

Days

Factor

0.000698869

113

0.001549133

175

0.002400120

0.000712578

114

0.001562853

176

0.002413851

0.000726286

115

0.001576573

177

0.002427583

0.000739995

116

0.001590293

178

0.002441315

0.000753703

117

0.001604014

179

0.002455047

0.000767412

118

0.001617734

180

0.002468779

0.000781121

119

0.001631455

181

0.002482511

0.000794831

120

0.001645176

182

0.002496244

0.000808540

121

0.001658897

183

0.002509977

0.000822250

122

0.001672619

184

0.002523710

0.000835960

123

0.001686340

0.000849670

124

0.001700062

366 Day Year 0.5% Compound Rate 184 Days Days Factor Days Factor Days Factor

0.000013661

0.000861020

125

0.001709097

0.000027323

0.000874693

126

0.001722782

0.000040984

0.000888366

127

0.001736467

0.000054646

0.000902040

128

0.001750152

0.000068308

0.000915713

129

0.001763837

0.000081970

0.000929387

130

0.001777522

0.000095632

0.000943061

131

0.001791208

0.000109295

0.000956735

132

0.001804893

0.000122958

0.000970409

133

0.001818579

0.000136620

0.000984084

134

0.001832265

0.000150283

0.000997758

135

0.001845951

0.000163947

0.001011433

136

0.001859638

0.000177610

0.001025108

137

0.001873324

0.000191274

0.001038783

138

0.001887011

0.000204938

0.001052459

139

0.001900698

0.000218602

0.001066134

140

0.001914385

0.000232266

0.001079810

141

0.001928073

0.000245930

0.001093486

142

0.001941760

0.000259595

0.001107162

143

0.001955448

0.000273260

0.001120839

144

0.001969136

0.000286924

0.001134515

145

0.001982824

0.000300590

0.001148192

146

0.001996512

0.000314255

0.001161869

147

0.002010201

0.000327920

0.001175546

148

0.002023889

0.000341586

0.001189223

149

0.002037578

0.000355252

0.001202900

150

0.002051267

0.000368918

0.001216578

151

0.002064957

366 Day Year 0.5% Compound Rate 184 Days

Days

Factor

Days

Factor

Days

Factor

0.000382584

0.001230256

152

0.002078646

0.000396251

0.001243934

153

0.002092336

0.000409917

0.001257612

154

0.002106025

0.000423584

0.001271291

155

0.002119715

0.000437251

0.001284969

156

0.002133405

0.000450918

0.001298648

157

0.002147096

0.000464586

0.001312327

158

0.002160786

0.000478253

0.001326006

159

0.002174477

0.000491921

0.001339685

160

0.002188168

0.000505589

0.001353365

161

0.002201859

0.000519257

100

0.001367044

162

0.002215550

0.000532925

101

0.001380724

163

0.002229242

0.000546594

102

0.001394404

164

0.002242933

0.000560262

103

0.001408085

165

0.002256625

0.000573931

104

0.001421765

166

0.002270317

0.000587600

105

0.001435446

167

0.002284010

0.000601269

106

0.001449127

168

0.002297702

0.000614939

107

0.001462808

169

0.002311395

0.000628608

108

0.001476489

170

0.002325087

0.000642278

109

0.001490170

171

0.002338780

0.000655948

110

0.001503852

172

0.002352473

0.000669618

111

0.001517533

173

0.002366167

0.000683289

112

0.001531215

174

0.002379860

0.000696959

113

0.001544897

175

0.002393554

0.000710630

114

0.001558580

176

0.002407248

0.000724301

115

0.001572262

177

0.002420942

0.000737972

116

0.001585945

178

0.002434636

0.000751643

117

0.001599628

179

0.002448331

0.000765315

118

0.001613311

180

0.002462025

0.000778986

119

0.001626994

181

0.002475720

0.000792658

120

0.001640678

182

0.002489415

0.000806330

121

0.001654361

183

0.002503110

0.000820003

122

0.001668045

184

0.002516806

0.000833675

123

0.001681729

0.000847348

124

0.001695413

TABLE OF INTEREST RATES PERIODS BEFORE JUL. 1, 1975 - PERIODS ENDING DEC. 31, 1986 OVERPAYMENTS AND UNDERPAYMENTS

PERIOD

RATE

In 1995-1 C.B.

DAILY RATE TABLE

Before Jul. 1, 1975

Table 2, pg. 557

Jul. 1, 1975-Jan. 31, 1976

Table 4, pg. 559

# TABLE OF INTEREST RATES PERIODS BEFORE JUL. 1, 1975 - PERIODS ENDING DEC. 31, 1986 OVERPAYMENTS AND UNDERPAYMENTS

In 1995-1 C.B.

PERIOD

RATE

DAILY RATE TABLE

Feb. 1, 1976-Jan. 31, 1978

Table 3, pg. 558

Feb. 1, 1978-Jan. 31, 1980

Table 2, pg. 557

Feb. 1, 1980-Jan. 31, 1982

12%

Table 5, pg. 560

Feb. 1, 1982-Dec. 31, 1982

20%

Table 6, pg. 560

Jan. 1, 1983-Jun. 30, 1983

16%

Table 37, pg. 591

Jul. 1, 1983-Dec. 31, 1983

11%

Table 27, pg. 581

Jan. 1, 1984-Jun. 30, 1984

11%

Table 75, pg. 629

Jul. 1, 1984-Dec. 31, 1984

11%

Table 75, pg. 629

Jan. 1, 1985-Jun. 30, 1985

13%

Table 31, pg. 585

Jul. 1, 1985-Dec. 31, 1985

11%

Table 27, pg. 581

Jan. 1, 1986-Jun. 30, 1986

10%

Table 25, pg. 579

Jul. 1, 1986-Dec. 31, 1986

Table 23, pg. 577

TABLE OF INTEREST RATES FROM JAN. 1, 1987 - DEC. 31, 1998

OVERPAYMENTS

UNDERPAYMENTS

RATE

1995-1 C.B. TABLE

RATE

1995-1 C.B. TABLE

Jan. 1, 1987-Mar. 31, 1987

575

577

Apr. 1, 1987-Jun. 30, 1987

575

577

Jul. 1, 1987-Sep. 30, 1987

575

577

Oct. 1, 1987-Dec. 31, 1987

577

10%

579

Jan. 1, 1988-Mar. 31, 1988

10%

627

11%

629

Apr. 1, 1988-Jun. 30, 1988

625

10%

627

Jul. 1, 1988-Sep. 30, 1988

625

10%

627

Oct. 1, 1988-Dec. 31, 1988

10%

627

11%

629

Jan. 1, 1989-Mar. 31, 1989

10%

579

11%

581

Apr. 1, 1989-Jun. 30, 1989

11%

581

12%

583

Jul. 1, 1989-Sep. 30, 1989

11%

581

12%

583

Oct. 1, 1989-Dec. 31, 1989

10%

579

11%

581

Jan. 1, 1990-Mar. 31, 1990

10%

579

11%

581

Apr. 1, 1990-Jun. 30, 1990

10%

579

11%

581

Jul. 1, 1990-Sep. 30, 1990

10%

579

11%

581

Oct. 1, 1990-Dec. 31, 1990

10%

579

11%

581

Jan. 1, 1991-Mar. 31, 1991

10%

579

11%

581

Apr. 1, 1991-Jun. 30, 1991

577

10%

579

Jul. 1, 1991-Sep. 30, 1991

577

10%

579

Oct. 1, 1991-Dec. 31, 1991

577

10%

579

Jan. 1, 1992-Mar. 31, 1992

623

625

Apr. 1, 1992-Jun. 30, 1992

621

623

Jul. 1, 1992-Sep. 30, 1992

621

623

TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS

TABLE OF INTEREST RATES FROM JAN. 1, 1987 - DEC. 31, 1998 OVERPAYMENTS UNDERPAYMENTS 1995-1 C.B. 1995-1 C.B. RATE TABLE PG RATE TABLE PG

Oct. 1, 1992-Dec. 31, 1992

619

621

Jan. 1, 1993-Mar. 31, 1993

571

573

Apr. 1, 1993-Jun. 30, 1993

571

573

Jul. 1, 1993-Sep. 30, 1993

571

573

Oct. 1, 1993-Dec. 31, 1993

571

573

Jan. 1, 1994-Mar. 31, 1994

571

573

Apr. 1, 1994-Jun. 30, 1994

571

573

Jul. 1, 1994-Sep. 30, 1994

573

575

Oct. 1, 1994-Dec. 31, 1994

575

577

Jan. 1, 1995-Mar. 31, 1995

575

577

Apr. 1, 1995-Jun. 30, 1995

577

10%

579

Jul. 1, 1995-Sep. 30, 1995

575

577

Oct. 1, 1995-Dec. 31, 1995

575

577

Jan. 1, 1996-Mar. 31, 1996

623

625

Apr. 1, 1996-Jun. 30, 1996

621

623

Jul. 1, 1996-Sep. 30, 1996

623

625

Oct. 1, 1996-Dec. 31, 1996

623

625

Jan. 1, 1997-Mar. 31, 1997

575

577

Apr. 1, 1997-Jun. 30, 1997

575

577

Jul. 1, 1997-Sep. 30, 1997

575

577

Oct. 1, 1997-Dec. 31, 1997

575

577

Jan. 1, 1998-Mar. 31, 1998

575

577

Apr. 1, 1998-Jun. 30, 1998

573

575

Jul. 1, 1998-Sep. 30, 1998

573

575

Oct. 1, 1998-Dec. 31, 1998

573

575

RATE

1995-1 C.B. TABLE

PAGE

Jan. 1, 1999-Mar. 31, 1999

573

Apr. 1, 1999-Jun. 30, 1999

575

Jul. 1, 1999-Sep. 30, 1999

575

Oct. 1, 1999-Dec. 31, 1999

575

Jan. 1, 2000-Mar. 31, 2000

623

Apr. 1, 2000-Jun. 30, 2000

625

Jul. 1, 2000-Sep. 30, 2000

625

Oct. 1, 2000-Dec. 31, 2000

625

Jan. 1, 2001-Mar. 31, 2001

577

Apr. 1, 2001-Jun. 30, 2001

575

# TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS

RATE

1995-1 C.B. TABLE

PAGE

Jul. 1, 2001-Sep. 30, 2001

573

Oct. 1, 2001-Dec. 31, 2001

573

Jan. 1, 2002-Mar. 31, 2002

571

Apr. 1, 2002-Jun. 30, 2002

571

Jul. 1, 2002-Sep. 30, 2002

571

Oct. 1, 2002-Dec. 31, 2002

571

Jan. 1, 2003-Mar. 31, 2003

569

Apr. 1, 2003-Jun. 30, 2003

569

Jul. 1, 2003-Sep. 30, 2003

569

Oct. 1, 2003-Dec. 31, 2003

567

Jan. 1, 2004-Mar. 31, 2004

615

Apr. 1, 2004-Jun. 30, 2004

617

Jul. 1, 2004-Sep. 30, 2004

615

Oct. 1, 2004-Dec. 31, 2004

617

Jan. 1, 2005-Mar. 31, 2005

569

Apr. 1, 2005-Jun. 30, 2005

571

Jul. 1, 2005-Sep. 30, 2005

571

Oct. 1, 2005-Dec. 31, 2005

573

Jan. 1, 2006-Mar. 31, 2006

573

Apr. 1, 2006-Jun. 30, 2006

573

Jul. 1, 2006-Sep. 30, 2006

575

Oct. 1, 2006-Dec. 31, 2006

575

Jan. 1, 2007-Mar. 31, 2007

575

Apr. 1, 2007-Jun. 30, 2007

575

Jul. 1, 2007-Sep. 30, 2007

575

Oct. 1, 2007-Dec. 31, 2007

575

Jan. 1, 2008-Mar. 31, 2008

621

Apr. 1, 2008-Jun. 30, 2008

619

Jul. 1, 2008-Sep. 30, 2008

617

Oct. 1, 2008-Dec. 31, 2008

619

Jan. 1, 2009-Mar. 31, 2009

569

Apr. 1, 2009-Jun. 30, 2009

567

Jul. 1, 2009-Sep. 30, 2009

567

Oct. 1, 2009-Dec. 31, 2009

567

Jan. 1, 2010-Mar. 31, 2010

567

Apr. 1, 2010-Jun. 30, 2010

567

Jul. 1, 2010-Sep. 30, 2010

567

Oct. 1, 2010-Dec. 31, 2010

567

Jan. 1, 2011-Mar. 31, 2011

565

Apr. 1, 2011-Jun. 30, 2011

567

Jul. 1, 2011-Sep. 30, 2011

567

Oct. 1, 2011-Dec. 31, 2011

565

# TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS

RATE

1995-1 C.B. TABLE

PAGE

Jan. 1, 2012-Mar. 31, 2012

613

Apr. 1, 2012-Jun. 30, 2012

613

Jul. 1, 2012-Sep. 30, 2012

613

Oct. 1, 2012-Dec. 31, 2012

613

Jan. 1, 2013-Mar. 31, 2013

565

Apr. 1, 2013-Jun. 30, 2013

565

Jul. 1, 2013-Sep. 30, 2013

565

Oct. 1, 2013-Dec. 31, 2013

565

Jan. 1, 2014-Mar. 31, 2014

565

Apr. 1, 2014-Jun. 30, 2014

565

Jul. 1, 2014-Sep. 30, 2014

565

Oct. 1, 2014-Dec. 31, 2014

565

Jan. 1, 2015-Mar. 31, 2015

565

Apr. 1, 2015-Jun. 30, 2015

565

Jul. 1, 2015-Sep. 30, 2015

565

TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT CORPORATE OVERPAYMENTS AND UNDERPAYMENTS

OVERPAYMENTS

UNDERPAYMENTS

RATE

1995-1 C.B. TABLE

RATE

1995-1 C.B. TABLE

Jan. 1, 1999-Mar. 31, 1999

571

573

Apr. 1, 1999-Jun. 30, 1999

573

575

Jul. 1, 1999-Sep. 30, 1999

573

575

Oct. 1, 1999-Dec. 31, 1999

573

575

Jan. 1, 2000-Mar. 31, 2000

621

623

Apr. 1, 2000-Jun. 30, 2000

623

625

Jul. 1, 2000-Sep. 30, 2000

623

625

Oct. 1, 2000-Dec. 31, 2000

623

625

Jan. 1, 2001-Mar. 31, 2001

575

577

Apr. 1, 2001-Jun. 30, 2001

573

575

Jul. 1, 2001-Sep. 30, 2001

571

573

Oct. 1, 2001-Dec. 31, 2001

571

573

Jan. 1, 2002-Mar. 31, 2002

569

571

Apr. 1, 2002-Jun. 30, 2002

569

571

Jul. 1, 2002-Sep. 30, 2002

569

571

Oct. 1, 2002-Dec. 31, 2002

569

571

Jan. 1, 2003-Mar. 31, 2003

567

569

Apr. 1, 2003-Jun. 30, 2003

567

569

Jul. 1, 2003-Sep. 30, 2003

567

569

## TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT CORPORATE OVERPAYMENTS AND UNDERPAYMENTS

OVERPAYMENTS

UNDERPAYMENTS

RATE

1995-1 C.B. TABLE

RATE

1995-1 C.B. TABLE

Oct. 1, 2003-Dec. 31, 2003

565

567

Jan. 1, 2004-Mar. 31, 2004

613

615

Apr. 1, 2004-Jun. 30, 2004

615

617

Jul. 1, 2004-Sep. 30, 2004

613

615

Oct. 1, 2004-Dec. 31, 2004

615

617

Jan. 1, 2005-Mar. 31, 2005

567

569

Apr. 1, 2005-Jun. 30, 2005

569

571

Jul. 1, 2005-Sep. 30, 2005

569

571

Oct. 1, 2005-Dec. 31, 2005

571

573

Jan. 1, 2006-Mar. 31, 2006

571

573

Apr. 1, 2006-Jun. 30, 2006

571

573

Jul. 1, 2006-Sep. 30, 2006

573

575

Oct. 1, 2006-Dec. 31, 2006

573

575

Jan. 1, 2007-Mar. 31, 2007

573

575

Apr. 1, 2007-Jun. 30, 2007

573

575

Jul. 1, 2007-Sep. 30, 2007

573

575

Oct. 1, 2007-Dec. 31, 2007

573

575

Jan. 1, 2008-Mar. 31, 2008

619

621

Apr. 1, 2008-Jun. 30, 2008

617

619

Jul. 1, 2008-Sep. 30, 2008

615

617

Oct. 1, 2008-Dec. 31, 2008

617

619

Jan. 1, 2009-Mar. 31, 2009

567

569

Apr. 1, 2009-Jun. 30, 2009

565

567

Jul. 1, 2009-Sep. 30, 2009

565

567

Oct. 1, 2009-Dec. 31, 2009

565

567

Jan. 1, 2010-Mar. 31, 2010

565

567

Apr. 1, 2010-Jun. 30, 2010

565

567

Jul. 1, 2010-Sep. 30, 2010

565

567

Oct. 1, 2010-Dec. 31, 2010

565

567

Jan. 1, 2011-Mar. 31, 2011

563

565

Apr. 1, 2011-Jun. 30, 2011

565

567

Jul. 1, 2011-Sep. 30, 2011

565

567

Oct. 1, 2011-Dec. 31, 2011

563

565

Jan. 1, 2012-Mar. 31, 2012

611

613

Apr. 1, 2012-Jun. 30, 2012

611

613

Jul. 1, 2012-Sep. 30, 2012

611

613

Oct. 1, 2012-Dec. 31, 2012

611

613

Jan. 1, 2013-Mar. 31, 2013

563

565

Apr. 1, 2013-Jun. 30, 2013

563

565

Jul. 1, 2013-Sep. 30, 2013

563

565

Oct. 1, 2013-Dec. 31, 2013

563

565

## TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT CORPORATE OVERPAYMENTS AND UNDERPAYMENTS

OVERPAYMENTS

UNDERPAYMENTS

RATE

1995-1 C.B. TABLE

RATE

1995-1 C.B. TABLE

Jan. 1, 2014-Mar. 31, 2014

563

565

Apr. 1, 2014-Jun. 30, 2014

563

565

Jul. 1, 2014-Sep. 30, 2014

563

565

Oct. 1, 2014-Dec. 31, 2014

563

565

Jan. 1, 2015-Mar. 31, 2015

563

565

Apr. 1, 2015-Jun. 30, 2015

563

565

Jul. 1, 2015-Sep. 30, 2015

563

565

TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS FROM JANUARY 1, 1991 - PRESENT

RATE

1995-1 C.B. TABLE

Jan. 1, 1991-Mar. 31, 1991

13%

585

Apr. 1, 1991-Jun. 30, 1991

12%

583

Jul. 1, 1991-Sep. 30, 1991

12%

583

Oct. 1, 1991-Dec. 31, 1991

12%

583

Jan. 1, 1992-Mar. 31, 1992

11%

629

Apr. 1, 1992-Jun. 30, 1992

10%

627

Jul. 1, 1992-Sep. 30, 1992

10%

627

Oct. 1, 1992-Dec. 31, 1992

625

Jan. 1, 1993-Mar. 31, 1993

577

Apr. 1, 1993-Jun. 30, 1993

577

Jul. 1, 1993-Sep. 30, 1993

577

Oct. 1, 1993-Dec. 31, 1993

577

Jan. 1, 1994-Mar. 31, 1994

577

Apr. 1, 1994-Jun. 30, 1994

577

Jul. 1, 1994-Sep. 30, 1994

10%

579

Oct. 1, 1994-Dec. 31, 1994

11%

581

Jan. 1, 1995-Mar. 31, 1995

11%

581

Apr. 1, 1995-Jun. 30, 1995

12%

583

Jul. 1, 1995-Sep. 30, 1995

11%

581

Oct. 1, 1995-Dec. 31, 1995

11%

581

Jan. 1, 1996-Mar. 31, 1996

11%

629

Apr. 1, 1996-Jun. 30, 1996

10%

627

Jul. 1, 1996-Sep. 30, 1996

11%

629

Oct. 1, 1996-Dec. 31, 1996

11%

629

Jan. 1, 1997-Mar. 31, 1997

11%

581

Apr. 1, 1997-Jun. 30, 1997

11%

581

Jul. 1, 1997-Sep. 30, 1997

11%

581

## TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS FROM JANUARY 1, 1991 - PRESENT

RATE

1995-1 C.B. TABLE

Oct. 1, 1997-Dec. 31, 1997

11%

581

Jan. 1, 1998-Mar. 31, 1998

11%

581

Apr. 1, 1998-Jun. 30, 1998

10%

579

Jul. 1, 1998-Sep. 30, 1998

10%

579

Oct. 1, 1998-Dec. 31, 1998

10%

579

Jan. 1, 1999-Mar. 31, 1999

577

Apr. 1, 1999-Jun. 30, 1999

10%

579

Jul. 1, 1999-Sep. 30, 1999

10%

579

Oct. 1, 1999-Dec. 31, 1999

10%

579

Jan. 1, 2000-Mar. 31, 2000

10%

627

Apr. 1, 2000-Jun. 30, 2000

11%

629

Jul. 1, 2000-Sep. 30, 2000

11%

629

Oct. 1, 2000-Dec. 31, 2000

11%

629

Jan. 1, 2001-Mar. 31, 2001

11%

581

Apr. 1, 2001-Jun. 30, 2001

10%

579

Jul. 1, 2001-Sep. 30, 2001

577

Oct. 1, 2001-Dec. 31, 2001

577

Jan. 1, 2002-Mar. 31, 2002

575

Apr. 1, 2002-Jun. 30, 2002

575

Jul. 1, 2002-Sep. 30, 2002

575

Oct. 1, 2002-Dec. 31, 2002

575

Jan. 1, 2003-Mar. 31, 2003

573

Apr. 1, 2003-Jun. 30, 2003

573

Jul. 1, 2003-Sep. 30, 2003

573

Oct. 1, 2003-Dec. 31, 2003

571

Jan. 1, 2004-Mar. 31, 2004

619

Apr. 1, 2004-Jun. 30, 2004

621

Jul. 1, 2004-Sep. 30, 2004

619

Oct. 1, 2004-Dec. 31, 2004

621

Jan. 1, 2005-Mar. 31, 2005

573

Apr. 1, 2005-Jun. 30, 2005

575

Jul. 1, 2005-Sep. 30, 2005

575

Oct. 1, 2005-Dec. 31, 2005

577

Jan. 1, 2006-Mar. 31, 2006

577

Apr. 1, 2006-Jun. 30, 2006

577

Jul. 1, 2006-Sep. 30, 2006

10%

579

Oct. 1, 2006-Dec. 31, 2006

10%

579

Jan. 1, 2007-Mar. 31, 2007

10%

579

Apr. 1, 2007-Jun. 30, 2007

10%

579

Jul. 1, 2007-Sep. 30, 2007

10%

579

Oct. 1, 2007-Dec. 31, 2007

10%

579

Jan. 1, 2008-Mar. 31, 2008

625

Apr. 1, 2008-Jun. 30, 2008

623

### TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS FROM JANUARY 1, 1991 - PRESENT

RATE

1995-1 C.B. TABLE

Jul. 1, 2008-Sep. 30, 2008

621

Oct. 1, 2008-Dec. 31, 2008

623

Jan. 1, 2009-Mar. 31, 2009

573

Apr. 1, 2009-Jun. 30, 2009

571

Jul. 1, 2009-Sep. 30, 2009

571

Oct. 1, 2009-Dec. 31, 2009

571

Jan. 1, 2010-Mar. 31, 2010

571

Apr. 1, 2010-Jun. 30, 2010

571

Jul. 1, 2010-Sep. 30, 2010

571

Oct. 1, 2010-Dec. 31, 2010

571

Jan. 1, 2011-Mar. 31, 2011

569

Apr. 1, 2011-Jun. 30, 2011

571

Jul. 1, 2011-Sep. 30, 2011

571

Oct. 1, 2011-Dec. 31, 2011

569

Jan. 1, 2012-Mar. 31, 2012

617

Apr. 1, 2012-Jun. 30, 2012

617

Jul. 1, 2012-Sep. 30, 2012

617

Oct. 1, 2012-Dec. 31, 2012

617

Jan. 1, 2013-Mar. 31, 2013

569

Apr. 1, 2013-Jun. 30, 2013

569

Jul. 1, 2013-Sep. 30, 2013

569

Oct. 1, 2013-Dec. 31, 2013

569

Jan. 1, 2014-Mar. 31, 2014

569

Apr. 1, 2014-Jun. 30, 2014

569

Jul. 1, 2014-Sep. 30, 2014

569

Oct. 1, 2014-Dec. 31, 2014

569

Jan. 1, 2015-Mar. 31, 2015

569

Apr. 1, 2015-Jun. 30, 2015

569

Jul. 1, 2015-Sep. 30, 2015

569

TABLE OF INTEREST RATES FOR CORPORATE OVERPAYMENTS EXCEEDING $10,000 FROM JANUARY 1, 1995 - PRESENT

RATE

1995-1 C.B. TABLE

Jan. 1, 1995-Mar. 31, 1995

6.5%

572

Apr. 1, 1995-Jun. 30, 1995

7.5%

574

Jul. 1, 1995-Sep. 30, 1995

6.5%

572

Oct. 1, 1995-Dec. 31, 1995

6.5%

572

Jan. 1, 1996-Mar. 31, 1996

6.5%

620

Apr. 1, 1996-Jun. 30, 1996

5.5%

618

Jul. 1, 1996-Sep. 30, 1996

6.5%

620

### TABLE OF INTEREST RATES FOR CORPORATE OVERPAYMENTS EXCEEDING $10,000 FROM JANUARY 1, 1995 - PRESENT

RATE

1995-1 C.B. TABLE

Oct. 1, 1996-Dec. 31, 1996

6.5%

620

Jan. 1, 1997-Mar. 31, 1997

6.5%

572

Apr. 1, 1997-Jun. 30, 1997

6.5%

572

Jul. 1, 1997-Sep. 30, 1997

6.5%

572

Oct. 1, 1997-Dec. 31, 1997

6.5%

572

Jan. 1, 1998-Mar. 31, 1998

6.5%

572

Apr. 1, 1998-Jun. 30, 1998

5.5%

570

Jul. 1. 1998-Sep. 30, 1998

5.5%

570

Oct. 1, 1998-Dec. 31, 1998

5.5%

570

Jan. 1, 1999-Mar. 31, 1999

4.5%

568

Apr. 1, 1999-Jun. 30, 1999

5.5%

570

Jul. 1, 1999-Sep. 30, 1999

5.5%

570

Oct. 1, 1999-Dec. 31, 1999

5.5%

570

Jan. 1, 2000-Mar. 31, 2000

5.5%

618

Apr. 1, 2000-Jun. 30, 2000

6.5%

620

Jul. 1, 2000-Sep. 30, 2000

6.5%

620

Oct. 1, 2000-Dec. 31, 2000

6.5%

620

Jan. 1, 2001-Mar. 31, 2001

6.5%

572

Apr. 1, 2001-Jun. 30, 2001

5.5%

570

Jul. 1, 2001-Sep. 30, 2001

4.5%

568

Oct. 1, 2001-Dec. 31, 2001

4.5%

568

Jan. 1, 2002-Mar. 31, 2002

3.5%

566

Apr. 1, 2002-Jun. 30, 2002

3.5%

566

Jul. 1, 2002-Sep. 30, 2002

3.5%

566

Oct. 1, 2002-Dec. 31, 2002

3.5%

566

Jan. 1, 2003-Mar. 31, 2003

2.5%

564

Apr. 1, 2003-Jun. 30, 2003

2.5%

564

Jul. 1, 2003-Sep. 30, 2003

2.5%

564

Oct. 1, 2003-Dec. 31, 2003

1.5%

562

Jan. 1, 2004-Mar. 31, 2004

1.5%

610

Apr. 1, 2004-Jun. 30, 2004

2.5%

612

Jul. 1, 2004-Sep. 30, 2004

1.5%

610

Oct. 1, 2004-Dec. 31, 2004

2.5%

612

Jan. 1, 2005-Mar. 31, 2005

2.5%

564

Apr. 1, 2005-Jun. 30, 2005

3.5%

566

Jul. 1, 2005-Sep. 30, 2005

3.5%

566

Oct. 1, 2005-Dec. 31, 2005

4.5%

568

Jan. 1, 2006-Mar. 31, 2006

4.5%

568

Apr. 1, 2006-Jun. 30, 2006

4.5%

568

Jul. 1, 2006-Sep. 30, 2006

5.5%

570

Oct. 1, 2006-Dec. 31, 2006

5.5%

570

Jan. 1, 2007-Mar. 31, 2007

5.5%

570

Apr. 1, 2007-Jun. 30, 2007

5.5%

570

## TABLE OF INTEREST RATES FOR CORPORATE OVERPAYMENTS EXCEEDING $10,000 FROM JANUARY 1, 1995 - PRESENT

1995-1 C.B.

RATE

TABLE

Jul. 1, 2007-Sep. 30, 2007

5.5%

570

Oct. 1, 2007-Dec. 31, 2007

5.5%

570

Jan. 1, 2008-Mar. 31, 2008

4.5%

616

Apr. 1, 2008-Jun. 30, 2008

3.5%

614

Jul. 1, 2008-Sep. 30, 2008

2.5%

612

Oct. 1, 2008-Dec. 31, 2008

3.5%

614

Jan. 1, 2009-Mar. 31, 2009

2.5%

564

Apr. 1, 2009-Jun. 30, 2009

1.5%

562

Jul. 1, 2009-Sep. 30, 2009

1.5%

562

Oct. 1, 2009-Dec. 31, 2009

1.5%

562

Jan. 1, 2010-Mar. 31, 2010

1.5%

562

Apr. 1, 2010-Jun. 30, 2010

1.5%

562

Jul. 1, 2010-Sep. 30, 2010

1.5%

562

Oct. 1, 2010-Dec. 31, 2010

1.5%

562

Jan. 1, 2011-Mar. 31, 2011

0.5%*

Apr. 1, 2011-Jun. 30, 2011

1.5%

562

Jul. 1, 2011-Sep. 30, 2011

1.5%

562

Oct. 1, 2011-Dec. 31, 2011

0.5%*

Jan. 1, 2012-Mar. 31, 2012

0.5%*

Apr. 1, 2012-Jun. 30, 2012

0.5%*

Jul. 1, 2012-Sep. 30, 2012

0.5%*

Oct. 1, 2012-Dec. 31, 2012

0.5%*

Jan. 1, 2013-Mar. 31, 2013

0.5%*

Apr. 1, 2013-Jun. 30, 2013

0.5%*

Jul. 1, 2013-Sep. 30, 2013

0.5%*

Oct. 1, 2013-Dec. 31, 2013

0.5%*

Jan. 1, 2014-Mar. 31, 2014

0.5%*

Apr. 1, 2014-Jun. 30, 2014

0.5%*

Jul. 1, 2014-Sep. 30, 2014

0.5%*

Oct. 1, 2014-Dec. 31, 2014

0.5%*

Jan. 1, 2015-Mar. 31, 2015

0.5%*

Apr. 1, 2015-Jun. 30, 2015

0.5%*

Jul. 1, 2015-Sep. 30, 2015

0.5%*

* The asterisk reflects the interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of this Revenue Ruling.

# Section 337 .- Effects on Corporation

§ 1.337(d)-3T Gain recognition upon certain part-
nership transactions involving a partner's stock
(temporary).

## TD 9722

## DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1

## Partnership Transactions Involving Equity Interests of a Partner

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Final and temporary regulations.

SUMMARY: This document contains fi-
nal and temporary regulations that prevent
a corporate partner from avoiding
corporate-level gain through transactions
with a partnership involving equity inter-
ests of the partner. These regulations af-
fect partnerships and their partners. The
text of these temporary regulations serves
as the text of proposed regulations (REG-
149518-03) published in the Proposed
Rules section in this issue of the Bulletin.

DATES: Effective Date: These regula-
tions are effective on June 12, 2015.

Applicability Date: For dates of appli-
cability, see §§ 1.337(d)-3T(i) and 1.732-
1T(c)(5).

### FOR FURTHER INFORMATION

CONTACT: Concerning the final and
temporary regulations, Kevin I. Babitz,
(202) 317-6852 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

#### Background

The General Utilities Doctrine and Its
Repeal

1969, Congress enacted a series of excep-
tions to the General Utilities doctrine,
starting with certain non-liquidating dis-
tributions of depreciable property. In the
Tax Equity and Fiscal Responsibility Act
of 1982, Public Law 97-248, 96 Stat. 324,
Congress enacted current section 311(b)
(originally designated as section 311(d)),
which required a corporation to recognize
gain on appreciated property distributed to
a shareholder in redemption of shares. In
1984, Congress enacted legislation that
required gain recognition for all non-
liquidating distributions. Finally, as part
of the Tax Reform Act of 1986, Public
Law 99-514, 100 Stat. 2085, (the Act),
Congress repealed what remained of the
General Utilities doctrine by enacting sec-
tion 336(a) of the Internal Revenue Code
(Code) to apply gain and loss recognition
to liquidating distributions. Under current
law, sections 311(b) and 336(a) of the
Code require a corporation that distributes
appreciated property to its shareholders to
recognize gain determined as if the prop-
erty were sold to the shareholders for its
fair market value. Additionally, section
631 of the Act added section 337(d) to the
Code to permit the Secretary to prescribe
regulations that are necessary or appropri-
ate to carry out the purposes of the Gen-
eral Utilities repeal, "including regula-
tions to ensure that [the repeal of the
General Utilities doctrine] may not be cir-
cumvented through the use of any provi-
sion of law or regulations."

##### 1992 Proposed Regulations

After the enactment of sections 311(b)
and 337(d), the Treasury Department and
the IRS became aware of transactions in
which taxpayers used a partnership to
postpone or avoid completely gain gener-
ally required to be recognized under sec-
tion 311(b). In one example of this trans-
action, a corporation entered into a
partnership and contributed appreciated
property. The partnership then acquired
stock of that corporate partner, and later
made a liquidating distribution of this
stock to the corporate partner. Under sec-
tion 731(a), the corporate partner did not
recognize gain on the partnership's distri-
bution of its stock. By means of this trans-
action, the corporation had disposed of the
appreciated property it formerly held and

had acquired its own stock, permanently
avoiding its gain in the appreciated prop-
erty. If the corporation had directly ex-
changed the appreciated property for its
own stock, section 311(b) would have re-
quired the corporation to recognize gain
upon the exchange.

In response to this type of transaction,
the Treasury Department and the IRS is-
sued Notice 89-37, 1989-1 CB 679, on
March 9, 1989. Notice 89-37 announced
that future regulations under section
337(d) would address the use of partner-
ships to avoid the repeal of the General
Utilities doctrine. Specifically, the Trea-
sury Department and the IRS determined
that, in certain circumstances, the acquisi-
tion (or ownership) by a partnership of
stock in one of its corporate partners (or
stock of any member of the affiliated
group of which the partner is a member)
results in avoidance of the repeal of the
General Utilities doctrine. Such avoid-
ance occurs to the extent that a corporate
partner, in substance, relinquishes an in-
terest in appreciated property in exchange
for an interest in its stock (or the stock of
an affiliate). The Notice provided that sec-
tion 311(b), rather than section 731(a),
would apply when a partner received a
distribution of its own stock, and that the
partner would recognize gain whenever a
pre-distribution transaction has the eco-
nomic effect of an exchange of appreci-
ated property for the partner's own stock.

On December 15, 1992, the Treasury
Department and the IRS published a no-
tice of proposed rulemaking under section
337(d) (PS-91-90, REG-208989-90,
1993-1 CB 919) in the Federal Register
(57 FR 59324) addressing partnership
transactions involving stock of a partner
(the 1992 proposed regulations). The 1992
proposed regulations adopted two rules to
protect the repeal of the General Utilities
doctrine: the deemed redemption rule (the
1992 deemed redemption rule) and the
distribution rule (the 1992 distribution
rule). The 1992 proposed regulations also
provided de minimis and inadvertence ex-
ceptions to these two rules.

The 1992 deemed redemption rule ad-
dressed pre-distribution transactions in-
volving corporate partner stock owned or
acquired by the partnership. The Treasury
Department and the IRS believed that cer-
tain of these transactions created the eco-

nomic effect of an exchange of appreci-
ated property for corporate partner stock.
The 1992 deemed redemption rule pro-
vided that a corporate partner recognizes
gain at the time of, and to the extent that,
any transaction (or series of transactions)
has the economic effect of an exchange by
the partner of its interest in appreciated
property for an interest in its stock (or the
stock of any member of the affiliated
group of which such partner is a member)
owned, acquired, or distributed by the
partnership.

The 1992 distribution rule provided
that a partnership's distribution to a part-
ner of the partner's stock is treated as a
redemption or an exchange of the stock of
the partner for a portion of the partner's
partnership interest with a value equal to
the distributed stock. Thus, the 1992 dis-
tribution rule applied section 311(b) prin-
ciples to the distribution to trigger gain to
the corporate partner, rather than applying
section 731, which would not have re-
quired gain recognition. The 1992 distri-
bution rule ensured that section 311(b)
would apply to any acquisition by the
corporate partner of its own stock where
the 1992 deemed redemption rule had not
applied. The preamble to the 1992 pro-
posed regulations indicated that comment-
ers on the Notice raised concerns that the
1992 distribution rule could duplicate gain
recognition and suggested a modified ap-
proach. However, the 1992 proposed reg-
ulations rejected the modified approach as
overly complex.

As noted previously, the 1992 pro-
posed regulations applied to stock of a
partner, to stock of a partner's affiliate,
and to other equity interests in the partner
or affiliate. The 1992 proposed regulations
used a modified affiliation standard to de-
termine whether a partner and another
corporation were affiliates. The 1992 pro-
posed regulations treated a corporation as
an affiliate of a partner at the time of a
deemed redemption or distribution by the
partnership if, immediately thereafter, the
partner and corporation were members of
an affiliated group as defined in section
1504(a) without regard to section 1504(b)
(section 337(d) affiliation). On January
19, 1993, the Treasury Department and
the IRS issued Notice 93-2, 1993-1 CB
292, which stated that the 1992 proposed
regulations would be amended to limit the

application of the regulations to transac-
tions in which section 337(d) affiliation
existed immediately before the deemed
redemption or distribution. The Treasury
Department and the IRS indicated that
further study was required for cases in
which section 337(d) affiliation did not
exist prior to a distribution of stock by a
partnership to a corporate partner, but re-
sulted from the distribution.

The Treasury Department and the IRS
received several written comments in re-
sponse to Notice 89-37, the 1992 pro-
posed regulations, and Notice 93-2. Com-
menters largely supported the 1992
deemed redemption rule, though some
suggested modifications. Some comment-
ers, however, opposed the 1992 distribu-
tion rule, asserting that the rule is overly
broad and inconsistent with the deemed
redemption rule. These comments are dis-
cussed in detail in the Explanation of Pro-
visions section of this preamble.

After considering these comment let-
ters, and taking into account subsequent
changes in relevant law as described in
part 1 of this preamble, the Treasury De-
partment and the IRS are withdrawing the
1992 proposed regulations and simultane-
ously issuing temporary and final regula-
tions that also serve as the text of new
proposed regulations published in the Pro-
posed Rules section of this issue of the
Bulletin.

## Explanation of Provisions

The purpose of these regulations au-
thorized under section 337(d) is to prevent
corporate taxpayers from using a partner-
ship to circumvent gain required to be
recognized under section 311(b) or sec-
tion 336(a). These regulations, including
the rules governing the amount and timing
of recognized gain, must be applied in a
manner consistent with, and which rea-
sonably carries out, this purpose.

These regulations apply when a part-
nership, either directly or indirectly, owns,
acquires, or distributes Stock of the Cor-
porate Partner (as defined in part 1 of this
preamble). Under these regulations, a
Corporate Partner (as defined in part 1 of
this preamble) may recognize gain when it
is treated as acquiring or increasing its
interest in Stock of the Corporate Partner
held by a partnership in exchange for ap-
preciated property in a manner that avoids

gain recognition under section 311(b) or
section 336(a). The regulations also pro-
vide exceptions under which a Corporate
Partner is not required to recognize gain.

These regulations retain the 1992
deemed redemption rule with the modifi-
cations described in part 2 of this pream-
ble. However, these regulations remove
the 1992 distribution rule in response to
comments. In its place, these regulations
apply the deemed redemption rule to part-
nership distributions of Stock of the Cor-
porate Partner to the Corporate Partner as
though the partnership amended its agree-
ment, immediately before the distribution,
to allocate 100 percent of the distributed
stock to the Corporate Partner.

### 1. Scope and Definitions

These regulations apply to certain part-
nerships that hold stock of a Corporate
Partner. For this purpose, a "Corporate
Partner" is defined as a person that holds
or acquires an interest in a partnership and
that is classified as a corporation for fed-
eral income tax purposes. The regulations
define "Stock of the Corporate Partner"
expansively to include the Corporate Part-
ner's stock, or other equity interests, in-
cluding options, warrants, and similar in-
terests, in the Corporate Partner or a
corporation that controls the Corporate
Partner within the meaning of section
304(c), except that section 318(a)(1) and
(3) shall not apply (section 304(c) con-
trol). Stock of the Corporate Partner also
includes interests in any entity to the ex-
tent that the value of the interest is attrib-
utable to Stock of the Corporate Partner.

These definitions of Corporate Partner
and Stock of the Corporate Partner are
consistent with those set forth in the 1992
proposed regulations except for two
changes. First, these regulations modify
the definition of Stock of the Corporate
Partner. Based on changes in the law and
comments received, the Treasury Depart-
ment and the IRS have determined that the
scope of the definition of "Stock of a
Partner" in the 1992 proposed regulations
was too narrow in certain instances and
too broad in others. These regulations
broaden the definition of Stock of a Cor-
porate Partner to include stock or other
equity interests of any corporation that
possesses section 304(c) control of the

Corporate Partner, whereas the 1992 pro-
posed regulations' definition was limited
to stock or other equity interests issued by
the Corporate Partner and its section
337(d) affiliates. Section 304(c) control
generally exists when there is ownership
of stock of a corporation possessing at
least 50 percent of the total combined
voting power of all classes of the corpo-
ration's stock that is entitled to vote or at
least 50 percent of the value of the shares
of all classes of stock of the corporation,
while control of a corporation under sec-
tion 1504(a)(2) requires ownership of
stock of the corporation possessing at
least 80 percent of the total voting power
of the stock of the corporation and at least
80 percent of the total value of the stock
of the corporation. The Treasury Depart-
ment and the IRS believe the lower
threshold for control set forth in section
304(c) is the more appropriate standard
for this purpose because General Utilities
repeal could be avoided by acquiring
stock of a corporation that owns less than
80 percent of the vote and value of the
Corporate Partner's stock. In addition,
these regulations narrow the definition of
Stock of a Corporate Partner to exclude
stock of any corporation that does not
possess section 304(c) control of the Cor-
porate Partner, even if the corporation is a
section 337(d) affiliate or a member of the
same consolidated group as the Corporate
Partner. The enactment of sections 732(f)
and 755(c) subsequent to the issuance of
the 1992 proposed regulations generally
have served to prevent abusive transac-
tions involving partnerships that own
stock of lower tier section 337(d) affiliates
of the Corporate Partner. Accordingly,
these regulations do not apply to a part-
nership that owns, acquires, or distributes
stock of any section 337(d) affiliate of the
Corporate Partner unless that affiliate pos-
sesses section 304(c) control of the Cor-
porate Partner. The Treasury Department
and the IRS continue to study the appli-
cation of these provisions and plan to is-
sue additional guidance as needed to ad-
dress further abuses in this area.
Comments are requested regarding such
guidance.

Second, these regulations add an ex-
ception for certain related-party partners.
Under this exception, Stock of the Corpo-
rate Partner does not include any stock or

other equity interest held or acquired by a
partnership if all interests in the partner-
ship's capital and profits are held by mem-
bers of an affiliated group defined in sec-
tion 1504(a) that includes the Corporate
Partner. Thus, these regulations do not
apply if, for example, a domestic corpo-
ration and its wholly owned domestic sub-
sidiary (each of which is an includible
corporation under section 1504(b)) are the
only partners in a partnership and either
corporation contributes stock of another
affiliate. The Treasury Department and the
IRS have determined that this additional
exception is appropriate because the
purpose of these regulations is not im-
plicated if a partnership is owned en-
tirely by affiliated corporations. The
Treasury Department and the IRS invite
comments on whether this exception
should be extended, for example, to
partnerships owned by controlled for-
eign corporations that are owned en-
tirely by a single affiliated group.

For partnerships that hold Stock of the
Corporate Partner, these regulations apply
to a transaction (or series of transactions)
that is a "Section 337(d) Transaction."
These regulations define a Section 337(d)
Transaction as a transaction that has the
effect of an exchange by a Corporate Part-
ner of its interest in appreciated property
for an interest in Stock of the Corporate
Partner owned, acquired, or distributed by
a partnership. For example, a Section
337(d) Transaction may occur if: (i) a
Corporate Partner contributes appreciated
property to a partnership that owns Stock
of the Corporate Partner; (ii) a partnership
acquires Stock of the Corporate Partner;
(iii) a partnership that owns Stock of the
Corporate Partner distributes appreciated
property to a partner other than the Cor-
porate Partner; (iv) a partnership distrib-
utes stock of the Corporate Partner to the
Corporate Partner; or (v) a partnership
agreement is amended in a manner that
increases a Corporate Partner's interest in
the Stock of the Corporate Partner (in-
cluding in connection with a contribution
to, or distribution from, a partnership).

If a partnership engages in a Section
337(d) Transaction, the Corporate Partner
must recognize gain. The regulations de-
fine a "Gain Percentage" that the partner-
ship uses to quantify the amount of gain
recognized. The computation of the Gain

Percentage is set forth in part 2 of this
preamble.

### 2. Deemed Redemption Rule

These regulations largely retain the
1992 deemed redemption rule. If a trans-
action is a Section 337(d) Transaction de-
scribed in part 1 of this preamble, a Cor-
porate Partner must recognize gain under
the deemed redemption rule. To determine
the amount of gain, the Corporate Partner
must first determine the amount of appre-
ciated property (other than Stock of the
Corporate Partner) effectively exchanged
for Stock of the Corporate Partner (by
value) and then calculate the amount of
taxable gain recognized.

These regulations set forth general prin-
ciples that apply in determining the amount
of appreciated property effectively ex-
changed for Stock of the Corporate Partner.
These general principles require that the
Corporate Partner's economic interest
with respect to both Stock of the Corpo-
rate Partner and all other appreciated
property of the partnership be determined
based on all facts and circumstances, in-
cluding the allocation and distribution
rights set forth in the partnership agree-
ment. The deemed redemption rule ap-
plies only to the extent that the transaction
has the effect of an exchange by the Cor-
porate Partner of its interest in appreciated
property for Stock of the Corporate Part-
ner. Thus, these regulations do not apply
to the extent a transaction has the effect of
an exchange by a Corporate Partner of
non-appreciated property for Stock of the
Corporate Partner or has the effect of an
exchange by a Corporate Partner of appre-
ciated property for property other than
Stock of the Corporate Partner.

A Corporate Partner must recognize
gain under these regulations even if the
Section 337(d) Transaction would not oth-
erwise change the Corporate Partner's al-
locable share of gain under section 704(c).
For example, if a Corporate Partner contrib-
utes appreciated property to a newly-formed
partnership and an individual contributes
cash that the partnership subsequently uses
to purchase Stock of the Corporate Part-
ner, then the purchase of the stock is a
Section 337(d) Transaction even though
the Corporate Partner's allocable share of
gain in the appreciated property under

section 704(c) is the same before and after
the purchase. The Treasury Department
and the IRS believe that this gain recog-
nition is appropriate because a Section
337(d) Transaction may create an imme-
diate benefit to the Corporate Partner
equivalent to the benefit associated with
the redemption of corporate stock in ex-
change for appreciated property. See Ex-
ample 4 of § 1.337(d)-3T(h) in these reg-
ulations.

If the Corporate Partner has an existing
interest in the partnership's Stock of the
Corporate Partner prior to the Section
337(d) Transaction, the deemed redemp-
tion rule applies only with respect to the
Corporate Partner's incremental increase
in the Stock of the Corporate Partner. For
example, changing allocations to increase
a Corporate Partner's interest in the Stock
of the Corporate Partner from 50 percent
to 80 percent and to decrease the Corpo-
rate Partner's interest in other appreciated
property from 80 percent to 50 percent
would have the effect of an exchange by
the Corporate Partner of the 30-percent
incremental decrease in its interest in the
appreciated property for the 30-percent
incremental increase in the Stock of the
Corporate Partner. See Example 5 of
§ 1.337(d)-3T(h) in these regulations.

For purposes of recognizing gain under
the deemed redemption rule, the Corpo-
rate Partner's interest in an identified
share of Stock of the Corporate Partner
will never be less than the Corporate Part-
ner's largest interest (by value) in that
share of Stock of the Corporate Partner that
was taken into account when the partnership
previously determined whether there had
been a Section 337(d) Transaction (regard-
less of whether the Corporate Partner rec-
ognized gain in the earlier transaction).
See Example 6 of § 1.337(d)-3T(h) in
these regulations. This rule ensures that
alternating increases and decreases in a
Corporate Partner's interest in Stock of
the Corporate Partner do not cause dupli-
cate gain recognition. This limitation does
not apply if any reduction in the Corporate
Partner's interest in the identified share of
Stock of the Corporate Partner occurred as
part of a plan or arrangement to circum-
vent the purpose of these regulations. See
Example 7 of § 1.337(d)-3T(h) in these
regulations.

In certain limited circumstances, a
partnership's acquisition of Stock of the
Corporate Partner does not have the effect
of an exchange of appreciated property for
that stock. For example, as one com-
menter asserted, if a partnership with an
operating business uses the cash generated
in that business to purchase Stock of the
Corporate Partner, the deemed redemp-
tion rule should not apply to the stock
purchase because the Corporate Partner's
share in appreciated property has not been
reduced, and thus no exchange has oc-
curred. The Treasury Department and the
IRS acknowledge that such stock acquisi-
tions would not contravene the purposes
of these regulations. Accordingly, these
regulations adopt this comment and do not
apply to stock purchases or other transac-
tions that do not have the effect of an
exchange of appreciated property for
Stock of the Corporate Partner.

If a transaction is a Section 337(d)
Transaction, the deemed redemption rule
requires the Corporate Partner to recog-
nize a percentage of its total gain in part-
nership appreciated property equal to a
fraction, the numerator of which is the
Corporate Partner's interest (by value) in
appreciated property effectively ex-
changed for Stock of the Corporate Part-
ner under the deemed redemption rule,
and the denominator of which is the Cor-
porate Partner's interest (by value) in ap-
preciated property immediately before the
Section 337(d) Transaction. This fraction
is defined in these regulations as the "Gain
Percentage." The Corporate Partner's gain
under the deemed redemption rule equals
the product of (i) the Corporate Partner's
Gain Percentage and (ii) the gain from the
appreciated property that is the subject of
the exchange that the that the Corporate
Partner would recognize if, immediately
before the Section 337(d) Transaction, all
assets of the partnership and any assets
contributed to the partnership in the sec-
tion 337(d) Transaction were sold in a
fully taxable transaction for cash in an
amount equal to the fair market value of
such property (taking into account section
7701(g)), reduced, but not below zero, by
any gain the Corporate Partner is required
to recognize with respect to the appreci-
ated property in the Section 337(d) Trans-
action under any other section of the
Code. For example, if a Corporate Partner

would be allocated $100x of tax gain on a
sale of appreciated partnership property
(other than Stock of the Corporate Part-
ner) and the Corporate Partner's interest
in that appreciated partnership property
(determined under all facts and circum-
stances) is $500x, and if the partnership
engages in a Section 337(d) Transaction
that reduces the Corporate Partner's inter-
est in appreciated partnership property by
$200x and increases the Corporate Part-
ner's interest in Stock of the Corporate
Partner by $200x, then the Corporate Part-
ner's Gain Percentage equals 40% (200x/
500x), and the Corporate Partner's gain
under the deemed redemption rule is $40x
(40% of $100x).

The gain from the hypothetical sale
used to compute gain under the deemed
redemption rule is determined by applying
the principles of section 704(c), which
generally requires the partnership to take
into account variations between the ad-
justed tax basis and fair market value of
partnership property at the time it is con-
tributed to the partnership and upon cer-
tain other events that allow or require the
value of partnership property to be rede-
termined under § 1.704-1(b)(2)(iv)(f).
See Examples 3 and 5 of § 1.337(d)-3T(h)
in these regulations. A partner's share of
gain under section 704(c) for this purpose
includes any remedial allocations under
§ 1.704-3(d) for a partnership that has
elected under section 704(c) to report no-
tional items of offsetting tax gain and loss
to its partners to eliminate distortions
that may arise when the partnership's
total tax gain or loss on the sale of
partnership property is less than all part-
ners' aggregate share of gain or loss
from the property.

These regulations also contain two
rules related to the effect of the deemed
redemption rule on partner and partner-
ship basis. First, these regulations require
the Corporate Partner to increase its basis
in its partnership interest by an amount
equal to the gain that the Corporate Part-
ner recognizes in a Section 337(d) Trans-
action. This basis increase is necessary to
prevent the Corporate Partner from recog-
nizing gain a second time when the part-
nership liquidates (or, if property is dis-
tributed to the Corporate Partner, when
that property is sold).

Second, the regulations require the
partnership to increase its adjusted tax ba-
sis in the appreciated property that is
treated as the subject of a Section 337(d)
Transaction by the amount of gain that the
Corporate Partner recognized with respect
to that property as a result of the Section
337(d) Transaction. This basis increase
applies regardless of whether the partner-
ship has elected under section 754 to ad-
just the basis of partnership property. This
rule prevents the Corporate Partner from
recognizing gain a second time when the
partnership sells the property that was ef-
fectively exchanged under the deemed re-
demption rule.

One commenter suggested that when a
partnership owns or acquires stock in a
Corporate Partner's subsidiary or a sister
of the Corporate Partner and the stock is
not issued as part of the transaction, the
deemed redemption rule should not apply
unless and until a subsequent transaction
relating to the stock creates tax conse-
quences that are inconsistent with General
Utilities repeal. As discussed in part 1 of
this preamble, these regulations only ap-
ply to Stock of a Corporate Partner, which
under these regulations, does not include
stock in a Corporate Partner's sister cor-
poration or subsidiary unless such corpo-
ration possesses section 304(c) control of
the Corporate Partner. Such control could
exist, if, for example, a Corporate Part-
ner's subsidiary were to own so-called
"hook stock" in the Corporate Partner. If
such control of the Corporate Partner does
exist, then it is appropriate to treat stock of
a Corporate Partner's subsidiary or sister
corporation as Stock of the Corporate
Partner because the value of that sister or
subsidiary corporation's stock owned or
acquired by the partnership is in part at-
tributable to the Corporate Partner's stock.

Another commenter suggested that the
deemed redemption rule is no longer nec-
essary. The commenter explained that the
acquisition of Stock of the Corporate Part-
ner is not the appropriate time to impose
tax and that the 1992 distribution rule and
changes in the law since 1989 make it
more difficult to exit a partnership tax-
free. The Treasury Department and the
IRS do not adopt this comment because a
Section 337(d) Transaction may create an
immediate benefit to the Corporate Part-
ner equivalent to the benefit associated

with the redemption of corporate stock in
exchange for appreciated property. If the
deemed redemption rule does not apply at
the time of this exchange, the Corporate
Partner can defer paying tax on this eco-
nomic benefit in a manner that is incon-
sistent with section 311(b).

#### 3. Partnership Distributions of Stock of the Corporate Partner

The 1992 distribution rule required a
Corporate Partner to recognize gain when
the partnership distributes Stock of the
Corporate Partner to the Corporate Part-
ner. Commenters noted a number of con-
cerns with this rule and recommended
eliminating it.

Several commenters noted that the rule
was overly broad because it could cause
the Corporate Partner to recognize gain in
an amount that exceeded the appreciation
in property effectively exchanged for the
stock. For example, the rule could require
a Corporate Partner to recognize gain
upon a partnership's distribution of appre-
ciated Stock of the Corporate Partner even
though the partnership held no other ap-
preciated property. One commenter stated
that the 1992 distribution rule would
therefore require the Corporate Partner to
recognize gain on appreciation inherent in
its partnership interest, even though the
distribution does not implicate the repeal
of the General Utilities doctrine and even
though section 1032 provides for nonrec-
ognition of gain on the distribution. The
commenter maintained that the 1992 dis-
tribution rule should not apply when a
Corporate Partner merely exchanges an
indirect interest in its own stock for a
direct interest in its own stock.

The Treasury Department and the IRS
agree with these comments and adopt new
rules governing the tax consequences of a
distribution of Stock of the Corporate
Partner to that Corporate Partner. Instead
of adopting the 1992 distribution rule,
these regulations extend the deemed re-
demption rule to certain distributions to
the Corporate Partner of Stock of the Cor-
porate Partner. These new rules governing
distributions apply only if the distributed
stock has previously been the subject of a
Section 337(d) Transaction or becomes
the subject of a Section 337(d) Transac-
tion as a result of the distribution (a sec-

tion 337(d) distribution). Additionally,
these regulations do not apply to a distri-
bution to the Corporate Partner of the
Stock of the Corporate Partner to which
section 732(f) applies at the time of the
distribution. If the deemed redemption
rule applies to a distribution, these regu-
lations deem the partnership to amend its
agreement immediately before the distri-
bution to allocate 100 percent of the dis-
tributed stock to the Corporate Partner and
to allocate an appropriately reduced inter-
est in other partnership property away
from the Corporate Partner. This deemed
allocation is solely for purposes of recog-
nizing gain under these regulations, and
no inference is intended with regard to the
treatment of such allocations generally.

If a distribution is a section 337(d)
distribution, then in addition to any gain
recognized under the deemed redemption
rule upon the distribution of Stock of the
Corporate Partner to the Corporate Part-
ner, these regulations also require the Cor-
porate Partner to recognize gain to the
extent that the partnership's basis in the
distributed Stock of the Corporate Partner
exceeds the Corporate Partner's basis in
its partnership interest (as reduced by any
cash distributed in the transaction) imme-
diately before the distribution. Recogni-
tion of gain in this circumstance is neces-
sary to prevent the Corporate Partner from
shifting basis away from its own stock
onto other property of the partnership. The
regulations provide an exception to this
additional gain recognition rule if the gain
recognition or basis reduction rules of sec-
tion 732(f) apply at the time of the distri-
bution. Although this exception generally
ensures that gain recognized as a result of
these regulations will not be duplicated as
a result of section 732(f), duplication may
still result in certain circumstances. For
example, if a Corporate Partner recog-
nizes gain under section 337(d) on a part-
nership distribution and section 732(f)
does not apply to the distribution because
the section 732(f) control requirement is
not satisfied at the time of the distribution,
but the control requirement is subse-
quently satisfied triggering section 732(f),
then the Corporate Partner could recog-
nize gain under both provisions. The Trea-
sury Department and the IRS invite com-
ments on how the rules in these

regulations should be coordinated with
section 732(f).

These regulations set forth two rules
under sections 337 and 732 to coordinate
the effects of the rule requiring gain rec-
ognition when the Stock of the Corporate
Partner is stepped down on a section
337(d) distribution with existing rules for
determining the basis of property upon
partnership distributions. The first rule ap-
plies for purposes of determining the basis
of property distributed to the Corporate
Partner (other than the basis of the Cor-
porate Partner in its own stock), the basis
of the Corporate Partner's remaining part-
nership interest, and the partnership's ba-
sis in undistributed Stock of the Corporate
Partner, and for purposes of computing
gain on the distribution. For these pur-
poses, the basis of Stock of the Corporate
Partner distributed to the Corporate Part-
ner equals the greater of: (i) the partner-
ship's basis of that distributed Stock of the
Corporate Partner immediately before the
distribution, or (ii) the fair market value of
that distributed Stock of the Corporate
Partner immediately before the distribu-
tion less the Corporate Partner's allocable
share of gain from all of the Stock of the
Corporate Partner if the partnership sold
all of its assets in a fully taxable transac-
tion for cash in an amount equal to the fair
market value of such property (taking into
account section 7701(g)) immediately be-
fore the distribution. See Examples 2 and
3 of § 1.337(d)-3T(h) in these regulations.
This special rule is necessary to prevent
basis from shifting away from distributed
Stock of the Corporate Partner to other
property. This basis shift could occur, for
example, upon a distribution of less than
all of the partnership's Stock of the Cor-
porate Partner to the Corporate Partner.
The Treasury Department and the IRS re-
quest comments on this rule, including
comments on whether its objectives
would be better achieved through guid-
ance under section 732 providing that on a
distribution of a partial interest in partner-
ship property, the basis of the distributed
property in the hands of the distributee
partner is determined by taking the prin-
ciples of section 704(c) into account.

A second rule applies when a Corpo-
rate Partner receives both Stock of the
Corporate Partner and other property in a
section 337(d) distribution. Under this

rule, the basis to be allocated to the prop-
erties distributed under section 732(a) or
(b) is allocated first to the Stock of the
Corporate Partner before taking into ac-
count the distribution of any other prop-
erty (other than cash). Therefore, before
taking into account the distribution of
other property, the Corporate Partner will
reduce its basis in its partnership interest
by the Corporate Partner's basis in the
distributed Stock of the Corporate Partner
(but not below zero). The Corporate Part-
ner will determine its basis in other dis-
tributed partnership property and in its
remaining partnership interest after giving
effect to this reduction. This rule, which
governs the application of sections 732(a)
and 732(b), is being promulgated pursuant
to the specific statutory grant of authority
in section 337(d)(1) to ensure that the
purposes of the repeal of the General Util-
ities doctrine are not circumvented
through the use of any provision of law or
regulations.

When a Corporate Partner receives a
partnership distribution of its own stock, it
is unclear under existing law whether the
Corporate Partner has basis in that stock.
(See, for example, Rev. Rul. 2006-2,
2006-1 CB 261.) The resolution of this
question is beyond the scope of these reg-
ulations. However, because the distribu-
tion to a Corporate Partner of its own
stock affects the Corporate Partner's basis
in other distributed property and any re-
tained partnership interest, these regula-
tions require the partnership and the Cor-
porate Partner to determine the basis of
other distributed property and any re-
tained partnership interest by reference to
the partnership's basis in the distributed
Stock of the Corporate Partner. That is,
the Corporate Partner determines its basis
in other distributed property and in any
retained partnership interest as though the
distributed stock was stock other than
Stock of the Corporate Partner. Similarly,
the regulations compute any gain recogni-
tion on the distribution by comparing the
Corporate Partner's basis in its partner-
ship interest to the basis of that Stock of
the Corporate Partner in the hands of the
partnership (without regard to whether the
Corporate Partner can have basis in the
distributed stock). No inference is in-
tended with respect to the question of

whether a corporation has or does not
have basis in its own stock.

#### 4. De Minimis and Inadvertence Exceptions

These regulations retain the de minimis
and inadvertence exceptions from the
1992 proposed regulations, but make
small modifications to the de minimis rule
to reduce burden. As set forth in these
regulations, the de minimis rule provides
that these regulations do not apply to a
Corporate Partner if three conditions are
satisfied. These conditions are tested upon
the occurrence of a Section 337(d) Trans-
action and upon any subsequent revalu-
ation event described in § 1.704-
1(b)(2)(iv)(f).

The first condition requires that both
the Corporate Partner and any persons re-
lated to the Corporate Partner under sec-
tion 267(b) or section 707(b) own, in the
aggregate, less than five percent of the
partnership. The second condition requires
that the partnership hold Stock of the Cor-
porate Partner worth less than two percent
of the value of the partnership's gross assets,
including Stock of the Corporate Partner.
The third condition requires that the partner-
ship has never, at any point in time, held
more than $1,000,000 in Stock of the Cor-
porate Partner or more than two percent of
any particular class of Stock of the Corpo-
rate Partner. The 1992 proposed regulations
contained similar conditions, but capped the
permissible value of the partnership's Stock
of the Corporate Partner at $250,000.

These regulations provide a special
rule that applies if the conditions of the de
minimis rule are satisfied at the time of a
Section 337(d) Transaction, but are not
satisfied at the time of a subsequent Sec-
tion 337(d) Transaction or revaluation
event described in § 1.704-1(b)(2)(iv)(f).
This rule provides that, solely for pur-
poses of the deemed redemption rule, a
Corporate Partner may determine its gain
on the subsequent acquisition or revalua-
tion event as if it had already recognized
gain at the previous event. Accordingly,
the Corporate Partner would only recog-
nize gain with respect to appreciation aris-
ing between the earlier acquisition or re-
valuation event and the subsequent event.
Neither the Corporate Partner nor the part-
nership increases its basis by the gain the

Corporate Partner would have recognized
if the de minimis rule did not apply to the
prior acquisition or revaluation event.

These regulations also contain an inad-
vertence exception. The inadvertence ex-
ception provides that these regulations do
not apply to Section 337(d) Transactions
in which the partnership satisfies two re-
quirements. First, the partnership must
dispose of, by sale or distribution, the
Stock of the Corporate Partner before the
due date (including extensions) of its
federal income tax return for the taxable
year in which the partnership acquired
the stock (or in which the Corporate
Partner joined the partnership, if appli-
cable). Second, the partnership must not
have distributed the Stock of the Corpo-
rate Partner to the Corporate Partner or a
person possessing section 304(c) control
of the Corporate Partner. Other than
broadening and narrowing the scope of
related distributees as a result of the
modified definition of Stock of the Cor-
porate Partner, this inadvertence excep-
tion is generally unchanged from the
1992 proposed regulations. However,
the Treasury Department and the IRS
will consider comments with respect to
removing the prohibition against distri-
butions of Stock of the Corporate Part-
ner to the Corporate Partner in light of
the enactment of section 737, which re-
quires a partner to recognize gain on
property with built-in gain contributed
to a partnership when the partnership
distributes other property to the partner
within seven years of the contribution.

### 5. Tiered Partnerships

The Treasury Department and the IRS
are concerned that taxpayers could use
tiered partnerships to circumvent these
regulations. Therefore, these regulations
require taxpayers to apply these regula-
tions to tiered partnerships in a manner
consistent with the regulations' purpose.
See Example 8 of § 1.337(d)-3T(h) in
these regulations.

## Effective/Applicability Date

These regulations apply to transactions
occurring on or after June 12, 2015.

## Special Analyses

It has been determined that this Trea-
sury Decision is not a significant regula-
tory action as defined in Executive Order
12866, as supplemented by Executive Or-
der 13563. Therefore, a regulatory assess-
ment is not required. For the applicability
of the Regulatory Flexibility Act (5
U.S.C. chapter 6), refer to the Special
Analyses section of the preamble to the
cross-referenced notice of proposed rule-
making published in the Proposed Rules
section in this issue of the Bulletin. Pur-
suant to section 7805(f) of the Code, these
regulations have been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.

## Drafting Information

The principal authors of these regula-
tions are Joseph R. Worst and Kevin I.
Babitz, Office of the Associate Chief
Counsel (Passthroughs and Special Indus-
tries). However, other personnel from the
Treasury Department and the IRS partic-
ipated in their development.

** * * *

* * * * *

## Amendment to the Regulations

Accordingly, 26 CFR part 1 is amended
as follows:

## PART I-INCOME TAXES

Paragraph 1. The authority citation for
part 1 is amended by adding an entry in
numerical order to read as follows:

Authority: 26 U.S.C. 7805 *

Section 1.337(d)-3T also issued under
26 U.S.C. 337(d). * * *

Par. 2. Section 1.337(d)-3T is added to
read as follows:

§ 1.337(d)-3T Gain recognition upon
certain partnership transactions
involving a partner's stock (temporary).

(a) Purpose. The purpose of this sec-
tion is to prevent corporate taxpayers from
using a partnership to circumvent gain
required to be recognized under section
311(b) or section 336(a). The rules of this
section, including the determination of the
amount of gain, must be applied in a man-

ner that is consistent with and that reason-
ably carries out this purpose.

(b) In general. This section applies
when a partnership, either directly or in-
directly, owns, acquires, or distributes
Stock of the Corporate Partner (within the
meaning of paragraph (c)(2) of this sec-
tion). Under paragraphs (d) or (e) of this
section, a Corporate Partner (within the
meaning of paragraph (c)(1) of this sec-
tion) is required to recognize gain when a
transaction has the effect of the Corporate
Partner acquiring or increasing an interest
in its own stock in exchange for appreci-
ated property in a manner that contravenes
the purpose of this section as set forth in
paragraph (a) of this section. Paragraph (f)
of this section sets forth exceptions under
which a Corporate Partner does not rec-
ognize gain.

(1) Corporate Partner. A Corporate
Partner is a person that is classified as a
corporation for federal income tax pur-
poses and holds or acquires an interest in
a partnership.

(2) Stock of the Corporate Partner-(i)
In general. With respect to a Corporate
Partner, Stock of the Corporate Partner
includes the Corporate Partner's stock, or
other equity interests, including options,
warrants, and similar interests, in the Cor-
porate Partner or a corporation that con-
trols the Corporate Partner within the
meaning of section 304(c), except that
section 318(a)(1) and (3) shall not apply.
Stock of the Corporate Partner also in-
cludes interests in any entity to the extent
that the value of the interest is attributable
to Stock of the Corporate Partner.

(ii) Affiliated partner exception. Stock
of the Corporate Partner does not include
any stock or other equity interests held or
acquired by a partnership if all interests in
the partnership's capital and profits are
held by members of an affiliated group as
defined in section 1504(a) that includes
the Corporate Partner.

(3) Section 337(d) Transaction. A Sec-
tion 337(d) Transaction is a transaction
(or series of transactions) that has the ef-
fect of an exchange by a Corporate Part-
ner of its interest in appreciated property
for an interest in Stock of the Corporate
Partner owned, acquired, or distributed by

a partnership. For example, a Section
337(d) Transaction may occur when-

(i) A Corporate Partner contributes ap-
preciated property to a partnership that
owns Stock of the Corporate Partner;

(ii) A partnership acquires Stock of the
Corporate Partner;

(iii) A partnership that owns Stock of
the Corporate Partner distributes appreci-
ated property to a partner other than a
Corporate Partner;

(iv) A partnership distributes Stock of
the Corporate Partner to the Corporate
Partner; or

(v) A partnership agreement is
amended in a manner that increases a Cor-
porate Partner's interest in Stock of the
Corporate Partner (including in connec-
tion with a contribution to, or distribution
from, a partnership).

(4) Gain Percentage. A Corporate
Partner's Gain Percentage equals a frac-
tion, the numerator of which is the Cor-
porate Partner's interest (by value) in ap-
preciated property effectively exchanged
for Stock of the Corporate Partner under
the test described in paragraphs (d)(1) and
(2) of this section, and the denominator of
which is the Corporate Partner's interest
(by value) in that appreciated property
immediately before the Section 337(d)
Transaction. Paragraph (d) of this section
requires a partnership to multiply the Gain
Percentage by the Corporate Partner's ag-
gregate gain in appreciated property to
determine gain recognized under this sec-
tion.

(d) Deemed redemption rule-(1) In
general. A Corporate Partner in a partner-
ship that engages in a Section 337(d)
Transaction recognizes gain at the time,
and to the extent, that the Corporate Part-
ner's interest in appreciated property
(other than Stock of the Corporate Part-
ner) is reduced in exchange for an in-
creased interest in Stock of the Corporate
Partner, as determined under paragraph
(d)(2) of this section. This section does
not apply to the extent a transaction has
the effect of an exchange by a Corporate
Partner of non-appreciated property for
Stock of the Corporate Partner or has the
effect of an exchange by a Corporate Part-
ner for property other than Stock of the
Corporate Partner.

(2) Corporate Partner's Interest in
Partnership Property. The Corporate

Partner's interest with respect to both
Stock of the Corporate Partner and the
appreciated property that is the subject of
the exchange is determined based on all
facts and circumstances, including the al-
location and distribution rights set forth in
the partnership agreement. The Corporate
Partner's interest in an identified share of
Stock of the Corporate Partner will never
be less than the Corporate Partner's larg-
est interest (by value) in that share of
Stock of the Corporate Partner that was
taken into account when the partnership
previously determined whether there had
been a Section 337(d) Transaction with
respect to such share (regardless of
whether the Corporate Partner recognized
gain in the earlier transaction). See Exam-
ple 6 of paragraph (h) of this section.
However, this limitation will not apply if
any reduction in the Corporate Partner's
interest in the identified share of Stock of
the Corporate Partner occurred as part of a
plan or arrangement to circumvent the
purpose of this section. See Example 7 of
paragraph (h) of this section.

(3) Amount of gain recognized on the
exchange. The amount of gain the Corpo-
rate Partner recognizes under paragraph
(d)(1) of this section equals the product of
the Corporate Partner's Gain Percentage
and the gain from the appreciated property
that is the subject of the exchange that the
Corporate Partner would recognize if, im-
mediately before the Section 337(d)
Transaction, all assets of the partnership
and any assets contributed to the partner-
ship in the Section 337(d) Transaction
were sold in a fully taxable transaction for
cash in an amount equal to the fair market
value of such property (taking into ac-
count section 7701(g)), reduced, but not
below zero, by any gain the Corporate
Partner is required to recognize with re-
spect to the appreciated property in the
Section 337(d) Transaction under any
other provision of this chapter. This gain
is computed taking into account alloca-
tions of tax items applying the principles
of section 704(c), including any remedial
allocations under § 1.704-3(d).

(4) Basis adjustments-(i) Corporate
Partner's basis in the partnership interest.
The basis of the Corporate Partner's inter-
est in the partnership is increased by the
amount of gain that the Corporate Partner
recognizes under this paragraph (d).

(ii) Partnership's basis in partnership
property. The partnership's adjusted tax
basis in the appreciated property that is
treated as the subject of the exchange un-
der this paragraph (d) is increased by the
amount of gain recognized with respect to
that property by the Corporate Partner as a
result of that exchange, regardless of
whether the partnership has an election in
effect under section 754.

(e) Distribution of Stock of the Corpo-
rate Partner-(1) In general. This para-
graph (e) applies to distributions to the
Corporate Partner of Stock of the Corpo-
rate Partner to which section 732(f) does
not apply and that have previously been
the subject of a Section 337(d) Transac-
tion or become the subject of a Section
337(d) Transaction as a result of the dis-
tribution. Upon the distribution of Stock
of the Corporate Partner to the Corporate
Partner, paragraph (d) of this section will
apply as though immediately before the
distribution the partners amended the part-
nership agreement to allocate to the Cor-
porate Partner a 100 percent interest in
that portion of the Stock of the Corporate
Partner that is distributed and to allocate
an appropriately reduced interest in other
partnership property away from the Cor-
porate Partner.

(2) Basis rules-(i) Basis allocation on
distributions of stock and other property.
If, as part of the same transaction, a part-
nership distributes Stock of the Corporate
Partner and other property (other than
cash) to the Corporate Partner, see
§ 1.732-1T(c)(1)(iii) for a rule allocating
basis first to the Stock of the Corporate
Partner before the distribution of the other
property.

(ii) Computation of Basis. For purposes
of determining the basis of property dis-
tributed to the Corporate Partner (other
than the basis of the Corporate Partner in
its own stock), the basis of the Corporate
Partner's remaining partnership interest,
and the partnership's basis in undistrib-
uted Stock of the Corporate Partner, and
for purposes of computing gain under
paragraph (e)(3) of this section, the part-
nership's basis of Stock of the Corporate
Partner distributed to the Corporate Part-
ner equals the greater of-

(A) The partnership's basis of that dis-
tributed Stock of the Corporate Partner
immediately before the distribution, or

(B) The fair market value of that dis-
tributed Stock of the Corporate Partner
immediately before the distribution less
the Corporate Partner's allocable share of
gain from all of the Stock of the Corporate
Partner if the partnership sold all of its
assets in a fully taxable transaction for
cash in an amount equal to the fair market
value of such property (taking into ac-
count section 7701(g)) immediately be-
fore the distribution.

(3) Gain recognition. The Corporate
Partner will recognize gain on a distribu-
tion of Stock of the Corporate Partner to
the Corporate Partner to the extent that the
partnership's basis in the distributed Stock
of the Corporate Partner (as determined
under paragraph (e)(2)(ii) of this section)
exceeds the Corporate Partner's basis in
its partnership interest (as reduced by any
cash distributed in the transaction) imme-
diately before the distribution.

(f) Exceptions-(1) De minimis rule-
(i) In general. This section does not apply
to a Corporate Partner if at the time that
the partnership acquires Stock of the Cor-
porate Partner or at the time of a revalu-
ation event as described in § 1.704-
1(b)(2)(iv)(f) (without regard to whether or
not the partnership revalues its assets) -

(A) The Corporate Partner and any per-
sons related to the Corporate Partner un-
der section 267(b) or section 707(b) own
in the aggregate less than five percent of
the partnership;

(B) The partnership holds Stock of the
Corporate Partner with a value of less than
two percent of the partnership's gross as-
sets (including the Stock of the Corporate
Partner); and

(1) Stock of the Corporate Partner with
a fair market value greater than
$1,000,000; or

(2) More than two percent of any par-
ticular class of Stock of the Corporate
Partner.

(ii) De minimis rule ceases to apply. If
a partnership satisfies the conditions of the
de minimis rule of paragraph (f)(1) of this
section upon an acquisition of Stock of the
Corporate Partner or revaluation event as
described in § 1.704-1(b)(2)(iv)(f), but
later fails to satisfy the conditions of the
de minimis rule upon a subsequent acqui-
sition or revaluation event, then solely for

purposes of paragraph (d) of this section,
the Corporate Partner may compute its
gain on the subsequent acquisition or re-
valuation event as if it had already recog-
nized gain at the previous event. Neither
the Corporate Partner nor the partnership
increases its basis by the gain the Corpo-
rate Partner would have recognized if the
de minimis rule of paragraph (f)(1) of this
section did not apply to the prior acquisi-
tion or revaluation event.

(2) Inadvertence rule. Unless acquired
as part of a plan to circumvent the purpose
of this section, this section does not apply
to Stock of the Corporate Partner that -

(i) Is disposed of (by sale or distribu-
tion) by the partnership before the due
date (including extensions) of its federal
income tax return for the taxable year
during which the Stock of the Corporate
Partner is acquired (or for the taxable year
in which the Corporate Partner becomes a
partner, whichever is applicable); and

(ii) Is not distributed to the Corporate
Partner or a corporation that controls the
Corporate Partner within the meaning of
section 304(c), except that section
318(a)(1) and (3) shall not apply.

(g) Tiered partnerships. The rules of
this section shall apply to tiered partner-
ships in a manner that is consistent with
the purpose set forth in paragraph (a) of
this section.

(h) Examples. The following examples
illustrate the principles of this section. All
amounts in the following examples are
reported in millions of dollars:

Example 1. Deemed redemption rule - contribu-
tion of Stock of a Corporate Partner. (i) In Year 1,
X, a corporation, and A, an individual, form partner-
ship AX as equal partners in all respects. X contrib-
utes Asset 1 with a fair market value of $100 and a
basis of $20. A contributes X stock, which is Stock
of the Corporate Partner, with a basis and fair market
value of $100.

(ii) Because A and X are equal partners in AX in
all respects, the partnership formation causes X's
interest in X stock to increase from $0 to $50 and its
interest in Asset 1 to decrease from $100 to $50.
Thus, the partnership formation is a Section 337(d)
Transaction because the formation has the effect of
an exchange by X of $50 of Asset 1 for $50 of X
stock.

(iii) X must recognize gain under paragraph (d)
of this section with respect to Asset 1 to prevent the
circumvention of section 311(b) principles. X's gain
equals the product of X's Gain Percentage and the
gain from Asset 1 that X would recognize (de-
creased, but not below zero, by any gain that X
recognized with respect to Asset 1 in the Section
337(d) Transaction under any other provision of this

chapter) if, immediately before the Section 337(d)
Transaction, all assets were sold in a fully taxable
transaction for cash in an amount equal to the fair
market value of such property. If Asset 1 had been
sold in a fully taxable transaction immediately be-
fore the formation of partnership AX, X's allocable
share of gain would have been $80. X's Gain Per-
centage is 50% (equal to a fraction, the numerator of
which is X's $50 interest in Asset 1 effectively
exchanged for X stock, and the denominator of
which is X's $100 interest in Asset 1 immediately
before the Section 337(d) Transaction). Thus, X rec-
ognizes $40 of gain ($80 multiplied by 50%) under
the deemed redemption rule in paragraph (d) of this
section. Under paragraph (d)(4)(i) of this section,
X's basis in its AX partnership interest increases
from $20 to $60. Under paragraph (d)(4)(ii) of this
section, AX's basis in Asset 1 increases from $20 to
$60 because Asset 1 is the appreciated property
treated as the subject of the exchange.

Example 2. Distribution of Stock of the Corpo-
rate Partner - pro rata distribution. (i) The facts are
the same as in Example 1(i). AX liquidates in Year
9, when Asset 1 and the X stock each have a fair
market value of $200. X and A each receive 50% of
Asset 1 and 50% of the X stock in the liquidation. At
the time AX liquidates, X's basis in its AX partner-
ship interest is $60 and A's basis in its AX partner-
ship interest is $100.

(ii) When AX liquidates, X's interests in its stock
and in Asset 1 do not change. Thus, the liquidation is
not a Section 337(d) Transaction because it does not
have the effect of an exchange by X of appreciated
property for Stock of the Corporate Partner.

(iii) Paragraph (e) of this section applies because
the distributed X stock was the subject of a previous
Section 337(d) Transaction and because section
732(f) does not apply. Under § 1.732-1T(c)(1)(iii),
the distribution to X of X stock is deemed to imme-
diately precede the distribution of 50% of Asset 1 to
X for purposes of determining X's basis in the dis-
tributed property. For purposes of determining X's
basis in Asset 1 and X's gain on distribution, the
basis of the distributed X stock is treated as $50, the
greater of $50 (50% of the stock's $100 basis in the
hands of the partnership), or $50, the fair market
value of that distributed X stock ($100) less X's
allocable share of gain from the distributed X stock
if AX had sold all of its assets in a fully taxable
transaction for cash in an amount equal to the fair
market value of such property immediately before
the distribution ($50). Thus, X reduces its basis in its
partnership interest by $50 prior to the distribution of
Asset 1. Accordingly, X's basis in the distributed
portion of Asset 1 is $10. Because AX's basis in the
distributed X stock immediately before the distribu-
tion ($50) does not exceed X's basis in its AX
partnership interest immediately before the distribu-
tion ($60), X recognizes no gain under paragraph
(e)(3) of this section.

Example 3. Distribution of Stock of the Corpo-
rate Partner - non pro rata distribution. (i) The facts
are the same as Example 2(i), except that when AX
liquidates, X receives 75% of the X stock and 25%
of Asset 1 and A receives 25% of the X stock and
75% of Asset 1.

(ii) The liquidation of AX causes X's interest in
X stock to increase from $100 to $150 and its inter-

est in Asset 1 to decrease from $100 to $50. Thus,
AX's liquidating distributions of X stock and Asset
1 to X are a Section 337(d) Transaction because the
distributions have the effect of an exchange by X of
$50 of Asset 1 for $50 of X stock.

(iii) X must recognize gain with respect to Asset
1 to prevent the circumvention of section 311(b)
principles. Under paragraph (e)(1) of this section,
paragraph (d) of this section is applied as if X and A
amended the AX partnership agreement to allocate
to X a 100% interest in the distributed portion of the
X stock. X must recognize gain equal to the product
of X's Gain Percentage and the gain from Asset 1
that X would have recognized (decreased, but not
below zero, by any gain X recognized with respect to
Asset 1 in the Section 337(d) Transaction under any
other provision of this chapter) if, immediately be-
fore the Section 337(d) Transaction, AX had sold all
of its assets in a fully taxable transaction for cash in
an amount equal to the fair market value of such
property.

(iv) If Asset 1 had been sold in a fully taxable
transaction immediately before the amendment of
the AX partnership agreement, X's allocable share of
gain would have been $90, or the sum of X's $40
remaining gain under section 704(c) and $50 of the
$100 post-contribution appreciation. X's Gain Per-
centage is 50% (equal to a fraction, the numerator of
which is X's $50 interest in Asset 1 effectively
exchanged for X stock, and the denominator of
which is X's $100 interest in Asset 1 immediately
before the Section 337(d) Transaction). Thus, X rec-
ognizes $45 of gain ($90 multiplied by 50%) under
the deemed redemption rule in paragraph (d) of this
section. Under paragraph (d)(4)(i) of this section,
X's basis in its AX partnership interest increases
from $60 to $105. Under paragraph (d)(4)(ii) of this
section, AX's basis in Asset 1 increases from $60 to
$105 because Asset 1 is the appreciated property
treated as the subject of the exchange.

(v) Paragraph (e) of this section applies because
the distributed X stock was the subject of a previous
Section 337(d) Transaction and because section
732(f) does not apply. Under § 1.732-1T(c)(1)(iii),
AX is treated as first distributing the X stock to X
before the distribution of 25% of Asset 1. For pur-
poses of determining X's basis in Asset 1 and X's
gain on distribution, the basis of the distributed X
stock is treated as $100, the greater of $75 (75% of
the stock's $100 basis in the hands of the partner-
ship) or $100, the fair market value of the distributed
X stock ($150) less X's allocable share of gain if the
partnership had sold all of the X stock immediately
before the distribution for cash in an amount equal to
its fair market value ($50). Thus, X will reduce its
basis in its partnership interest by $100 prior to the
distribution of Asset 1. Accordingly, X's basis in the
distributed portion of Asset 1 is $5. Because AX's
basis in the distributed X stock immediately before
the distribution as computed for purposes of this
section ($100) does not exceed X's basis in its AX
partnership interest immediately before the distribu-
tion ($105), X recognizes no additional gain under
paragraph (e)(3) of this section.

Example 4. Deemed redemption rule - subse-
quent purchase of Stock of the Corporate Partner.
The facts are the same as Example 1(i), except that A
contributes cash of $100 instead of X stock. In a later

year, when the value of Asset 1 has not changed, AX
uses the contributed cash to purchase X stock for
$100. AX's purchase of X stock has the effect of an
exchange by X of appreciated property for X stock,
and thus, is a Section 337(d) Transaction. X must
recognize gain at the time, and to the extent, that X's
share of appreciated property (other than X stock) is
reduced in exchange for X stock. Thus, the conse-
quences of the partnership's purchase of X stock are
the same as those described in Example 1(ii) and
(iii), resulting in X recognizing $40 of gain.

Example 5. Change in allocation ratios - amend-
ment of partnership agreement. (i) The facts are the
same as Example 2(i), except that in Year 9, AX
does not liquidate, and the AX partnership agree-
ment is amended to allocate to X 80% of the income,
gain, loss, and deduction from the X stock and to
allocate to A 80% of the income, gain, loss, and
deduction from Asset 1. If AX had sold the partner-
ship assets immediately before the change to the
partnership agreement, X would have been allocated
$90 of gain from Asset 1 and $50 of gain from the X
stock.

(ii) The amendment to the AX partnership agree-
ment causes X's interest in its stock to increase from
$100 (50% of the stock value immediately before the
amendment of the agreement) to $160 (80% of stock
value immediately following amendment of agree-
ment) and its interest in Asset 1 to decrease from
$100 to $40. Thus, the amendment of the partnership
agreement is a Section 337(d) Transaction because
the amendment has the effect of an exchange by X of
$60 of Asset 1 for $60 of its stock.

(iii) X must recognize gain equal to the product
of X's Gain Percentage and the gain from Asset 1
that X would have recognized (decreased, but not
below zero, by any gain X recognized with respect to
Asset 1 in the Section 337(d) Transaction under any
other provision of this chapter ) if, immediately
before the Section 337(d) Transaction, AX had sold
all of its assets in a fully taxable transaction for cash
in an amount equal to the fair market value of such
property. If Asset 1 had been sold in a fully taxable
transaction immediately before the amendment of
the AX partnership agreement, X's allocable share of
gain would have been $90, or the sum of X's $40
remaining gain under section 704(c) and 50% of the
$100 post-contribution appreciation. X's Gain Per-
centage is 60% (equal to a fraction, the numerator of
which is X's $60 interest in Asset 1 effectively
exchanged for X stock, and the denominator of
which is X's $100 interest in Asset 1 immediately
before the Section 337(d) Transaction). Thus, X rec-
ognizes $54 of gain ($90 multiplied by 60%) under
the deemed redemption rule in paragraph (d) of this
section. Under paragraph (d)(4)(i) of this section,
X's basis in its AX partnership interest increases
from $60 to $114. Under paragraph (d)(4)(ii) of this
section, AX's basis in Asset 1 increases from $60 to
$114 because Asset 1 is the appreciated property
treated as the subject of the exchange.

Example 6. Change in allocation ratios - admis-
sion and exit of a partner. (i) The facts are the same
as Example 1(i). In addition, in Year 2, when the
values of Asset 1 and the X stock have not changed,
B contributes $100 of cash to AX in exchange for a
one-third interest in the partnership. Upon the ad-
mission of B as a partner, X's interest in Asset 1

decreases from $50 to $33.33, and its interest in B's
contributed cash increases. B's admission is not a
Section 337(d) Transaction because it does not have
the effect of an exchange by X of its interest in Asset
1 for X stock. Accordingly, X does not recognize
gain under paragraph (d) of this section.

(ii) In Year 9, when the values of Asset 1 and the
X stock have not changed, the partnership distributes
$50 of cash and 50% of Asset 1 (valued at $50) to B
in liquidation of B's interest. X and A are equal
partners in all respects after the distribution. Upon
the liquidation of B's interest, X's interest in Asset 1
decreases from $33.33 to $25, and its interest in X
stock increases from $33.33 to $50. AX's liquidation
of B's interest has the effect of an exchange by X of
appreciated property for X stock, and thus, is a
Section 337(d) Transaction.

(iii) Pursuant to paragraph (d)(2) of this section,
X's interest in X stock and other appreciated prop-
erty held by the partnership is determined based on
all facts and circumstances, including allocation and
distribution rights in the partnership agreement.
However, paragraph (d)(2) of this section also re-
quires that X's interest in its stock for purposes of
paragraph (d) will never be less than the Corporate
Partner's largest interest (by value) in those shares of
Stock of the Corporate Partner taken into account
when the partnership previously determined whether
there had been a Section 337(d) Transaction (regard-
less of whether the Corporate Partner recognized
gain in the earlier transaction). Although X's interest
in X stock increases to $50 upon AX's liquidation of
B's interest, X's largest interest previously taken into
account under paragraph (d)(1) of this section was
$50. Thus, X's interest in its stock is not considered
to be increased, and X therefore recognizes no gain
under paragraph (d) of this section, provided that the
transactions did not occur as part of a plan or ar-
rangement to circumvent the purpose of this section.

Example 7. Change in allocation ratios - plan to
circumvent purpose of this section. (i) In Year 1, X,
a corporation, and A, an individual, contribute a
small amount of capital to newly-formed partnership
AX, with X receiving a 99% interest in AX and A
receiving a 1% interest in AX. AX borrows $100
from a third-party lender and uses the proceeds to
purchase X stock, which is Stock of the Corporate
Partner. Later, as part of a plan or arrangement to
circumvent the purposes of this section, A contrib-
utes $100 of cash, which AX uses to repay the loan,
and X contributes Asset 1 with a fair market value of
$100 and basis of $20. After these contributions, A
and X are equal partners in AX in all respects.

(ii) Pursuant to paragraph (d)(2) of this section,
X's interest in X stock and other appreciated prop-
erty held by the partnership is determined based on
all facts and circumstances, including allocation and
distribution rights in the partnership agreement. Gen-
erally pursuant to paragraph (d)(2) of this section,
X's interest in X stock for purposes of paragraph (d)
will never be less than the Corporate Partner's larg-
est interest (by value) in those shares of Stock of the
Corporate Partner taken into account when the part-
nership previously determined whether there had
been a Section 337(d) Transaction (regardless of
whether the Corporate Partner recognized gain in the
earlier transaction). This limitation does not apply,
however, if the reduction in X's interest in X's stock

occurred as part of a plan or arrangement to circum-
vent the purpose of this section. Because the trans-
actions described in this example are part of a plan or
arrangement to circumvent the purpose of this sec-
tion, the limitation in paragraph (d)(2) of this section
does not apply. Accordingly, the deemed redemption
rule under paragraph (d) of this section applies to the
transactions with the consequences described in Ex-
ample 1(iii) of this section, resulting in X recogniz-
ing $40 of gain.

Example 8. Tiered partnership. (i) In Year 1, X,
a corporation, and A, an individual, form partnership
UTP. X contributes Asset 1 with a fair market value
of $80 and a basis of $0 in exchange for an 80%
interest in UTP. A contributes $20 of cash in ex-
change for a 20% interest in UTP. UTP and B, an
individual, form partnership LTP as equal partners.
UTP contributes Asset 1 and $20 of cash. B contrib-
utes X stock, which is Stock of the Corporate Part-
ner, with a basis and fair market value of $100.

(ii) Pursuant to paragraph (g) of this section, the
rules of this section shall apply to tiered partnerships
in a manner that is consistent with the purpose set
forth in paragraph (a) of this section. Pursuant to
paragraph (d)(1) of this section, if X is in a partner-
ship that engages in a Section 337(d) Transaction, X
must recognize gain at the time, and to the extent,
that X's share of appreciated property is reduced in
exchange for X stock. The formation of LTP causes
X's interest in X stock to increase from $0 to $40
and its interest in Asset 1 to decrease from $64 to
$32. Thus, LTP's formation is a Section 337(d)
Transaction because the formation has the effect of
an exchange by X of $32 of Asset 1 for $32 of X
stock.

(iii) X must recognize gain with respect to Asset
1 to prevent the circumvention of section 311(b)
principles. X must recognize gain equal to the prod-
uct of X's Gain Percentage and the gain from Asset
1 (decreased, but not below zero, by any gain X
recognized with respect to Asset 1 in the Section
337(d) Transaction under any other provision of this
chapter) that X would recognize if, immediately
before the Section 337(d) Transaction, all assets
were sold in a fully taxable transaction for cash in an
amount equal to the fair market value of such prop-
erty. If Asset 1 had been sold in a fully taxable
transaction immediately before LTP's formation,
X's allocable share of gain would have been $80
pursuant to section 704(c). X's Gain Percentage is
50% (equal to a fraction, the numerator of which is
X's $32 interest in Asset 1 effectively exchanged for
X stock, and the denominator of which is X's $64
interest in Asset 1 immediately before the Section
337(d) Transaction). Thus, X recognizes $40 of gain
($80 multiplied by 50%) under the deemed redemp-
tion rule in paragraph (d) of this section. Under
paragraphs (d)(4)(i) and (d)(4)(ii) of this section, X's
basis in its UTP partnership interest increases from
$0 to $40, UTP's basis in its LTP partnership interest
increases from $20 to $60, and LTP's basis in Asset
1 increases from $0 to $40 pursuant to paragraph (g)
of this section.

(i) Effective/applicability date. This
section applies to transactions occurring
on or after June 12, 2015.

(j) Expiration date. This section ex-
pires on June 11, 2018.

Par. 3. Section 1.732-1 is amended by
revising paragraphs (c)(1) and (5) to read
as follows:

§ 1.732-1 Basis of distributed property
other than money.

* * * * *

(5) Effective/applicability date-(i) In
general. This paragraph (c) applies to dis-
tributions of property from a partnership
that occur on or after December 15, 1999.

(ii) [Reserved]. For further guidance,
see § 1.732-1T(c)(5)(ii).

* * * * *

Par. 4. Section 1.732-1T is added to
read as follows:

§ 1.732-1T Basis of distributed property
other than money (temporary).

(a) and (b) [Reserved]. For further
guidance, see § 1.732-1(a) and (b).

(c) Allocation of basis among proper-
ties distributed to a partner-(1) General
rule-(i) Unrealized receivables and in-
ventory items. Except as provided in para-
graph (c)(1)(iii) of this section, the basis
to be allocated to properties distributed to
a partner under section 732(a)(2) or (b) is
allocated first to any unrealized receiv-
ables (as defined in section 751(c)) and
inventory items (as defined in section
751(d)(2)) in an amount equal to the ad-
justed basis of each such property to the
partnership immediately before the distri-
bution. If the basis to be allocated is less
than the sum of the adjusted bases to the
partnership of the distributed unrealized
receivables and inventory items, the ad-
justed basis of the distributed property
must be decreased in the manner provided
in § 1.732-1(c)(2)(i). See § 1.460-
4(k)(2)(iv)(D) for a rule determining the
partnership's basis in long-term contract
accounted for under a long-term contract
method of accounting.

(ii) Other distributed property. Any ba-
sis not allocated to unrealized receivables
or inventory items under paragraph
(c)(1)(i) of this section or to stock of per-
sons that control the corporate partner or
to the corporate partner's stock under
paragraph (c)(1)(iii) of this section is al-

located to any other property distributed
to the partner in the same transaction by
assigning to each distributed property an
amount equal to the adjusted basis of the
property to the partnership immediately
before the distribution. However, if the
sum of the adjusted bases to the partner-
ship of such other distributed property
does not equal the basis to be allocated
among the distributed property, any in-
crease or decrease required to make the
amounts equal is allocated among the dis-
tributed property as provided in § 1.732-
1(c)(2).

(iii) Stock distributed to the corporate
partner. If a partnership makes a distribu-
tion described in § 1.337(d)-3T(e)(1),
then for purposes of this section, the basis
to be allocated to properties distributed
under section 732(a)(2) or (b) is allocated
first to the Stock of the Corporate Partner,
as defined in § 1.337(d)-3T(c)(2), before
the distribution of any other property
(other than cash). The amount allocated to
the Stock of the Corporate Partner is as
provided in § 1.337(d)-3T(e)(2).

(2) through (5)(i) [Reserved]. For fur-
ther guidance, see § 1.732-1(c)(2)
through (c)(5)(i).

(ii) Exception. Notwithstanding para-
graph (c)(5)(i), the first sentence of each
of paragraphs (c)(1)(i) and (c)(1)(ii) of
this section, and paragraph (c)(1)(iii) of
this section in its entirety, apply to distri-
butions of Stock of the Corporate Partner,
as defined in § 1.337(d)-3T(c)(2), that
occur on or after June 12, 2015.

(d) and (e) [Reserved]. For further
guidance, see § 1.732-1(d) and (e).

(f) Expiration date. This section ex-
pires on June 11, 2018.

John Dalrymple,
Deputy Commissioner for
Services and Enforcement.

Approved June 1, 2015

Mark J. Mazur
Assistant Secretary of the
Treasury (Tax Policy).

(Filed by the Office of the Federal Register on June 11, 8:45
a.m., and published in the issue of the Federal Register for
June 12, 80 F.R. 33402)

## Section 9815 .- Summary of Benefits and coverage and Uniform Glossary

26 CFR 54.9815-2715 - Summary of benefits and
coverage and uniform glossary.

TD 9724

DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 54

DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590

DEPARTMENT OF HEALTH
AND HUMAN SERVICES
45 CFR Part 147

Summary of Benefits and
Coverage and Uniform
Glossary

AGENCIES: Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration, Depart-
ment of Labor; Centers for Medicare &
Medicaid Services, Department of Health
and Human Services.

ACTION: Final rules.

SUMMARY: This document contains fi-
nal regulations regarding the summary
of benefits and coverage (SBC) and the
uniform glossary for group health plans
and health insurance coverage in the
group and individual markets under the
Patient Protection and Affordable Care
Act. It finalizes changes to the regula-
tions that implement the disclosure re-
quirements under section 2715 of the
Public Health Service Act to help plans
and individuals better understand their

health coverage, as well as to gain a
better understanding of other coverage
options for comparison.

DATES: Effective Date: These final
regulations are effective on August 17,
2015.

FOR FURTHER INFORMATION
CONTACT: Elizabeth Schumacher or
Amber Rivers, Employee Benefits Secu-
rity Administration, Department of La-
bor, at (202) 693-8335 (not a toll-free
number); Karen Levin, Internal Revenue
Service, Department of the Treasury, at
(202) 317-5500 (not a toll-free number);
Heather Raeburn, Centers for Medicare
& Medicaid Services, Department of
Health and Human Services, at (301)
492-4224 (not a toll-free number).

Customer Service Information: Individ-
uals interested in obtaining information
from the Department of Labor concerning
employment-based health coverage laws
may call the EBSA Toll-Free Hotline at
1-866-444-EBSA (3272) or visit the De-
partment of Labor's website (http://www.
dol.gov/ebsa). In addition, information
from HHS on private health insurance for
consumers can be found on CMS's web-
site (www.cms.gov/cciio) and information
on health reform can be found at
http://www.healthcare.gov.

# SUPPLEMENTARY INFORMATION:

## I.Background

The Patient Protection and Affordable
Care Act, Pub. L. 111-148, was enacted
on March 23, 2010; the Health Care and
Education Reconciliation Act, Pub. L.
111-152, was enacted on March 30,
2010. These statutes are collectively
known as the Affordable Care Act. The
Affordable Care Act reorganizes,
amends, and adds to the provisions of
part A of title XXVII of the Public
Health Service Act (PHS Act) relating

to group health plans and health insur-
ance issuers in the group and individual
markets. The term "group health plan"
includes both insured and self-insured
group health plans.1 The Affordable
Care Act adds section 715(a)(1) to the
Employee Retirement Income Security
Act (ERISA) and section 9815(a)(1) to
the Internal Revenue Code (the Code) to
incorporate the provisions of part A of
title XXVII of the PHS Act into ERISA
and the Code, and make them applicable
to group health plans, and health insur-
ance issuers providing health insurance
coverage in connection with group
health plans. The PHS Act sections in-
corporated by this reference are sections
2701 through 2728.

Section 2715 of the PHS Act, as added
by the Affordable Care Act, directs the
Departments of Labor, Health and Human
Services (HHS), and the Treasury (the
Departments)2 to develop standards for
use by a group health plan and a health
insurance issuer offering group or indi-
vidual health insurance coverage in
compiling and providing a summary of
benefits and coverage (SBC) that "accu-
rately describes the benefits and cover-
age under the applicable plan or cover-
age." PHS Act section 2715 also calls
for the "development of standards for
the definitions of terms used in health
insurance coverage."

In accordance with the statute, the De-
partments, in developing such standards,
consulted with the National Association
of Insurance Commissioners (referred to
in this document as the "NAIC")3, and the
NAIC provided its final recommendations
to the Departments regarding the SBC on
July 29, 2011. On August 22, 2011, the
Departments published proposed regula-
tions (2011 proposed regulations) and an
accompanying document soliciting com-
ments on the template, instructions, and
related materials for implementing the
disclosure provisions under PHS Act sec-

"The term "group health plan" is used in title XXVII of the PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is distinct from the term "health plan," as used in other provisions
of title I of the Affordable Care Act. The term "health plan" does not include self-insured group health plans.

2Note, however, that in sections under headings listing only two of the three Departments, the term "Departments" generally refers only to the two Departments listed in the heading.

3The NAIC convened a working group (NAIC working group) comprised of a diverse group of stakeholders. This working group met frequently for over one year while developing its
recommendations. In developing its recommendations, the NAIC considered the results of various consumer testing sponsored by both insurance industry and consumer associations.
Throughout the process, NAIC working group draft documents and meeting notes were displayed on the NAIC's website for public review, and several interested parties filed formal
comments. In addition to participation from the NAIC working group members, conference calls and in-person meetings were open to other interested parties and individuals and provided
an opportunity for non-member feedback. See www.naic.org/committees_b_consumer_information.htm.

tion 2715.4 After consideration of all the
comments received on the 2011 proposed
regulations and accompanying docu-
ments, the Departments published joint
final regulations to implement the disclo-
sure requirements under PHS Act section
2715 on February 14, 2012 (2012 final
regulations) and an accompanying docu-
ment with the template, instructions, and
related materials.5

After the 2012 final regulations were
published, the Departments released Fre-
quently Asked Questions (FAQs) regard-
ing implementation of the SBC provisions
as part of six issuances. The Departments
released FAQs about Affordable Care Act
Implementation Parts VII, VIII, IX, X,
XIV, and XIX to answer outstanding
questions, including questions related to
the SBC.6 These FAQs addressed ques-
tions related to compliance with the re-
quirements of the 2012 final regulations,
implemented additional safe harbors,7 and
released updated SBC materials.

On December 30, 2014, the Depart-
ments issued proposed regulations (De-
cember 2014 proposed regulations), as
well as a new proposed SBC template,
instructions, an updated uniform glossary,
and other materials to incorporate some of
the feedback the Departments have re-
ceived and to make some improvements
to the template.8 The draft updated tem-
plate, instructions, and supplementary ma-
terials are available at http://cciio.cms.gov
and http://www.dol.gov/ebsa/healthreform/
regulations/summaryofbenefits.html.

On March 30, 2015, the Departments
released an FAQ stating that the Depart-
ments intend to finalize changes to the
regulations in the near future but intend to
utilize consumer testing and offer an op-
portunity for the public, including the
NAIC, to provide further input before fi-
nalizing revisions to the SBC template

and associated documents.9 The Depart-
ments anticipate the new template and as-
sociated documents will be finalized by
January 2016 and will apply to coverage
that would renew or begin on the first day
of the first plan year (or, in the individual
market, policy year) that begins on or after
January 1, 2017 (including open season
periods that occur in the Fall of 2016 for
coverage beginning on or after January 1,
2017).

After consideration of the comments
and feedback received from stakeholders
in response to the December 2014 pro-
posed regulations, the Departments are
publishing these final regulations. In re-
sponse to the 2014 proposed regulations,
the Departments received comments on
the regulations as well as the template and
associated documents. The Departments
received many comments on the proposed
changes to the template and associated
documents but received very few com-
ments relating to the regulations. As stated
in the FAQ issued on March 30, 2015, the
Departments anticipate the new template
and associated documents will be final-
ized by January 2016, and, therefore, only
the comments on the regulations will be
addressed in this final rule. Comments
relating to the template and associated
documents will be addressed when those
documents are finalized.

## II. Overview of the Final Regulations

A. Requirement to Provide a Summary
of Benefits and Coverage

1\. Provision of the SBC by an Issuer to

a Plan

Under paragraph (a)(1)(i) of the 2012
final regulations, a health insurance issuer
offering group health insurance coverage
must provide an SBC to a group health

plan (or its sponsor) upon an application
by the plan for health coverage. The issuer
must provide the SBC as soon as practi-
cable following receipt of the application,
but in no event later than seven business
days following receipt of the application.
The Departments proposed to add lan-
guage to clarify that, under the 2012 final
regulations, a health insurance issuer of-
fering group health insurance coverage (or
plan, if applicable, under paragraph
(a)(1)(ii), as discussed below) is not re-
quired to automatically provide the SBC
again if the issuer already provided the
SBC before application to any entity or
individual, provided there is no change
in the information required to be in the
SBC.

The comments the Departments re-
ceived on this clarification generally sup-
ported the proposed language and, accord-
ingly, these final regulations finalize the
language of the proposed regulations
without change. Therefore, these final reg-
ulations include language clarifying that,
if the issuer provides the SBC upon re-
quest before application for coverage, the
requirement to provide an SBC upon ap-
plication is deemed satisfied, and the is-
suer is not required to automatically pro-
vide another SBC upon application to the
same entity or individual, provided there
is no change to the information required to
be in the SBC. However, if there has been
a change in the information required to be
included in the SBC, a new SBC that
includes the changed information must be
provided upon application (that is, as soon
as practicable following receipt of the ap-
plication, but in no event later than seven
business days following receipt of the ap-
plication).

Under paragraph (a)(i)(B) of the 2012
final regulations, if there is any change in
the information required to be in the SBC

4See proposed regulations, published at 76 FR 52442 (August 22, 2011) and guidance document published at 76 FR 52475 (August 22, 2011).

5See final regulations, published at 77 FR 8668 (February 14, 2012) and guidance document published at 77 FR 8706 (February 14, 2012).

6See Frequently Asked Questions about Affordable Care Act Implementation Part VII (available at www.dol.gov/ebsa/faqs/faq-aca7.html and http://www.cms.gov/CCIIO/Resources/Fact-
Sheets-and-FAQs/aca_implementation_faqs7.html); Part VIII (available at www.dol.gov/ebsa/faqs/faq-aca8.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/
aca_implementation_faqs8.html); Part IX (available at www.dol.gov/ebsa/faqs/faq-aca9.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs9.html); Part
X (available at www.dol.gov/ebsa/faqs/faq-aca10.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs10.html); Part XIV (available at www.dol.gov/
ebsa/faqs/faq-aca14.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs14.html); and Part XIX (available at www.dol.gov/ebsa/faqs/faq-aca19.html and
http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs19.html).

7 As discussed more fully herein, some of the enforcement safe harbors and transitions are being made permanent (several with modifications) by these final regulations.

8See proposed regulations published at 79 FR 78577 (December 30, 2014).

9See Frequently Asked Questions about Affordable Care Act Implementation Part XXIV, available at http://www.dol.gov/ebsa/faqs/faq-aca24.html and http://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs24.html.

that was provided upon application and
before the first day of coverage, the is-
suer must update and provide a current
SBC to the plan (or its sponsor) no later
than the first day of coverage. If the
information is unchanged, the issuer
does not need to provide the SBC again
in connection with coverage for that
plan year, except upon request. The De-
cember 2014 proposed regulations
stated that if the plan sponsor is negoti-
ating coverage terms after an applica-
tion has been filed and the information
required to be in the SBC changes, an
updated SBC is not required to be pro-
vided to the plan or its sponsor (unless
an updated SBC is requested) until the
first day of coverage. The updated SBC
should reflect the final coverage terms
under the policy, certificate, or contract
of insurance that was purchased.

Some commenters supported the clari-
fication and stated that if there is a change
in the information required, a new SBC
that includes the changed information
must be provided upon application. Other
commenters stated that enrollees in both
the group and individual markets need to
know of pending plan changes during
open and special enrollment periods so
that they can make informed decisions
about their plan options.

These final regulations finalize the lan-
guage of the proposed regulations with-
out change. Therefore, if the plan spon-
sor is negotiating coverage terms after
an application has been filed and the
information required to be in the SBC
changes, an updated SBC is not required
to be provided to the plan or its sponsor
(unless an updated SBC is requested)
until the first day of coverage. The up-
dated SBC is required to reflect the final
coverage terms under the policy, certif-
icate, or contract of insurance that was
purchased.

2\. Provision of the SBC by a Plan or
Issuer to Participants and Beneficiaries

Under paragraph (a)(1)(ii) of 2012 fi-
nal regulations, a group health plan (in-
cluding the plan administrator), and a
health insurance issuer offering group
health insurance coverage, must provide
an SBC to a participant or beneficiary10
with respect to each benefit package of-
fered by the plan or issuer for which the
participant or beneficiary is eligible.11 The
December 2014 proposed regulations
clarified that if the plan or issuer provides
the SBC prior to application for coverage,
the plan or issuer is not required to auto-
matically provide another SBC upon ap-
plication, if there is no change to the in-
formation required to be in the SBC. If
there is any change to the information
required to be in the SBC by the time the
application is filed, the plan or issuer must
update and provide a current SBC as soon
as practicable following receipt of the ap-
plication, but in no event later than seven
business days following receipt of the ap-
plication.

The comments the Departments re-
ceived on this proposal generally sup-
ported adopting the language of the pro-
posed regulations, which incorporates this
clarification of the 2012 final regulations.
Therefore, these final regulations provide
that if an SBC was provided upon request
before application, the requirement to pro-
vide the SBC upon application is deemed
satisfied, provided there is no change to
the information required to be in the SBC.
However, if there has been a change in the
information required to be in the SBC, a
new SBC that includes the updated infor-
mation must be provided as soon as prac-
ticable following receipt of the applica-
tion, but in no event later than seven
business days following receipt of the ap-
plication.

Under the 2012 final regulations, if
there is any change to the information

required to be in the SBC that was pro-
vided upon application and before the first
day of coverage, the plan or issuer must
update and provide a current SBC to a
participant or beneficiary no later than the
first day of coverage. The December 2014
proposed regulations addressed how to
satisfy the requirement to provide an SBC
when the terms of coverage are not final-
ized. Those proposed regulations pro-
posed that if the plan sponsor is negotiat-
ing coverage terms after an application
has been filed and the information re-
quired to be in the SBC changes, the plan
or issuer is not required to provide an
updated SBC (unless an updated SBC is
requested) until the first day of coverage.
The updated SBC would be required to
reflect the final coverage terms under the
policy, certificate, or contract of insurance
that was purchased. The Departments did
not receive comments relating to this pro-
vision, and, therefore, these final regula-
tions finalize the language of the proposed
regulations without change.

Under the 2012 final regulations, the
plan or issuer must also provide the SBC
to individuals enrolling through a special
enrollment period, also called special en-
rollees.12 Special enrollees must be pro-
vided with an SBC no later than when a
summary plan description is required to
be provided under the timeframe set forth
in ERISA section 104(b)(1)(A) and its
implementing regulations, which is 90
days from enrollment.

The December 2014 proposed regula-
tions followed the approach of the 2012
final rules with respect to this requirement
and did not include a proposed change.
The proposed regulations provided that, to
the extent individuals who are eligible for
special enrollment would like to receive
SBCs earlier than this timeframe, they
may request an SBC with respect to any
particular plan, policy, or benefit package
and the SBC is required to be provided as
soon as practicable, but in no event later

10ERISA section 3(7) defines a participant as: any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become
eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employers or members of such organization, or whose beneficiaries may be eligible
to receive any such benefit. ERISA section 3(8) defines a beneficiary as: a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled
to a benefit thereunder.

11With respect to insured group health plan coverage, PHS Act section 2715 generally places the obligation to provide an SBC on both the group health plan and health insurance issuer.
As discussed below, under section III.A.1.d., "Special Rules to Prevent Unnecessary Duplication with Respect to Group Health Coverage", if either the issuer or the plan provides the SBC,
both will have satisfied their obligations. As they do with other notices required of both plans and issuers under part 7 of ERISA, title XXVII of the PHS Act, and Chapter 100 of the Code,
the Departments expect plans and issuers to make contractual arrangements for sending SBCs. Accordingly, the remainder of this preamble generally refers to requirements for plans or
issuers.

12See special enrollment regulations published at 26 CFR 54.9801-6, 29 CFR 2590.701-6, and 45 CFR 146.117.

than seven business days following re-
ceipt of the request. The Departments
received several comments relating to
the timeframe. While some commenters
supported the existing requirement,
other commenters stated that the Depart-
ments should require plans and issuers
to provide the SBC to special enrollees
upon enrollment or by the first day of
coverage. Some commenters stated that
rules should require plans and issuers to
treat special enrollees the same as appli-
cants for coverage, which would require
provision of the SBC as soon as practi-
cable following receipt of an applica-
tion, but in no event later than seven
business days following receipt of the
application.

The Departments recognize the im-
portance of special enrollees having in-
formation about a plan, policy, or ben-
efit package for which they are eligible;
however, special enrollees have the op-
portunity to obtain this information by
requesting the SBC. Accordingly, these
regulations retain the provision of the
proposed regulations regarding special
enrollees without change. To the extent
that individuals who are eligible for spe-
cial enrollment and are contemplating
their coverage options would like to re-
ceive SBCs earlier, they may always
request an SBC with respect to any par-
ticular plan, policy, or benefit package,
and the SBC is required to be provided
as soon as practicable, but in no event
later than seven business days following
receipt of the request. Therefore, these
final regulations continue to provide that
the plan or issuer must provide the SBC
to individuals enrolling through a spe-
cial enrollment period, also called spe-
cial enrollees, no later than when a sum-
mary plan description is required to be
provided under the timeframe set forth
in ERISA section 104(b)(1)(A) and its
implementing regulations, which is 90
days from enrollment.

B. Special Rules to Prevent Unnecessary
Duplication with Respect to Group
Health Coverage

Paragraph (a)(1)(iii) of the 2012 final
regulations sets forth three special rules to
streamline provision of the SBC and avoid
unnecessary duplication with respect to
group health coverage. In addition to re-
taining these three existing special rules,
the Departments proposed adding two ad-
ditional provisions, and codifying an en-
forcement safe harbor set forth in a previ-
ous FAQ,13 to ensure participants and
beneficiaries receive information while
preventing unnecessary duplication. The
first proposed provision sought to address
circumstances where an entity required to
provide an SBC with respect to an indi-
vidual has entered into a binding contract
with another party to provide the SBC to
the individual. In such a case, the pro-
posed regulations stated that the entity
would be considered to satisfy the re-
quirement to provide the SBC with re-
spect to the individual if specified con-
ditions are met:

(1) The entity monitors performance
under the contract;14

(2) If the entity has knowledge that the
SBC is not being provided in a manner
that satisfies the requirements of this sec-
tion and the entity has all information
necessary to correct the noncompliance,
the entity corrects the noncompliance as
soon as practicable; and

(3) If the entity has knowledge the SBC
is not being provided in a manner that
satisfies the requirements of this section
and the entity does not have all informa-
tion necessary to correct the noncompli-
ance, the entity communicates with par-
ticipants and beneficiaries who are
affected by the noncompliance regarding
the noncompliance, and begins taking sig-
nificant steps as soon as practicable to
avoid future violations.

In response to this proposal, some
commenters expressed concern that the
proposed approach would permit circum-
stances where a group health plan that

contracts with a third party administrator
is deemed compliant with the require-
ments, although certain participants and
beneficiaries under the plan have not re-
ceived an SBC. On the other hand, the
Departments received comments recom-
mending the final regulations eliminate
the requirement to monitor the perfor-
mance of contractors, arguing that it is
unnecessary and unduly burdensome.

In light of all the comments received,
the Departments finalize the proposed ap-
proach without change. The approach set
forth by the Departments works to achieve
the goals of preventing unnecessary dupli-
cation for plans and issuers, while incor-
porating safeguards to ensure that partic-
ipants and beneficiaries receive the
requisite information. The Departments
believe that the requirement to monitor
the performance under the contract is nec-
essary to ensure that participants and ben-
eficiaries receive the information to which
they are entitled. The Departments may
provide additional guidance if the Depart-
ments become aware of situations where
participants and beneficiaries are not be-
ing provided SBCs in accordance with
these final regulations.

The second provision proposed by the
Departments addressed unnecessary du-
plication with respect to a group health
plan that uses two or more insurance prod-
ucts provided by separate issuers to insure
benefits under the plan. The Departments
recognize that a plan sponsor may pur-
chase an insurance product for certain
coverage from a particular issuer and pur-
chase a separate insurance product or self-
insure with respect to other coverage
(such as outpatient prescription drug cov-
erage). In these circumstances, the first
issuer may or may not know of the exis-
tence of other coverage, or whether the
plan sponsor has arranged the two benefit
packages as a single plan or two separate
plans.

To address these arrangements, the De-
cember 2014 proposed regulations pro-
posed that, with respect to a group health

13See Affordable Care Act Implementation FAQs Part IX, question 10, available at http://www.dol.gov/ebsa/faqs/faq-aca9.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-
FAQs/aca_implementation_faqs9.html.

14The selection and monitoring of service providers for a group health plan, including parties assuming responsibility to complete, provide information for, or deliver SBCs, is a fiduciary
act subject to prudence and loyalty duties and prohibited transaction provisions of ERISA. No single fiduciary procedure will be appropriate in all cases; the procedure for selecting and
monitoring service providers may vary in accordance with the nature of the plan and other facts and circumstances relevant to the choice of the service provider. More general information
on hiring and monitoring service providers is contained in the Department of Labor publication "Understanding Your Fiduciary Responsibilities Under a Group Health Plan," which is
available at: www.dol.gov/ebsa/publications/ghpfiduciaryresponsibilities.html.

plan that uses two or more insurance prod-
ucts provided by separate issuers, the
group health plan administrator is respon-
sible for providing complete SBCs with
respect to the plan. The group health plan
administrator may contract with one of its
issuers (or other service providers) to per-
form that function. Absent a contract to
perform the function, an issuer has no
obligation to provide coverage informa-
tion for benefits that it does not insure.
The comments the Departments received
on this proposed provision generally sup-
ported the approach, and therefore these
regulations also finalize this rule without
change.

To address concerns regarding unnec-
essary duplication in situations where
plans may have benefits provided by more
than one issuer, the Departments set forth
an enforcement safe harbor in an FAQ on
May 11, 2012,15 which permitted the pro-
vision of multiple partial SBCs if certain
conditions were satisfied. The Depart-
ments extended this enforcement safe har-
bor for one year on April 23, 2013,16 and
indefinitely on May 2, 2014.17 The Depart-
ments requested comment on whether to
codify this policy in the final regulations.

Some commenters supported the pol-
icy in the enforcement safe harbor and
either requested the Departments extend
the enforcement safe harbor or codify it in
regulations. Other commenters requested
that the Departments require plan admin-
istrators to synthesize the information into
a single SBC in order to meet the SBC
content requirements when two or more
insurance products are provided by sepa-
rate issuers with respect to a single group
health plan.

These final regulations codify this en-
forcement safe harbor, which permits a
group health plan administrator to synthe-
size the information into a single SBC or
provide multiple partial SBCs that, to-
gether, provide all the relevant informa-
tion to meet the SBC content require-
ments.

C. Provision of the SBC by an Issuer
Offering Individual Market Coverage

Paragraph (a)(1)(iv) of the HHS 2012
final regulations sets forth standards ap-
plicable to individual health insurance
coverage, under which the provision of
the SBC by an issuer offering individual
market coverage largely parallels the
group market requirements described
above, with only those changes necessary
to reflect the differences between the two
markets. The rules provide that a health
insurance issuer offering individual
health insurance coverage must provide
an SBC to an individual or dependent
upon receiving an application for any
health insurance policy as soon as prac-
ticable following receipt of the applica-
tion, but in no event later than seven
business days following receipt of the
application.18 If there is any change in
the information required to be in the
SBC that was provided upon application
and before the first day of coverage, the
issuer must update and provide a current
SBC to an individual or dependent no
later than the first day of coverage.

The December 2014 proposed regula-
tions proposed to clarify when the issuer
must provide the SBC again if the issuer
already provided the SBC prior to appli-
cation. HHS proposed that if the issuer
provides the SBC prior to application
for coverage, the issuer is not required
to automatically provide another SBC
upon application, if there is no change to
the information required to be in the
SBC. If there is any change to the infor-
mation required to be in the SBC that
was provided prior to application for
coverage by the time the application is
filed, the issuer must update and provide
a current SBC to the same individual or
dependent as soon as practicable follow-
ing receipt of the application, but in no
event later than seven business days fol-
lowing receipt of the application.

The comments received on this pro-
posal generally supported adopting the
language of the proposed regulation.
Therefore, these final regulations provide
that if an SBC was provided upon request
before application, the requirement to pro-
vide the SBC upon application is deemed
satisfied, provided there is no change to
the information required to be in the SBC.
However, if there has been a change in the
information that is required to be in the
SBC, a new SBC that includes the
changed information must be provided as
soon as practicable following receipt of
the application, but in no event later than
seven business days following receipt of
the application.

HHS also proposed to address situa-
tions where an issuer offering individual
market insurance coverage, consistent
with applicable Federal and State law, au-
tomatically reenrolls an individual and
any dependents into a different plan or
product than the plan in which these indi-
viduals were previously enrolled. If the
issuer automatically re-enrolls an individ-
ual covered under a policy, certificate, or
contract of insurance (including every de-
pendent) into a policy, certificate, or con-
tract of insurance under a different plan or
product, HHS proposed that the issuer
would be required to provide an SBC with
respect to the coverage in which the indi-
vidual (including every dependent) will be
enrolled, consistent with the timing re-
quirements that apply when the policy is
renewed or reissued. The comments re-
ceived regarding this proposal supported
this proposed approach. Therefore, these
final regulations finalize the proposed ap-
proach without change.

D. Special Rules to Prevent Unnecessary
Duplication With Respect to Individual
Health Insurance Coverage

Student health insurance coverage is a
type of individual health insurance cover-
age provided pursuant to a written agree-

15 Affordable Care Act Implementation FAQs Part IX, question 10, available at http://www.dol.gov/ebsa/faqs/faq-aca9.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-
FAQs/aca_implementation_faqs9.html.

16Affordable Care Act Implementation FAQs Part XIV, question 5, available at www.dol.gov/ebsa/faqs/faq-aca14.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/
aca_implementation_faqs14.html.

17 Affordable Care Act FAQ Part XIX, question 8, available at www.dol.gov/ebsa/faqs/faq-aca19.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/
aca_implementation_faqs19.html.

18We clarify for issuers participating in an Exchange for the individual market, an issuer's obligation to provide the SBC upon "application" is triggered by the issuer's receipt of notice
from the Exchange of the individual's plan selection, rather than the Exchange's receipt of the individual's eligibility application.

ment between an institution of higher ed-
ucation and a health insurance issuer to
students enrolled in that institution of
higher education, and their dependents,
that meet certain specified conditions.19
The December 2014 proposed regulations
proposed to extend an anti-duplication
rule similar to that provided with respect
to group health coverage to student health
insurance coverage. HHS proposed that
the requirement to provide an SBC with
respect to an individual would be consid-
ered satisfied for an entity (such as an
institution of higher education) if another
party (such as a health insurance issuer)
provides a timely and complete SBC to
the individual. HHS solicited comments
on whether or not a requirement to mon-
itor the provisioning of the SBC in this
circumstance should be added.

The comments received generally sup-
ported this proposal. Most of the com-
menters supported requiring the entity that
is contracting the provisioning of the SBC
to a different entity to monitor the contract
to ensure individuals receive an SBC.
However, a few commenters stated that
such a requirement would be unnecessary
and unduly burdensome.

Considering the comments received,
these final regulations adopt an anti-
duplication provision with respect to pro-
viding SBCs for student health insurance
coverage, with the addition of a duty to
monitor that parallels the duty to monitor
that is being finalized with respect to the
anti-duplication rule for group health
plans. HHS believes that the requirement
to monitor the performance under the con-
tract is necessary to ensure that individu-
als receive the information to which they
are entitled. HHS may provide additional
guidance if the Departments become
aware of situations where individuals are

not being provided SBCs in accordance
with these final regulations.

### E. Content

PHS Act section 2715(b)(3) generally
provides that the SBC must include nine
statutory content elements. The 2012 final
regulations added three content elements:
(1) for plans and issuers that maintain one
or more networks of providers, an Internet
address (or similar contact information)
for obtaining a list of the network provid-
ers; (2) for plans and issuers that use a
formulary in providing prescription drug
coverage, an Internet address (or similar
contact information) for obtaining infor-
mation on prescription drug coverage un-
der the plan or coverage; and (3) an Inter-
net address for obtaining the uniform
glossary, as well as a contact phone num-
ber to obtain a paper copy of the uniform
glossary, and a disclosure that paper cop-
ies of the uniform glossary are available.

#### 1. Minimum Essential Coverage and Minimum Value Statement

One of the statutory content elements
is a statement of whether the plan or cov-
erage provides minimum essential cover-
age (MEC) as defined under section
5000A(f) of the Code, and whether the
plan's or coverage's share of the total
allowed costs of benefits provided under
the plan or coverage is not less than 60%
of those costs. In April 2013, the Depart-
ments issued an updated SBC template
(and sample completed SBC) with the ad-
dition of statements regarding whether the
plan or coverage provides MEC (as de-
fined under section 5000A(f) of the Code)
and whether the plan or coverage meets
the minimum value (MV) requirements.20

In Affordable Care Act Implementation
FAQs Part XIV, issued contemporane-
ously with the updated SBC template in
April 2013, the Departments stated that
this language is required to be included in
SBCs provided with respect to coverage
beginning on or after January 1, 2014.21

The Departments also stated in Afford-
able Care Act Implementation FAQs Part
XIV that if a plan or issuer was unable to
modify the SBC template for these disclo-
sures, the Departments would not take any
enforcement action against a plan or is-
suer for using the original template autho-
rized at the time the 2012 final regulations
were issued, provided that the SBC was
furnished with a cover letter or similar
disclosure stating whether the plan or cov-
erage does or does not provide MEC and
whether the plan's or coverage's share of
the total allowed costs of benefits pro-
vided under the plan or coverage does or
does not meet the MV standard under the
Affordable Care Act.22 As stated in the
FAQ issued on March 30, 2015, the De-
partments anticipate finalizing the new
template and associated documents by
January 2016. Therefore, until the new
template and associated documents are fi-
nalized and applicable, plans and issuers
may continue to rely on the flexibility
provided in Affordable Care Act Imple-
mentation FAQs Part XIV 23 and the De-
partments will not take enforcement ac-
tion against a plan or issuer that provides
an SBC with a cover letter or similar
disclosure with the required MEC and
MV statements.24

#### 2. QHP and Abortion Services

Under section 1303(b)(3)(A) of the Af-
fordable Care Act and implementing reg-
ulations at 45 CFR 156.280(f), a Qualified

19See 45 CFR 147.145, published at 77 FR 16453 (March 21, 2012).

20See Affordable Care Act Implementation FAQs Part XIV, question 1, available at www.dol.gov/ebsa/faqs/faq-aca14.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-
FAQs/aca_implementation_faqs14.html.

21 The guidance with respect to statements regarding MEC and MV was originally issued for SBCs provided with respect to coverage beginning on or after January 1, 2014, and before January
1, 2015 (referred to as the "second year of applicability"). See Affordable Care Act Implementation FAQs Part XIV, question 1, available at www.dol.gov/ebsa/faqs/faq-acal4.html and
http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs14.html. This guidance was extended to be applicable until further guidance was issued. See
Affordable Care Act Implementation FAQs Part XIX, question 7, available at www.dol.gov/ebsa/faqs/faq-aca19.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/
aca_implementation_faqs19.html

22 See Affordable Care Act Implementation FAQs Part XIV, question 2, available at www.dol.gov/ebsa/faqs/faq-aca14.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-
FAQs/aca_implementation_faqs14.html.

23 Affordable Care Act Implementation FAQs Part XIV, question 2, available at www.dol.gov/ebsa/faqs/faq-aca14.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/
aca_implementation_faqs14.html.

24HHS also notes that until the new template and associated documents are finalized and applicable, it will not take enforcement action against an individual market issuer for omitting such
a statement for minimum value, which is not relevant with respect to individual market coverage.

Health Plan (QHP) issuer that elects to
offer a QHP that provides coverage of
abortion services for which federal fund-
ing is prohibited (non-excepted abortion
services) must provide a notice to enroll-
ees, as part of the SBC provided at the
time of enrollment, of coverage of such
services.

The December 2014 proposed regula-
tions proposed to require issuers of QHPs
sold through an individual market Ex-
change to disclose on the SBC these
QHPs whether abortion services are cov-
ered or excluded, and whether coverage is
limited to services for which federal fund-
ing is allowed (excepted abortion ser-
vices). Several commenters supported this
proposal. Some commenters recom-
mended that the requirement to disclose
coverage or exclusion of abortion services
be expanded to all plans and issuers offer-
ing coverage in all markets, not only is-
suers of QHPs in the individual market.
Finally, some commenters recommended
limiting the required disclosure to only a
QHP issuer that offers a QHP providing
coverage of non-excepted abortion ser-
vices.

After consideration of all the com-
ments regarding this proposal, these final
regulations adopt the proposed approach
without change. These final regulations
require that QHP issuers must disclose on
the SBC for QHPs sold through an indi-
vidual market Exchange whether abortion
services are covered or excluded, and
whether coverage is limited to excepted
abortion services. HHS feels that this level
of transparency is important to facilitate
comparisons across individual market
QHPs, and to avoid confusion regarding
which abortion services are or are not
covered.

The December 2014 proposed regula-
tions were published contemporaneously
with proposed updates to the SBC tem-
plate, instructions, and associated docu-
ments. The proposed updates to the SBC
template instructions and associated doc-
uments included guidance for QHP issu-
ers regarding the wording and placement
of the abortion disclosure requirement on
the SBC. We received numerous com-
ments regarding the proposed language
for the disclosure, as well as the place-
ment of the disclosure on the SBC tem-
plate. As previously stated, the Depart-

ments anticipate finalizing the new
template and associated documents, sepa-
rately from this final rule, by January
2016. HHS will consider and address the
comments regarding the wording and
placement of the disclosure in finalizing
the new template and associated docu-
ments. HHS acknowledges that QHP is-
suers will not have final guidance regard-
ing the specific wording and placement of
this disclosure until the template, instruc-
tions, and associated documents are final-
ized. Therefore, until the new template
and associated documents are finalized
and applicable, individual market QHP is-
suers may adopt any reasonable wording
and placement of the disclosure on the
SBC. Individual market QHP issuers
may also provide the disclosure in a
cover letter or other similar disclosure
provided with the SBC. Consistent with
the effective dates described in section
K of this final rule, this requirement is
applicable for individual market QHP
issuers for SBCs issued in connection
with coverage that begins on or after
January 1, 2016.

For Multi-State Plan issuers, the Office
of Personnel Management will issue guid-
ance about the wording and placement of
the abortion disclosure requirement on the
SBC.

### 3. Contact Information for Questions

The statute provides that the SBC
must include "a contact number for the
consumer to call with additional ques-
tions and an Internet web address where
a copy of the actual individual coverage
policy or group certificate of coverage
can be reviewed and obtained." The
2012 final regulations state that the SBC
must include "contact information for
questions and obtaining a copy of the
plan document or the insurance policy,
certificate, or contract of insurance
(such as a telephone number for cus-
tomer service and an Internet address for
obtaining a copy of the plan document
or the insurance policy, certificate, or
contract of insurance)." These final reg-
ulations clarify that all plans and issuers
must include on the SBC contact infor-
mation for questions.

4\. Internet Address to Obtain the Actual
Individual Underlying Policy or Group
Certificate

Questions have arisen as to whether
PHS Act section 2715(b)(3)(i) (which re-
quires that an SBC include ". . . an Inter-
net web address where a copy of the ac-
tual individual coverage policy or group
certificate of coverage can be reviewed
and obtained") and associated regulations
require that all plans and issuers must post
underlying plan documents automatically
on an Internet website. Some commenters
stated that plans and issuers should be
required to post actual policy and under-
lying plan documents as well as direct
links to the plan's prescription drug for-
mulary. Other commenters stated that the
Departments should permit plan sponsors
to decide whether the underlying plan
documents are posted online. Others
stated that mandating self-insured group
health plans to post underlying plan infor-
mation online is redundant and burden-
some.

The statutory language regarding this
requirement refers specifically to an "in-
dividual coverage policy" and "group cer-
tificate of coverage." This statutory provi-
sion does not reference group health plan
coverage that provides benefits on a self-
insured basis. While the Departments rec-
ognize that such information may be use-
ful to consumers, based on the statutory
language, the Departments may only re-
quire issuers to post the underlying indi-
vidual coverage policy or group certificate
of coverage to an Internet address. Ac-
cordingly, these final regulations provide
that issuers must also include an Internet
web address where a copy of the actual
individual coverage policy or group cer-
tificate of coverage can be reviewed and
obtained. The Departments note that these
final regulations require these documents
to be easily available to individuals, plan
sponsors, and participants and beneficia-
ries shopping for coverage prior to sub-
mitting an application for coverage. For
the group market only, because the actual
"certificate of coverage" is not available
until after the plan sponsor has negotiated
the terms of coverage with the issuer, an
issuer is permitted to satisfy this require-
ment with respect to plan sponsors that are
shopping for coverage by posting a sam-

ple group certificate of coverage for each
applicable product. After the actual certif-
icate of coverage is executed, it must be
easily available to plan sponsors and par-
ticipants and beneficiaries via an Internet
web address.

The Departments note that nothing in
this section prohibits issuers and group
health plan sponsors from making addi-
tional underlying group health plan or pol-
icy documents more readily available to
participants and beneficiaries, including
by posting them on the internet. HHS en-
courages issuers to make all relevant pol-
icy documents easily accessible to indi-
viduals shopping for, and enrolled in,
coverage to facilitate comparison of pol-
icy options and understanding of benefits
available under a particular plan or policy.

The Departments also note that, sepa-
rate from the SBC requirement, provisions
of other applicable laws require disclosure
of plan documents and other instruments
governing the plan. For example, ERISA
section 104 and the Department of La-
bor's implementing regulations25 provide
that, for plans subject to ERISA, the plan
documents and other instruments under
which the plan is established or operated
must generally be furnished by the plan
administrator to plan participants26 upon
request. In addition, the Department of
Labor's claims procedure regulations (ap-
plicable to ERISA plans), as well as the
Departments' claims and appeals regula-
tions under the Affordable Care Act (ap-
plicable to all non-grandfathered group
health plans and health insurance issuers
in the group and individual markets),27 set
forth rules regarding claims and appeals,
including the right of claimants (or their
authorized representatives) upon appeal of
an adverse benefit determination (or a fi-
nal internal adverse benefit determination)
to be provided by the plan or issuer, upon
request and free of charge, reasonable ac-

cess to and copies of all documents, re-
cords, and other information relevant to
the claimant's claim for benefits. Plans
and issuers must continue to comply with
these provisions and any other applicable
laws.

### F. Appearance

PHS Act section 2715 sets forth stan-
dards related to the appearance and lan-
guage of the SBC. Specifically, the SBC is
to be presented in a culturally and linguis-
tically appropriate manner utilizing termi-
nology understandable by the average
plan enrollee, in a uniform format that
does not exceed four double-sided pages
in length, and does not include print
smaller than 12-point font. Plans and is-
suers have informed the Departments that
they are concerned about including all of
the required information in the SBC while
also satisfying the limitation on the length
of the document of four double-sided
pages. Comments were invited on poten-
tial ways to reconcile the statutory page
limit with the statutory content, appear-
ance, and format requirements, particu-
larly the need for the summary to present
information in an understandable, accu-
rate, and meaningful way that facilitates
comparisons of health options, including
those that have disparate and compara-
tively complex features. Specifically, the
Departments invited comments on the
sorts of plans that have difficulty meeting
the statutory limit, and what other sorts of
accommodations may be appropriate for
those plans.

Some commenters expressed concern
regarding the difficulty of complying with
the statutory page limit. One commenter
stated that it is difficult to provide custom-
ers with clear and accurate information
while describing the benefits provided un-
der certain complex plan designs. As dis-
cussed above, the statute requires that the

SBC not exceed four pages, and these
final regulations retain the interpretation
set forth in the 2012 final regulations that
the SBC can be four double-sided pages.
The Departments will address specific is-
sues related to completing the four-page
template, as well as the issues plans and
issuers encounter meeting these require-
ments with the finalization of the new
template and associated documents, sepa-
rate from this final rule.

### G. Form

#### 1. Group Health Plan Coverage

To facilitate faster and less burden-
some disclosure of the SBC and to be
consistent with PHS Act section
2715(d)(2), which permits disclosure in
either paper or electronic form, the 2012
final regulations set forth rules to permit
greater use of electronic transmittal of the
SBC. For SBCs provided electronically
by a plan or issuer to participants and
beneficiaries, the 2012 final regulations
make a distinction between a participant
or beneficiary who is already covered un-
der the group health plan and a participant
or beneficiary who is eligible for coverage
but not enrolled in a group health plan.
For participants and beneficiaries who are
already covered under the group health
plan, the 2012 final regulations permit
provision of the SBC electronically, if the
requirements of the Department of La-
bor's regulations at 29 CFR 2520.104b-1
are met. Paragraph (c) of those regulations
includes an electronic disclosure safe har-
bor.28 For participants and beneficiaries
who are eligible for but not enrolled in
coverage, the 2012 final regulations per-
mit the SBC to be provided electronically,
if the format is readily accessible29 and a
paper copy is provided free of charge
upon request. Additionally, to reduce pa-
per copies that may be unnecessary, if the

2529 CFR 2520.104b-1.

26ERISA section 3(7) defines a "participant" to include any employee or former employee who is or may become eligible to receive a benefit of any type from an employee benefit plan
or whose beneficiaries may be eligible to receive any such benefit. Accordingly, employees who are not enrolled but are, for example, in a waiting period for coverage, or who are otherwise
shopping amongst benefit package options at open season, generally are considered plan participants for this purpose.

2729 CFR 2560.503-1. See also 29 CFR 2590.715-2719(b)(2)(i) and 45 CFR 147.136(b)(2)(i), requiring nongrandfathered plans and issuers to incorporate the internal claims and appeals
processes set forth in 29 CFR 2560.503-1.

28On April 7, 2011, the Department of Labor published a Request for Information regarding electronic disclosure at 76 FR 19285. In it, the Department of Labor stated that it is reviewing
the use of electronic media by employee benefit plans to furnish information to participants and beneficiaries covered by employee benefit plans subject to ERISA. Because these SBC
regulations adopt the ERISA electronic disclosure rules by cross-reference, any changes that may be made to 29 CFR 2520.104b-1 in the future would also apply to the SBC.

29The Departments note that our use of the phrase "readily accessible" in this context is not intended to connote terms of art, such as "reasonable accommodation," "readily achievable,"
and "accessible," as used in connection with the determination of legal requirements with regard to disability.

electronic form is an Internet posting, the
plan or issuer must timely advise the in-
dividual in paper form (such as a post-
card) or email that the documents are
available on the Internet, provide the In-
ternet address, and notify the individual
that the documents are available in paper
form upon request. The Departments note
that the rules for participants and benefi-
ciaries who are eligible for but not en-
rolled in coverage are substantially similar
to the requirements for an issuer providing
an electronic SBC to a group health plan
(or its sponsor) under paragraph (a)(4)(i)
of the regulations. Finally, plans, and par-
ticipants and beneficiaries (both those
covered and those eligible but not en-
rolled), have the right to receive an SBC
in paper form, free of charge, upon re-
quest.

In Affordable Care Act Implementa-
tion FAQs Part IX, question 1, the Depart-
ments adopted an additional safe harbor
related to electronic delivery of SBCs.30
In the December 2014 proposed regula-
tions, the Departments proposed to codify
this safe harbor through rulemaking.
Commenters generally supported permit-
ting electronic delivery of SBCs. Some
commenters requested the Departments
adopt the safe harbor outlined in the FAQ.
Other commenters recommended adopt-
ing the safe harbor standard for all indi-
viduals receiving the SBC without making
any distinction as to whether the individ-
ual is already enrolled in the plan.

These final regulations adopt the safe
harbor for electronic delivery set forth in
the FAQ without expanding the applica-
tion of the safe harbor to all individuals
entitled to receive the SBC. The Depart-
ments note that these rules provide a
mechanism by which all SBCs may be
provided electronically. The Departments
believe that the approach set forth in the
FAQ achieves an appropriate balance be-
tween ensuring participants and beneficia-
ries receive the necessary information,
while allowing plans and issuers to pro-
vide such information electronically.
Thus, SBCs may be provided electroni-
cally to participants and beneficiaries in

connection with their online enrollment or
online renewal of coverage under the plan.
SBCs also may be provided electronically
to participants and beneficiaries who re-
quest an SBC online. In either case, the
individual must have the option to receive
a paper copy upon request.

#### 2. Individual Health Insurance Coverage and Self-insured Non-Federal Governmental Plans

The HHS 2012 final regulations estab-
lished a provision under paragraph
(a)(4)(iii)(C) that deems health insurance
issuers in the individual market to be in
compliance with the requirement to pro-
vide the SBC to an individual requesting
summary information about a health insur-
ance product prior to submitting an applica-
tion for coverage if the issuer provides the
content required under paragraph (a)(2) of
the regulations to the federal health reform
Web portal described in 45 CFR 159.120.
Issuers must submit all of the content re-
quired under paragraph (a)(2), as specified
in guidance by the Secretary, to be deemed
compliant with the requirement to provide
an SBC to an individual requesting sum-
mary information prior to submitting an ap-
plication for coverage. HHS intends to con-
tinue to facilitate the operation of this
deemed compliance option for individual
market issuers. An issuer must provide all
SBCs other than the "shopper" SBC con-
templated in the deemed compliance provi-
sion as required under the 2012 final regu-
lations (and any future final regulations),
including providing the SBC at the time of
application and renewal.

The Departments note that, consistent
with the 2012 final regulations, an issuer
in the individual market must provide the
SBC in a manner that can reasonably be
expected to provide actual notice regard-
less of the format. An issuer in the indi-
vidual market satisfies the form require-
ments set forth in the 2012 final
regulations if it does at least one of the
following: (1) Hand-delivers a paper copy
of the SBC to the individual or dependent;
(2) mails a paper copy of the SBC to the
mailing address provided to the issuer by

the individual or dependent; (3) provides
the SBC by email after obtaining the in-
dividual's or dependent's agreement to re-
ceive the SBC or other electronic dis-
closures by email; (4) posts the SBC on
the Internet and advises the individual
or dependent in paper or electronic
form, in a manner compliant with 45
CFR 147.200(a)(4)(iii)(A)(1) through
(3), that the SBC is available on the
Internet and includes the applicable In-
ternet address; or (5) provides the SBC
by any other method that can reasonably
be expected to provide actual notice.

The 2012 final regulations also provide
that the obligation to provide an SBC can-
not be satisfied electronically in the indi-
vidual market unless: the format is readily
accessible; the SBC is displayed in a lo-
cation that is prominent and readily acces-
sible; the SBC is provided in an electronic
form that can be electronically retained
and printed; the SBC is consistent with the
appearance, content, and language re-
quirements; and the issuer notifies the in-
dividual that a paper SBC is available
upon request without charge.31

The December 2014 proposed regula-
tions proposed to clarify the form and
manner for SBCs provided by a self-
insured non-Federal governmental plan.
Under the proposal, such SBCs could be
provided in paper form. Alternatively,
such SBCs could be provided electroni-
cally if the plan conforms to either the
substance of the provisions applicable to
ERISA plans (in paragraph (a)(4)(ii) of
the regulations) or to individual health
insurance coverage (in paragraph
(a)(4)(iii) of the regulations).

The Departments did not receive any
comments regarding this proposal. There-
fore, the Departments are finalizing the
proposal without change, to allow for self-
insured non-Federal governmental plans
to provide an SBC in either paper form, or
electronically if the plan conforms to ei-
ther the substance of the provisions appli-
cable to ERISA plans (in paragraph
(a)(4)(ii) of the regulations) or to individ-
ual health insurance coverage (in para-
graph (a)(4)(iii) of the regulations).

30See Affordable Care Act Implementation FAQs Part IX, question 4, available at http://www.dol.gov/ebsa/faqs/faq-aca9.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-
FAQs/aca_implementation_faqs9.html.

31We clarify that an issuer's posting of the SBC on its website is not sufficient by itself; paragraph (a)(4)(iii) of the 2012 final regulations requires the SBC to be provided in a manner that
can reasonably be expected to provide actual notice in paper or electronic form.

#### H. Language

PHS Act section 2715(b)(2) provides
that standards shall ensure that the SBC
"is presented in a culturally and linguisti-
cally appropriate manner." The 2012 final
regulations provide that a plan or issuer
for this purpose is considered to provide
the SBC in a culturally and linguistically
appropriate manner if the thresholds and
standards of 45 CFR 147.136(e), imple-
menting standards for the form and man-
ner of notices related to internal claims
appeals and external review, are met as
applied to the SBC.32

To help plans and issuers meet the lan-
guage requirements of paragraph (a)(5) of
the 2012 final regulations, as requested by
commenters, HHS provided written trans-
lations of the SBC template, sample lan-
guage, and the uniform glossary in Chi-
nese, Navajo, Spanish, and Tagalog (the
four languages with populations meeting
the thresholds outlined in 45 CFR
147.136(e)).33 HHS may also make these
materials available in other languages to
facilitate voluntary distribution of SBCs
to other individuals with limited English
proficiency. The Departments requested
comment on this standard, and on other
potential standards that could facilitate
consistency across the Departments' pro-
grams.

Some commenters requested an addi-
tional standard that would require the
translation of the SBC into any language
spoken by 500 individuals or 5 percent of
individuals in the plan's service area or an
employer's workforce, whichever is less,
and to include taglines in at least 15 lan-
guages on all SBCs that indicate the avail-
ability of translated SBCs and oral lan-
guage services. Some commenters were
concerned that the 10 percent standard for
language and translation services is insuf-
ficient to present the SBC in a culturally
and linguistically appropriate manner and
cited different Federal standards for other

disclosures. Other commenters supported
the existing requirement from the 2012
final regulations or stated that the preva-
lence of speakers of a language in a par-
ticular state is the best criteria for identi-
fying which language services should be
provided.

The Departments believe that it is im-
portant to provide SBCs in a culturally
and linguistically appropriate manner to
ensure that individuals get the important
information needed to properly evaluate
coverage options. The standard estab-
lished under the 2012 final regulations
addresses the need to provide language
services to ensure that consumers receive
SBCs in an understandable format while
balancing that need with the goal of keep-
ing administrative costs down. Addition-
ally, a rule based on a particular number
or percentage of a plan's population,
rather than a county's population, may
increase administrative costs and make it
difficult for plans and issuers to provide
SBCs that comply with the page limita-
tions. Therefore, these final rules continue
to provide that a plan or issuer is consid-
ered to provide the SBC in a culturally
and linguistically appropriate manner if
the thresholds and standards of 45 CFR
147.136(e), implementing standards for
the form and manner of notices related to
internal claims appeals and external re-
view, are met as applied to the SBC.34,35

##### I. Process for Imposition of Fine in the Case of Willful Violation

In general, PHS Act section 2715(f)
provides that a group health plan (includ-
ing its administrator), and a health insur-
ance issuer offering group or individual
health insurance coverage, that willfully
fails to provide the information required
under this section are subject to a fine. In
the December 2014 proposed regulations,
the Department of Labor proposed that it
will use the same process and procedures

for assessment of the civil fine as used for
failure to file an annual report under 29
CFR 2560.502c-2 and 29 CFR part 2570,
subpart C. In accordance with ERISA sec-
tion 502(b)(3), 29 U.S.C. 1132(b)(3), the
Secretary of Labor is not authorized to
assess this fine against a health insurance
issuer. Moreover, the IRS proposed to
clarify that the IRS will enforce this sec-
tion using a process and procedure con-
sistent with section 4980D of the Code.
The Departments did not receive com-
ments on this proposal to utilize existing
processes and procedures under ERISA
and the Code and therefore finalize these
proposals without change.

#### J. Applicability

In August 2012, the Departments is-
sued FAQs36 that provided a temporary
nonenforcement policy with respect to
group health plans providing Medicare
Advantage benefits, which are Medicare
benefits financed by the Medicare Trust
Funds, for which the benefits are set by
Congress and regulated by the Centers for
Medicare & Medicaid Services. The De-
cember 2014 proposed regulations pro-
posed to add language to codify this tem-
porary relief and exempt from the SBC
requirements a group health plan benefit
package that provides Medicare Advan-
tage benefits. Medicare Advantage bene-
fits are not health insurance coverage, and
Medicare Advantage organizations are not
required to provide an SBC with respect
to such benefits. Additionally, there are
separately required disclosures required to
be provided by Medicare Advantage or-
ganizations to ensure that enrollees in
these plans receive the necessary informa-
tion about their coverage and benefits.

The Departments did not receive com-
ments opposing the proposal to exempt
group health plans providing Medicare
Advantage benefits from the SBC require-
ments. Therefore, these final regulations

32 See 75 FR 43330 (July 23, 2010), as amended by 76 FR 37208 (June 24, 2011). Guidance on the HHS website contains a list of the counties that meet this threshold. This information
is available at http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/2009-13-CLAS-County-Data_12-05-14_clean_508.pdf.

33Translations are available at http://cciio.cms.gov/programs/consumer/summaryandglossary/index.html.
34See 75 FR 43330 (July 23, 2010), as amended by 76 FR 37208 (June 24, 2011).

35Nothing in these regulations should be construed as limiting an individual's rights under other Federal authorities applicable to recipients of Federal financial assistance, such as Section
504 of the Rehabilitation Act of 1973, which includes effective communication requirements for individuals with disabilities, and Title VI of the Civil Rights Act of 1964, which includes
language assistance requirements for individuals with limited English proficiency.

36See Affordable Care Act Implementation FAQs Part X, question 1, available at http://www.dol.gov/ebsa/faqs/faq-aca10.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-
FAQs/aca_implementation_faqs10.html.

finalize without change the proposal to
codify the relief and exempt from the SBC
requirements a group health plan benefit
package that provides Medicare Advan-
tage benefits.

In May 2012, the Departments issued
FAQs addressing insurance products that
are no longer being offered for purchase
("closed blocks of business"). The Depart-
ments had provided temporary enforce-
ment relief through an FAQ provided that
certain conditions were met: (1) The in-
surance product is no longer being ac-
tively marketed; (2) the health insurance
issuer stopped actively marketing the
product prior to September 23, 2012,
when the requirement to provide an SBC
was first applicable to health insurance
issuers; and (3) the health insurance issuer
has never provided an SBC with respect to
such product.37 The Departments reiter-
ated that relief in the December 2014 pro-
posed regulations, and we do so again in
these final regulations. But, we again note
that if an insurance product was actively
marketed for business on or after Septem-
ber 23, 2012, and is no longer being ac-
tively marketed for business, or if the plan
or issuer ever provided an SBC in connec-
tion with the product, the plan and issuer
must provide the SBC with respect to such
coverage, as required by PHS Act section
2715 and these final regulations.

#### K. Applicability Date

The December 2014 proposed regula-
tions proposed that these rules, if final-
ized, would apply for disclosures with re-
spect to participants and beneficiaries who
enroll or re-enroll in group health cover-
age through an open enrollment period
(including re-enrollees and late enrollees)
beginning on the first day of the first open
enrollment period that begins on or after
September 1, 2015. With respect to dis-
closures to participants and beneficiaries
who enroll in group health coverage other
than through an open enrollment period
(including individuals who are newly eli-
gible for coverage and special enrollees),
the requirements were proposed to apply

beginning on the first day of the first plan
year that begins on or after September 1,
2015. For disclosures to plans, and to indi-
viduals and dependents in the individual
market, these requirements were proposed
to apply to health insurance issuers begin-
ning on September 1, 2015. Comments re-
ceived generally supported these applicabil-
ity dates, except that a number of
commenters suggested that the requirements
apply with respect to the individual market
for coverage beginning on or after January
1, 2016. These final regulations adopt the
applicability dates as proposed, except that
for disclosures to individuals and depen-
dents in the individual market, the require-
ments apply to health insurance issuers with
respect to SBCs issued for coverage that
begins on or after January 1, 2016. Until
these final regulations become applicable,
plans and issuers must continue to comply
with the 2012 final regulations, as applicable.

## III. Economic Impact and Paperwork Burden

### A. Executive Orders 12866 and 13563- Departments of Labor and HHS

Executive Orders 12866 and 13563 di-
rect agencies to assess all costs and ben-
efits of available regulatory alternatives
and, if regulation is necessary, to select
regulatory approaches that maximize net
benefits (including potential economic,
environmental, public health and safety
effects; distributive impacts; and equity).
Executive Order 13563 emphasizes the
importance of quantifying both costs and
benefits, of reducing costs, of harmoniz-
ing rules, and of promoting flexibility.
This rule has been designated a "signifi-
cant regulatory action" under section 3(f)
of Executive Order 12866. Accordingly,
the rule has been reviewed by the Office
of Management and Budget.

A regulatory impact analysis (RIA)
must be prepared for major rules with
economically significant effects ($100
million or more in any one year). As dis-
cussed below, the Departments have con-
cluded that these final regulations would
not have economic impacts of $100 mil-

lion or more in any one year or otherwise
meet the definition of an "economically
significant rule" under Executive Order
12866. Nonetheless, consistent with Exec-
utive Orders 12866 and 13563, the De-
partments have provided an assessment of
the potential benefits and the costs asso-
ciated with these final regulations.

These final regulations are expected to
have only small benefits and costs as they
primarily provide clarifications of the pre-
vious 2012 final regulations and also in-
corporate into regulations previous guid-
ance issued by the Departments that has
taken the form of responses to frequently
asked questions or enforcement safe har-
bors.38 The Departments have not been
able to quantify these costs and benefits,
but they are qualitatively discussed below.

The clarifications would help lower costs
as they establish that duplicate SBCs do not
have to be provided upon application if a
previous SBC was provided and there have
been no changes to the required informa-
tion. The clarification also prevents unnec-
essary duplications for plans and issuers,
while incorporating safeguards to ensure
that participants and beneficiaries (and cov-
ered individuals and dependents) receive the
required information. These final regula-
tions also provide flexibility in providing
SBCs for the situation where a plan has
multiple issuers and also adopt the safe har-
bor for electronic delivery previously set
forth in an FAQ, thereby reducing the cost
of delivery.

These final regulations also require an
issuer to provide an internet web address
where a copy of the actual individual cov-
erage policy or group certificate of cover-
age can be reviewed and obtained. The
costs associated with this requirement are
discussed in the Paperwork Reduction Act
section below.

### B.Paperwork Reduction Act

1\. Departments of Labor and the
Treasury

These final rules are not subject to the
requirements of the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.),

37See Affordable Care Act Implementation FAQs Part IX, question 12, available at http://www.dol.gov/ebsa/faqs/faq-aca9.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-
FAQs/aca_implementation_faqs9.html.

38See Affordable Care Act Implementation FAQs Part XXIV available at http://www.dol.gov/ebsa/faqs/faq-aca24.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/
aca_implementation_faqs24.html.

because these final regulations make no
changes to the existing collection of infor-
mation as defined in 44 U.S.C. 3502(3).

Please note that the proposed regula-
tions included an ICR related to the revi-
sion of the SBC template that has been
omitted in these final regulations as the
Departments intend to utilize consumer
testing and offer an opportunity for public
comment before finalizing revisions to the
SBC template. An analysis under the PRA
will be conducted when the SBC template
is finalized.

2\. Department of Health and Human
Services

These final regulations require health
insurance issuers offering group and indi-
vidual health insurance coverage must in-
clude in the SBC an Internet web address
where a copy of the actual individual cov-
erage policy or group certificate of cover-
age can be reviewed and obtained. These
documents are required to be easily avail-
able to individuals, plan sponsors, and
participants and beneficiaries shopping for
coverage prior to submitting an applica-
tion for coverage. With respect to group
health coverage, because the actual "cer-
tificate of coverage" is not available until
after the plan sponsor has negotiated the
terms of coverage with the issuer, an is-
suer is permitted to satisfy this require-
ment with respect to plan sponsors that are
shopping for coverage by posting a sam-
ple group certificate of coverage for each
applicable product. After the actual certif-
icate of coverage is executed, it must be
easily available to plan sponsors and par-
ticipants and beneficiaries via an Internet
web address.

Some commenters stated that requiring
the individual coverage policy documents
and group certificates of coverage be
made available by posting to an Internet
web address would be unduly burdensome
because of the requirement to make the
documents available to individuals and
plan sponsors shopping for coverage, but
not yet enrolled in coverage. The Decem-
ber 2014 proposed regulations estimated
the burden for this requirement to be de
minimis because the documents already

exist and issuers already have web ad-
dresses where the materials can be made
available. Additionally, HHS understands
that issuers already frequently make these
materials available online to individuals,
plan sponsors, and participants and bene-
ficiaries after enrollment in coverage.
These final regulations clarify that these
documents must be made available online
to those shopping for coverage prior to
enrollment as well. It is not expected that
group health insurance issuers will be pro-
viding access to group certificates of cov-
erage prior to execution of the final group
certificate of coverage. Instead, HHS an-
ticipates and expects that the sample
group certificate of coverage that under-
lies the product being marketed and sold,
and that have been filed with and ap-
proved by a state Department of Insur-
ance, are what will be provided prior to
the execution of the actual group certifi-
cate of coverage. Based on this HHS still
believes that the requirement to make
these documents available via an Internet
web address will result in only a de mini-
mis burden on issuers.

These final regulations make no other
revisions to the existing collection of in-
formation. The December 2014 proposed
regulations included an ICR related to the
revision of the SBC template that has been
omitted in these final regulations as the
Departments intend to utilize consumer
testing and offer an opportunity for public
comment before finalizing revisions to the
SBC template. An analysis under the PRA
will be conducted when the SBC template
is finalized.

The Department notes that persons are
not required to respond to, and generally
are not subject to any penalty for failing to
comply with, an ICR unless the ICR has a
valid OMB control number.

The 2015-2017 paperwork burden es-
timates are summarized as follows:

Type of Review: Revision.

Agency: Department of Health and Hu-
man Services.

Title: Summary of Benefits and Cover-
age Uniform Glossary

CMS Identifier (OMB Control Num-
ber): CMS-10407 (0938-1146).

Affected Public: Private sector.

Total Respondents: 126,500
Total Responses: 41,153,858
Frequency of Response: On-going.
Estimated Total Annual Burden Hours
(three year average): 322,411 hours.

Estimated Total Annual Cost Burden

(three year average): $7,207,361

## C. Regulatory Flexibility Act

The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes certain
requirements with respect to Federal rules
that are subject to the notice and comment
requirements of section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. 551
et seq.) and which are likely to have a
significant economic impact on a substan-
tial number of small entities. Unless the
head of an agency certifies that a proposed
rule is not likely to have a significant
economic impact on a substantial number
of small entities, section 603 of the RFA
requires that the agency present an initial
regulatory flexibility analysis (IRFA) de-
scribing the rule's impact on small entities
and explaining how the agency made its
decisions with respect to the application
of the rule to small entities.

The RFA generally defines a "small
entity" as (1) a proprietary firm meeting
the size standards of the Small Business
Administration (SBA) (13 CFR 121.201)
pursuant to the Small Business Act (15
U.S.C. 631 et seq.), (2) a nonprofit orga-
nization that is not dominant in its field, or
(3) a small government jurisdiction with a
population of less than 50,000. (States and
individuals are not included in the defini-
tion of "small entity.")

There are several different types of
small entities affected by these final reg-
ulations. For issuers and third party ad-
ministrators, the Departments use as their
measure of significant economic impact
on a substantial number of small entities a
change in revenues of more than 3 to 5
percent. For plans, the Departments con-
tinue to consider a small plan to be an
employee benefit plan with fewer than
100 participants.39 Further, while some
large employers may have small plans, in
general small employers maintain most
small plans. Thus, the Departments be-

39The basis for this definition is found in section 104(a)(2) of ERISA, which permits the Secretary of Labor to prescribe simplified annual reports for pension plans that cover fewer than
100 participants.

lieve that assessing the impact of this final
rule on small plans is an appropriate sub-
stitute for evaluating the effect on small
entities. The definition of small entity con-
sidered appropriate for this purpose dif-
fers, however, from a definition of small
business that is based on size standards
promulgated by the Small Business Ad-
ministration (SBA) (13 CFR 121.201)
pursuant to the Small Business Act (15
U.S.C. 631 et seq.).

The Departments carefully considered
the likely impact of these final rules on
small entities in connection with their as-
sessment under Executive Order 12866.
The incremental changes of these final
regulations impose minimal additional
costs, but also serve to reduce the costs of
compliance by providing help to plans and
service providers by providing clarifica-
tions. These final regulations also incor-
porate into regulations previous guidance
from the Departments that has taken the
form of responses to frequently asked
questions or enforcement safe harbors.
Accordingly, pursuant to section 605(b) of
the RFA, the Departments hereby certify
that these final regulations will not have a
significant economic impact on a substan-
tial number of small entities.

### D. Unfunded Mandates Reform Act- Department of Labor and Department of Health and Human Services

Section 202 of the Unfunded Mandates
Reform Act (UMRA) of 1995 requires
that agencies assess anticipated costs and
benefits before issuing any final rule that
includes a Federal mandate that could re-
sult in expenditure in any one year by
State, local or Tribal governments, in the
aggregate, or by the private sector, of
$100 million in 1995 dollars updated an-
nually for inflation. In 2015, that threshold
level is approximately $144 million.
These final regulations include no man-
dates on State, local, or Tribal governments.
These final regulations propose require-
ments regarding standardized consumer dis-
closures that would affect private sector
firms (for example, health insurance issuers
offering coverage in the individual and
group markets, and third-party administra-
tors providing administrative services to
group health plans), but we conclude that
these costs would not exceed the $144 mil-

lion threshold. Thus, the Departments of
Labor and HHS conclude that these final
regulations would not impose an unfunded
mandate on State, local or Tribal govern-
ments or the private sector. Regardless, con-
sistent with policy embodied in UMRA, the
final requirements described in this notice of
final rulemaking has been designed to be the
least burdensome alternative for State, local
and Tribal governments, and the private sec-
tor while achieving the objectives of the
Affordable Care Act.

### E. Federalism Statement-Department of Labor and Department of Health and Human Services

Executive Order 13132 outlines funda-
mental principles of federalism, and re-
quires the adherence to specific criteria by
Federal agencies in the process of their
formulation and implementation of poli-
cies that have "substantial direct effects"
on the States, the relationship between the
national government and States, or on the
distribution of power and responsibilities
among the various levels of government.
Federal agencies promulgating regula-
tions that have federalism implications
must consult with State and local officials
and describe the extent of their consulta-
tion and the nature of the concerns of
State and local officials in the preamble to
the regulation.

In the Departments of Labor's and
HHS' view, these final regulations have
federalism implications because they
would have direct effects on the States,
the relationship between the national gov-
ernment and the States, or on the distribu-
tion of power and responsibilities among
various levels of government relating to
the disclosure of health insurance cover-
age information to consumers. Under
these final regulations, all group health
plans and health insurance issuers offering
group or individual health insurance cov-
erage, including self-funded non-federal
governmental plans as defined in section
2791 of the PHS Act, would be required to
follow uniform standards for compiling
and providing a summary of benefits and
coverage to consumers. Such Federal
standards developed under PHS Act sec-
tion 2715(a) would preempt any related
State standards that require a summary of
benefits and coverage that provides less

information to consumers than that re-
quired to be provided under PHS Act sec-
tion 2715(a).

In general, through section 514,
ERISA supersedes State laws to the extent
that they relate to any covered employee
benefit plan, and preserves State laws that
regulate insurance, banking, or securities.
While ERISA prohibits States from regu-
lating a plan as an insurance or investment
company or bank, the preemption provi-
sions of section 731 of ERISA and section
2724 of the PHS Act (implemented in 29
CFR 2590.731(a) and 45 CFR 146.143(a))
apply so that the requirements in title XX-
VII of the PHS Act (including those added
by the Affordable Care Act) are not to be
construed to supersede any provision of
State law which establishes, implements,
or continues in effect any standard or re-
quirement solely relating to health insur-
ance issuers in connection with individual
or group health insurance coverage except
to the extent that such standard or require-
ment prevents the application of a require-
ment of a Federal standard. The confer-
ence report accompanying HIPAA
indicates that this is intended to be the
"narrowest" preemption of State laws
(See House Conf. Rep. No. 104-736, at
205, reprinted in 1996 U.S. Code Cong. &
Admin. News 2018).

States may continue to apply State law
requirements except to the extent that
such requirements prevent the application
of the Affordable Care Act requirements
that are the subject of this rulemaking.
Accordingly, States have significant lati-
tude to impose requirements on health in-
surance issuers that are more restrictive
than the Federal law. However, under
these final rules, a State would not be
allowed to impose a requirement that
modifies the summary of benefits and cov-
erage required to be provided under PHS
Act section 2715(a), because it would pre-
vent the application of these final rules'
uniform disclosure requirements.

In compliance with the requirement of
Executive Order 13132 that agencies ex-
amine closely any policies that may have
federalism implications or limit the policy
making discretion of the States, the De-
partments of Labor and HHS have en-
gaged in efforts to consult with and work
cooperatively with affected States, includ-
ing consulting with, and attending confer-

ences of, the National Association of In-
surance Commissioners and consulting
with State insurance officials on an indi-
vidual basis. It is expected that the De-
partments of Labor and HHS will act in a
similar fashion in enforcing the Afford-
able Care Act, including the provisions of
section 2715 of the PHS Act. Throughout
the process of developing these final regu-
lations, to the extent feasible within the ap-
plicable preemption provisions, the Depart-
ments of Labor and HHS have attempted to
balance the States' interests in regulating
health insurance issuers, and Congress' in-
tent to provide uniform minimum protec-
tions to consumers in every State. By doing
so, it is the Departments of Labor's and
HHS' view that they have complied with the
requirements of Executive Order 13132.

Pursuant to the requirements set forth
in section 8(a) of Executive Order 13132,
and by the signatures affixed to this final
rule, the Departments certify that the Em-
ployee Benefits Security Administration
and the Centers for Medicare & Medicaid
Services have complied with the require-
ments of Executive Order 13132 for the
attached final rules in a meaningful and
timely manner.

F. Special Analyses - Department of the
Treasury

For purposes of the Department of the
Treasury it has been determined that this
notice of final rulemaking is not a signif-
icant regulatory action as defined in Ex-
ecutive Order 12866, as supplemented by
Executive Order 13563. Therefore, a reg-
ulatory assessment is not required. It has
also been determined that section 553(b)
of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
final regulations. For a discussion of the
impact of this final rule on small entities,
please see section V.C. of this preamble.
Pursuant to section 7805(f) of the Code,
this notice of final rulemaking has been
submitted to the Small Business Admin-
istration for comment on its impact on
small business.

### G. Congressional Review Act

These final regulations are subject to
the Congressional Review Act provisions
of the Small Business Regulatory En-

forcement Fairness Act of 1996 (5 U.S.C.
801 et seq.), which specifies that before a
rule can take effect, the Federal agency pro-
mulgating the rule shall submit to each
House of the Congress and to the Comptrol-
ler General a report containing a copy of the
rule along with other specified information,
and has been transmitted to Congress and
the Comptroller General for review.

# IV. Statutory Authority

The Department of the Treasury regu-
lations are adopted pursuant to the author-
ity contained in sections 7805 and 9833 of
the Code.

The Department of Labor regulations
are adopted pursuant to the authority con-
tained in 29 U.S.C. 1027, 1059, 1135,
1161-1168, 1169, 1181-1183, 1181 note,
1185, 1185a, 1185b, 1185d, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Pub.
L.104-191, 110 Stat. 1936; sec. 401(b),
Pub. L. 105-200, 112 Stat. 645 (42 U.S.C.
651 note); sec. 512(d), Pub. L. 110-343,
122 Stat. 3881; sec. 1001, 1201, and
1562(e), Pub. L. 111-148, 124 Stat. 119,
as amended by Pub. L. 111-152, 124 Stat.
1029; Secretary of Labor's Order 1-2011,
77 FR 1088 (January 9, 2012).

The Department of Health and Human
Services regulations are adopted pursuant
to the authority contained in sections 2701
through 2763, 2791, and 2792 of the PHS
Act (42 USC 300gg through 300gg-63,
300gg-91, and 300gg-92), as amended.
* * * * *

Approved June 8, 2015.

John Dalrymple,
Deputy Commissioner for
Services and Enforcement,
Internal Revenue Service.

Approved June 9, 2015.

Mark J. Mazur,
Assistant Secretary of the
Treasury (Tax Policy).

Signed this 5th day of June, 2015.

Phyllis C. Borzi,
Assistant Secretary,
Employee Benefits Security Administration,
Department of Labor.

Approved June 2, 2015.

Andrew M. Slavitt,
Acting Administrator,
Centers for Medicare & Medicaid Services.

Approved June 9, 2015.

Sylvia M. Burwell,
Secretary,
Department of Health and Human Services.

## DEPARTMENT OF THE TREASURY

Internal Revenue Service
26 CFR Chapter 1

Accordingly, 26 CFR part 54 is
amended as follows:

### PART 54 -PENSION EXCISE TAXES

Paragraph 1. The authority citation for
part 54 continues to read in part as fol-
lows:

Authority: Authority: 26 U.S.C. 7805
* * *
Section 54.9815-2715 also issued un-
der 26 U.S.C. 9833;

* * * * *

Par. 2. Section 54.9815-2715 is re-
vised to read as follows:

## § 54.9815-2715 Summary of benefits and coverage and uniform glossary.

(a) Summary of benefits and coverage-
(1) In general. A group health plan (and
its administrator as defined in section
3(16)(A) of ERISA)), and a health insur-
ance issuer offering group health insur-
ance coverage, is required to provide a
written summary of benefits and coverage
(SBC) for each benefit package without
charge to entities and individuals de-
scribed in this paragraph (a)(1) in accor-
dance with the rules of this section.

(i) SBC provided by a group health
insurance issuer to a group health plan-
(A) Upon application. A health insurance
issuer offering group health insurance
coverage must provide the SBC to a group
health plan (or its sponsor) upon applica-
tion for health coverage, as soon as prac-
ticable following receipt of the applica-
tion, but in no event later than seven

business days following receipt of the ap-
plication. If an SBC was provided before
application pursuant to paragraph
(a)(1)(i)(D) of this section (relating to
SBCs upon request), this paragraph
(a)(1)(i)(A) is deemed satisfied, provided
there is no change to the information re-
quired to be in the SBC. However, if there
has been a change in the information re-
quired, a new SBC that includes the
changed information must be provided
upon application pursuant to this para-
graph (a)(1)(i)(A).

(B) By first day of coverage (if there
are changes). If there is any change in the
information required to be in the SBC that
was provided upon application and before
the first day of coverage, the issuer must
update and provide a current SBC to the
plan (or its sponsor) no later than the first
day of coverage.

(C) Upon renewal, reissuance, or re-
enrollment. If the issuer renews or reis-
sues a policy, certificate, or contract of
insurance for a succeeding policy year, or
automatically re-enrolls the policyholder
or its participants and beneficiaries in cov-
erage, the issuer must provide a new SBC
as follows:

(1) If written application is required (in
either paper or electronic form) for re-
newal or reissuance, the SBC must be
provided no later than the date the written
application materials are distributed.

(2) If renewal, reissuance, or reenroll-
ment is automatic, the SBC must be pro-
vided no later than 30 days prior to the
first day of the new plan or policy year;
however, with respect to an insured plan,
if the policy, certificate, or contract of
insurance has not been issued or renewed
before such 30-day period, the SBC must
be provided as soon as practicable but in
no event later than seven business days
after issuance of the new policy, certifi-
cate, or contract of insurance, or the re-
ceipt of written confirmation of intent to
renew, whichever is earlier.

(D) Upon request. If a group health
plan (or its sponsor) requests an SBC or
summary information about a health in-
surance product from a health insurance
issuer offering group health insurance
coverage, an SBC must be provided as
soon as practicable, but in no event later
than seven business days following re-
ceipt of the request.

(ii) SBC provided by a group health
insurance issuer and a group health plan
to participants and beneficiaries-(A) In
general. A group health plan (including its
administrator, as defined under section
3(16) of ERISA), and a health insurance
issuer offering group health insurance
coverage, must provide an SBC to a par-
ticipant or beneficiary (as defined under
sections 3(7) and 3(8) of ERISA), and
consistent with the rules of paragraph
(a)(1)(iii) of this section, with respect to
each benefit package offered by the plan
or issuer for which the participant or ben-
eficiary is eligible.

(B) Upon application. The SBC must
be provided as part of any written appli-
cation materials that are distributed by the
plan or issuer for enrollment. If the plan or
issuer does not distribute written applica-
tion materials for enrollment, the SBC
must be provided no later than the first
date on which the participant is eligible to
enroll in coverage for the participant or
any beneficiaries. If an SBC was provided
before application pursuant to paragraph
(a)(1)(ii)(F) of this section (relating to
SBCs upon request), this paragraph
(a)(1)(ii)(B) is deemed satisfied, provided
there is no change to the information re-
quired to be in the SBC. However, if there
has been a change in the information that
is required to be in the SBC, a new SBC
that includes the changed information
must be provided upon application pursu-
ant to this paragraph (a)(1)(ii)(B).

(C) By first day of coverage (if there
are changes). (1) If there is any change to
the information required to be in the SBC
that was provided upon application and
before the first day of coverage, the plan
or issuer must update and provide a cur-
rent SBC to a participant or beneficiary no
later than the first day of coverage.

(2) If the plan sponsor is negotiating
coverage terms after an application has
been filed and the information required to
be in the SBC changes, the plan or issuer
is not required to provide an updated SBC
(unless an updated SBC is requested) until
the first day of coverage.

(D) Special enrollees. The plan or is-
suer must provide the SBC to special en-
rollees (as described in § 54.9801-6) no
later than the date by which a summary
plan description is required to be provided
under the timeframe set forth in ERISA

section 104(b)(1)(A) and its implementing
regulations, which is 90 days from enroll-
ment.

(E) Upon renewal, reissuance, or reen-
rollment. If the plan or issuer requires
participants or beneficiaries to renew in
order to maintain coverage (for example,
for a succeeding plan year), or automati-
cally re-enrolls participants and beneficia-
ries in coverage, the plan or issuer must
provide a new SBC, as follows:

(1) If written application is required for
renewal, reissuance, or reenrollment (in
either paper or electronic form), the SBC
must be provided no later than the date on
which the written application materials
are distributed.

(F) Upon request. A plan or issuer
must provide the SBC to participants or
beneficiaries upon request for an SBC or
summary information about the health
coverage, as soon as practicable, but in no
event later than seven business days fol-
lowing receipt of the request.

(iii) Special rules to prevent unneces-
sary duplication with respect to group
health coverage-(A) An entity required to
provide an SBC under this paragraph
(a)(1) with respect to an individual satis-
fies that requirement if another party pro-
vides the SBC, but only to the extent that
the SBC is timely and complete in accor-
dance with the other rules of this section.
Therefore, for example, in the case of a
group health plan funded through an in-
surance policy, the plan satisfies the re-
quirement to provide an SBC with respect
to an individual if the issuer provides a
timely and complete SBC to the individ-
ual. An entity required to provide an SBC
under this paragraph (a)(1) with respect to
an individual that contracts with another
party to provide such SBC is considered

to satisfy the requirement to provide such
SBC if:

(1) The entity monitors performance
under the contract;

(B) If a single SBC is provided to a
participant and any beneficiaries at the
participant's last known address, then
the requirement to provide the SBC to
the participant and any beneficiaries is
generally satisfied. However, if a bene-
ficiary's last known address is different
than the participant's last known ad-
dress, a separate SBC is required to be
provided to the beneficiary at the bene-
ficiary's last known address.

(C) With respect to a group health plan
that offers multiple benefit packages, the
plan or issuer is required to provide a new
SBC automatically to participants and
beneficiaries upon renewal or reenroll-
ment only with respect to the benefit pack-
age in which a participant or beneficiary is
enrolled (or will be automatically re-
enrolled under the plan); SBCs are not
required to be provided automatically
upon renewal or reenrollment with respect
to benefit packages in which the partici-
pant or beneficiary is not enrolled (or will
not automatically be enrolled). However,
if a participant or beneficiary requests an
SBC with respect to another benefit pack-
age (or more than one other benefit pack-
age) for which the participant or benefi-
ciary is eligible, the SBC (or SBCs, in the
case of a request for SBCs relating to
more than one benefit package) must be
provided upon request as soon as practi-
cable, but in no event later than seven

business days following receipt of the re-
quest.

(D) Subject to paragraph (a)(2)(ii) of
this section, a plan administrator of a
group health plan that uses two or more
insurance products provided by separate
health insurance issuers with respect to a
single group health plan may synthesize
the information into a single SBC or pro-
vide multiple partial SBCs provided that
all the SBC include the content in para-
graph (a)(2)(iii) of this section.

(2) Content-(i) In general. Subject to
paragraph (a)(2)(iii) of this section, the
SBC must include the following:

(A) Uniform definitions of standard in-
surance terms and medical terms so that
consumers may compare health coverage
and understand the terms of (or exceptions
to) their coverage, in accordance with
guidance as specified by the Secretary;

(B) A description of the coverage, in-
cluding cost sharing, for each category of
benefits identified by the Secretary in
guidance;

(D) The cost-sharing provisions of the
coverage, including deductible, coinsur-
ance, and copayment obligations;

(E) The renewability and continuation
of coverage provisions;

(F) Coverage examples, in accordance
with the rules of paragraph (a)(2)(ii) of
this section;

(G) With respect to coverage begin-
ning on or after January 1, 2014, a state-
ment about whether the plan or coverage
provides minimum essential coverage as
defined under section 5000A(f) and
whether the plan's or coverage's share of
the total allowed costs of benefits pro-
vided under the plan or coverage meets
applicable requirements;

(H) A statement that the SBC is only a
summary and that the plan document, pol-
icy, certificate, or contract of insurance
should be consulted to determine the gov-
erning contractual provisions of the cov-
erage;

(I) Contact information for questions;

(J) For issuers, an Internet web address
where a copy of the actual individual cov-
erage policy or group certificate of cover-
age can be reviewed and obtained;

(K) For plans and issuers that maintain
one or more networks of providers, an

Internet address (or similar contact infor-
mation) for obtaining a list of network
providers;

(L) For plans and issuers that use a
formulary in providing prescription drug
coverage, an Internet address (or similar
contact information) for obtaining infor-
mation on prescription drug coverage; and

(M) An Internet address for obtaining
the uniform glossary, as described in para-
graph (c) of this section, as well as a
contact phone number to obtain a paper
copy of the uniform glossary, and a dis-
closure that paper copies are available.

(ii) Coverage examples. The SBC must
include coverage examples specified by
the Secretary in guidance that illustrate
benefits provided under the plan or cover-
age for common benefits scenarios (in-
cluding pregnancy and serious or chronic
medical conditions) in accordance with
this paragraph (a)(2)(ii).

(A) Number of examples. The Secre-
tary may identify up to six coverage ex-
amples that may be required in an SBC.

(B) Benefits scenarios. For purposes of
this paragraph (a)(2)(ii), a benefits sce-
nario is a hypothetical situation, consist-
ing of a sample treatment plan for a spec-
ified medical condition during a specific
period of time, based on recognized clin-
ical practice guidelines as defined by the
National Guideline Clearinghouse,
Agency for Healthcare Research and
Quality. The Secretary will specify, in
guidance, the assumptions, including the
relevant items and services and reim-
bursement information, for each claim in
the benefits scenario.

(C) Illustration of benefit provided. For
purposes of this paragraph (a)(2)(ii), to
illustrate benefits provided under the plan
or coverage for a particular benefits sce-
nario, a plan or issuer simulates claims
processing in accordance with guidance
issued by the Secretary to generate an
estimate of what an individual might ex-
pect to pay under the plan, policy, or
benefit package. The illustration of bene-
fits provided will take into account any
cost sharing, excluded benefits, and other
limitations on coverage, as specified by
the Secretary in guidance.

(iii) Coverage provided outside the
United States. In lieu of summarizing cov-
erage for items and services provided out-
side the United States, a plan or issuer

may provide an Internet address (or sim-
ilar contact information) for obtaining in-
formation about benefits and coverage
provided outside the United States. In any
case, the plan or issuer must provide an
SBC in accordance with this section that
accurately summarizes benefits and cov-
erage available under the plan or coverage
within the United States.

(3) Appearance. (i) A group health
plan and a health insurance issuer must
provide an SBC in the form, and in accor-
dance with the instructions for completing
the SBC, that are specified by the Secre-
tary in guidance. The SBC must be pre-
sented in a uniform format, use terminol-
ogy understandable by the average plan
enrollee, not exceed four double-sided
pages in length, and not include print
smaller than 12-point font.

(ii) A group health plan that utilizes
two or more benefit packages (such as
major medical coverage and a health flex-
ible spending arrangement) may synthe-
size the information into a single SBC, or
provide multiple SBCs.

(4) Form. (i) An SBC provided by an
issuer offering group health insurance
coverage to a plan (or its sponsor), may be
provided in paper form. Alternatively, the
SBC may be provided electronically (such
as by email or an Internet posting) if the
following three conditions are satisfied -

(A) The format is readily accessible by
the plan (or its sponsor);

(B) The SBC is provided in paper form
free of charge upon request; and

(C) If the electronic form is an Internet
posting, the issuer timely advises the plan
(or its sponsor) in paper form or email that
the documents are available on the Inter-
net and provides the Internet address.

(ii) An SBC provided by a group health
plan or health insurance issuer to a partic-
ipant or beneficiary may be provided in
paper form. Alternatively, the SBC may
be provided electronically (such as by
email or an Internet posting) if the re-
quirements of this paragraph (a)(4)(ii) are
met.

(A) With respect to participants and
beneficiaries covered under the plan or
coverage, the SBC may be provided elec-
tronically as described in this paragraph
(a)(4)(ii)(A). However, in all cases, the
plan or issuer must provide the SBC in
paper form if paper form is requested.

(1) In accordance with the Department
of Labor's disclosure regulations at 29
CFR 2520.104b-1;

(2) In connection with online enroll-
ment or online renewal of coverage under
the plan; or

(3) In response to an online request
made by a participant or beneficiary for
the SBC.

(B) With respect to participants and
beneficiaries who are eligible but not en-
rolled for coverage, the SBC may be pro-
vided electronically if:

(1) The format is readily accessible;

(2) The SBC is provided in paper form
free of charge upon request; and

(3) In a case in which the electronic
form is an Internet posting, the plan or
issuer timely notifies the individual in pa-
per form (such as a postcard) or email that
the documents are available on the Inter-
net, provides the Internet address, and no-
tifies the individual that the documents are
available in paper form upon request.

(5) Language. A group health plan or
health insurance issuer must provide the
SBC in a culturally and linguistically ap-
propriate manner. For purposes of this
paragraph (a)(5), a plan or issuer is con-
sidered to provide the SBC in a culturally
and linguistically appropriate manner if
the thresholds and standards of 29 CFR
2590.715-2719(e) are met as applied to
the SBC.

(b) Notice of modification. If a group
health plan, or health insurance issuer of-
fering group health insurance coverage,
makes any material modification (as de-
fined under section 102 of ERISA) in any
of the terms of the plan or coverage that
would affect the content of the SBC, that
is not reflected in the most recently pro-
vided SBC, and that occurs other than in
connection with a renewal or reissuance
of coverage, the plan or issuer must pro-
vide notice of the modification to enroll-
ees not later than 60 days prior to the date
on which the modification will become
effective. The notice of modification must
be provided in a form that is consistent
with the rules of paragraph (a)(4) of this
section.

(c) Uniform glossary-(1) In general. A
group health plan, and a health insurance
issuer offering group health insurance
coverage, must make available to partici-
pants and beneficiaries the uniform glos-

sary described in paragraph (c)(2) of this
section in accordance with the appearance
and form and manner requirements of
paragraphs (c)(3) and (4) of this section.

(2) Health-coverage-related terms and
medical terms. The uniform glossary must
provide uniform definitions, specified by
the Secretary in guidance, of the following
health-coverage-related terms and medi-
cal terms:

(i) Allowed amount, appeal, balance
billing, co-insurance, complications of
pregnancy, co-payment, deductible, dura-
ble medical equipment, emergency medi-
cal condition, emergency medical transpor-
tation, emergency room care, emergency
services, excluded services, grievance, ha-
bilitation services, health insurance, home
health care, hospice services, hospitaliza-
tion, hospital outpatient care, in-network co-
insurance, in-network co-payment, medi-
cally necessary, network, non-preferred
provider, out-of-network co-insurance, out-
of-network co-payment, out-of-pocket limit,
physician services, plan, preauthorization,
preferred provider, premium, prescription
drug coverage, prescription drugs, primary
care physician, primary care provider, pro-
vider, reconstructive surgery, rehabilitation
services, skilled nursing care, specialist,
usual customary and reasonable (UCR), and
urgent care; and

(ii) Such other terms as the Secretary
determines are important to define so that
individuals and employers may compare
and understand the terms of coverage and
medical benefits (including any excep-
tions to those benefits), as specified in
guidance.

(3) Appearance. A group health plan,
and a health insurance issuer, must pro-
vide the uniform glossary with the appear-
ance specified by the Secretary in guid-
ance to ensure the uniform glossary is
presented in a uniform format and uses
terminology understandable by the aver-
age plan enrollee.

(4) Form and manner. A plan or issuer
must make the uniform glossary described
in this paragraph (c) available upon re-
quest, in either paper or electronic form
(as requested), within seven business days
after receipt of the request.

(d) Preemption. State laws that conflict
with this section (including a state law
that requires a health insurance issuer to
provide an SBC that supplies less infor-

mation than required under paragraph (a)
of this section) are preempted.

(e) Failure to provide. A group health
plan that willfully fails to provide infor-
mation required under this section to a
participant or beneficiary is subject to a
fine of not more than $1,000 for each such
failure. A failure with respect to each par-
ticipant or beneficiary constitutes a sepa-
rate offense for purposes of this paragraph
(e). The Department will enforce this sec-
tion using a process and procedure con-
sistent with section 4980D of the Code.

(f) Applicability to Medicare Advan-
tage benefits. The requirements of this
section do not apply to a group health
plan benefit package that provides
Medicare Advantage benefits pursuant
to or 42 U.S.C. Chapter 7, Subchapter
XVIII, Part C.

(g) Applicability date. (1) This section
is applicable to group health plans and
group health insurance issuers in accor-
dance with this paragraph (g). (See 29
CFR 2590.715-1251(d), providing that
this section applies to grandfathered
health plans.)

(i) For disclosures with respect to par-
ticipants and beneficiaries who enroll or
re-enroll through an open enrollment pe-
riod (including re-enrollees and late en-
rollees), this section applies beginning on
the first day of the first open enrollment
period that begins on or after September 1,
2015; and

(ii) For disclosures with respect to par-
ticipants and beneficiaries who enroll in
coverage other than through an open en-
rollment period (including individuals
who are newly eligible for coverage and
special enrollees), this section applies be-
ginning on the first day of the first plan
year that begins on or after September 1,
2015.

(2) For disclosures with respect to
plans, this section is applicable to health
insurance issuers beginning September 1,
2015.

(Filed by the Office of the Federal Register on June 12,
2015, 4:15 p.m., and published in the issue of the Federal
Register for June 16, 2015, 80 F.R. 34292)

# Section 9815 .- Summary of Benefits and coverage and Uniform Glossary

26 CFR 54.9815-2715 - Summary of benefits and
coverage and uniform glossary.

TD 9725

DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 20, 25, and 602

## Portability of a Deceased Spousal Unused Exclusion Amount

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Final regulations and removal
of temporary regulations.

SUMMARY: This document contains fi-
nal regulations that provide guidance un-
der sections 2010 and 2505 of the Internal
Revenue Code on the estate and gift tax
applicable exclusion amount, in general,
as well as on the applicable requirements
for electing portability of a deceased
spousal unused exclusion (DSUE) amount
to the surviving spouse and on the appli-
cable rules for the surviving spouse's use
of this DSUE amount. The statutory pro-
visions underlying the portability rules
were enacted as part of the Tax Relief,
Unemployment Insurance Reauthoriza-
tion, and Job Creation Act of 2010, and
these provisions were made permanent by
the American Taxpayer Relief Act of
2012. The portability rules affect the es-
tates of married decedents dying on or
after January 1, 2011, and the surviving
spouses of those decedents.

DATES: Effective Date. These regula-
tions are effective on June 12.

Applicability Dates: For specific dates
of applicability of the final regulations,
see §§ 20.2001-2(b), 20.2010-1(e),
20.2010-2(e), 20.2010-3(f), 25.2505-
1(e), and 25.2505-2(g).

FOR FURTHER INFORMATION
CONTACT: Karlene Lesho (202) 317-
6859 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

### Paperwork Reduction Act

The collections of information con-
tained in these regulations have been re-
viewed and approved by the Office of
Management and Budget under control
number 1545-0015. The collections of
information are in §§ 20.2010-2(a), 20.2010-
2(a)(1), 20.2010-2(a)(3)(i), 20.2010-
2(a)(7)(ii)(B), and 20.2010-2(b). Re-
sponses to each collection of information
are voluntary to obtain the benefit of being
able to elect portability or to take advan-
tage of the special reporting requirements
applicable to certain assets, and, for cer-
tain estates, to opt out of a deemed porta-
bility election. The likely respondents are
executors of estates of decedents survived
by a spouse.

An agency may not conduct or spon-
sor, and a person is not required to re-
spond to, a collection of information un-
less it displays a valid control number.

Books and records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.

### Background

This document amends the Estate Tax
Regulations (26 CFR part 20) under sec-
tions 2001 and 2010 of the Internal Rev-
enue Code (Code) and the Gift Tax Reg-
ulations (26 CFR part 25) under section
2505 of the Code. On December 17, 2010,
in section 303 of the Tax Relief, Unem-
ployment Insurance Reauthorization, and
Job Creation Act of 2010, Public Law
111-312 (124 Stat. 3296, 3302) (TRUIR-
JCA), Congress amended section 2010(c)
of the Code to allow portability of the
applicable exclusion amount between
spouses and made conforming amend-
ments to sections 2505(a), 2631(c), and
6018(a)(1) of the Code. The changes
made by TRUIRJCA to sections 2010(c),
2505(a), 2631(c), and 6018(a)(1) of the
Code were scheduled to expire after De-
cember 31, 2012, pursuant to section 304
of TRUIRJCA. However, on January 2,
2013, Congress enacted the American
Taxpayer Relief Act of 2012, Public Law

112-240 (126 Stat. 2313) (ATRA), which
made portability permanent. In section
101(c)(2) of ATRA, Congress made a tech-
nical correction to section 2010(c)(4)(B) of
the Code, retroactive to the original date of
enactment of section 303 of TRUIRJCA, by
amending clause (i) to replace "basic exclu-
sion amount" with "applicable exclusion
amount."

On June 18, 2012, temporary regula-
tions relating to this topic (TD 9593, 77
FR 36150) (“2012 temporary regula-
tions") and a notice of proposed rulemak-
ing cross-referencing the temporary regu-
lations (REG-141832-11, 77 FR 36229)
("NPRM") were published in the Federal
Register. No requests to speak at the
scheduled public hearing were received,
and the hearing was canceled. Comments
responding to the NPRM were received
and are available for public inspection and
copying at http://www.regulations.gov or
upon request. After consideration of all
the comments, the proposed rules in the
NPRM are adopted as amended by this
Treasury decision. The public comments
and revisions are discussed in this pre-
amble.

## Summary of Comments and Explanation of Revisions

### 1. Availability of Extension of Time to Elect Portability

Section 2010(c) of the Code allows the
estate of a decedent who is survived by a
spouse to make a portability election,
which generally allows the surviving
spouse to apply the decedent's deceased
spousal unused exclusion (DSUE) amount
to the surviving spouse's own transfers
during life and at death. Under section
2010(c)(5)(A), a portability election is ef-
fective only if made on an estate tax return
filed by the executor of the decedent's
estate within the time prescribed by law
for filing such return. Section 20.2010-
2T(a)(1) of the 2012 temporary regula-
tions requires every estate electing porta-
bility of a decedent's DSUE amount to file
an estate tax return within nine months of
the decedent's date of death, unless an
extension of time for filing has been
granted.

A commenter requested that the final
regulations address the availability of an
extension of time under §§ 301.9100-2

and 301.9100-3 of the Procedure and Ad-
ministration Regulations to elect portabil-
ity under section 2010(c)(5)(A) of the
Code. Section 301.9100-2(b) provides an
automatic six-month extension of time for
making certain statutory and regulatory
elections if the return is timely filed. Be-
cause the portability election is deemed to
be made by the timely filing of a complete
and properly prepared estate tax return,
this relief provision will not be helpful
with regard to the portability election un-
less the return that was timely filed was
not complete or properly prepared and
that insufficiency is corrected within six
months from the unextended due date of
the return.

Section 301.9100-3 allows the grant of
an extension of time for making regula-
tory elections that do not meet the require-
ments for an automatic extension of time
under § 301.9100-2. An extension under
§ 301.9100-3 to elect portability is not
available to estates that are required to file
an estate tax return based on the applica-
ble amount in section 6018(a) because, in
such a case, the due date for the portability
election is prescribed by statute and
§ 301.9100-3 applies only to an election
whose due date is prescribed by regula-
tion. See sections 2010(c)(5)(A), 6075(a),
and 6018(a); § 301.9100-1(b). However,
an extension of time under § 301.9100-3
to elect portability may be available to
estates that are under the value threshold
described in section 6018 for being re-
quired to file an estate tax return. In such
a case, the due date for the portability
election is prescribed by regulation, not by
statute. See Rev. Proc. 2014-18, 2014-7
IRB 513, section 2.03.

The Treasury Department and the IRS
believe that clarifying the availability of
an extension of time under § 301.9100-3
to elect portability will assist taxpayers in
understanding and meeting their tax re-
sponsibilities. Accordingly, the final reg-
ulations provide that an extension of time
to elect portability will not be granted
under § 301.9100-3 to any estate that is
required to file an estate tax return be-
cause the value of the gross estate equals
or exceeds the threshold amount described
in section 6018, but may be granted under
the rules set forth in § 301.9100-3 to
estates with a gross estate value below

that threshold amount and thus not other-
wise required to file an estate tax return.

As transitional relief in the wake of
TRUIRJCA and ATRA, the Treasury De-
partment and the IRS have published
guidance regarding the availability of an
automatic extension of time for executors
of certain estates under the filing threshold
of section 6018(a) to file an estate tax
return to elect portability of an unused
exclusion amount. See Notice 2012-21,
2012-10 IRB 450; Rev. Proc. 2014-18.
The Treasury Department and the IRS
continue to receive, and are continuing to
consider, requests for permanent exten-
sions of this type of relief. However, such
relief is not included in the final regula-
tions.

#### 2. Effect of Portability Election Where DSUE Amount is Uncertain

Section 20.2010-2T(a)(2) of the 2012
temporary regulations provides that upon
the timely filing of a complete and prop-
erly prepared estate tax return, an executor
of the estate of a decedent survived by a
spouse will have elected portability of the
decedent's DSUE amount, unless the ex-
ecutor validly opts out of making the por-
tability election. The inclusion of a com-
putation of the DSUE amount is an
essential requirement of a complete and
properly prepared estate tax return in-
tended to make the portability election.
See section 2010(c)(5)(A) and § 20.2010-
2T(b)(1). Section 20.2010-3T(c) provides
that the portability election applies (and
generally is available to the surviving
spouse) upon the decedent's death, but, to
the extent the DSUE amount subsequently
is reduced or cannot be substantiated, the
DSUE amount will not be available to the
surviving spouse.

A commenter requested that the final
regulations address whether an estate can
make a "protective" election if a DSUE
amount is not reflected on an otherwise
complete and properly prepared estate tax
return at the time of its timely filing, but
subsequent adjustments to amounts on the
estate tax return would result in unused
exclusion of that decedent. The following
example illustrates such a scenario. An
executor files a complete and properly
prepared estate tax return that shows a
DSUE amount equal to zero at the time of

the return's timely filing and does not
follow the instructions set forth in the
instructions for opting out of portability.
At the same time, the executor also files a
protective claim for refund attributable to
a claim against the estate. Subsequently,
the estate becomes entitled to a deduction
under section 2053 for a payment made in
satisfaction of the claim against the estate
which reduces the estate tax and results in
unused exemption.

In this example, the Treasury Depart-
ment and the IRS believe that the executor
has elected portability in accordance with
§ 20.2010-2T(a)(2) and that the recom-
puted DSUE amount will be available to the
decedent's surviving spouse. The final reg-
ulations clarify this intended result by pro-
viding in § 20.2010-2(b) that the computa-
tion requirement in section 2010(c)(5)(A)
will be satisfied if the estate tax return is
prepared in accordance with the require-
ments of § 20.2010-2(a)(7). Accordingly,
there is no need for a protective election.

### 3. Persons Permitted to Make the Election

Several commenters requested that the
final regulations allow a surviving spouse
who is not an executor as defined in sec-
tion 2203 of the Code to file an estate tax
return and make the portability election in
several different circumstances. A few of
the circumstances described include those
in which the spouse is given the right to
file the estate tax return in a prenuptial or
marital agreement, or the spouse has pe-
titioned the appropriate local court for the
spouse's appointment as an executor
solely for the limited purpose of filing the
estate tax return and the executor does not
make the portability election. The Trea-
sury Department and the IRS recognize
the possibility that an executor may exer-
cise the executor's discretion to not make
the portability election, thus causing the es-
tate to forfeit the opportunity to elect porta-
bility, but note that section 2010(c)(5) of the
Code permits only the executor of the dece-
dent's estate to file the estate tax return and
make the portability election. The 2012
temporary regulations address the circum-
stances in which an appointed executor or
a non-appointed executor may file the es-
tate tax return and decide whether or not
to elect portability. The Treasury Depart-
ment and the IRS believe that any consid-

eration of what, if any, state law action
might bring the surviving spouse within
the definition of executor under section
2203 is outside of the scope of this regu-
lation. Accordingly, the final regulations
adopt the applicable rules in the 2012 tem-
porary regulations without change.

#### 4. Requirement of a "Complete and Properly Prepared" Estate Tax Return

Section 20.2010-2T(a)(2) provides
that the estate of a decedent survived by a
spouse makes the portability election by
timely filing a complete and properly pre-
pared estate tax return for the decedent's
estate. Section 20.2010-2T(a)(7)(i) pro-
vides that an estate tax return prepared in
accordance with all applicable require-
ments is considered a "complete and prop-
erly prepared" estate tax return. Section
20.2010-2T(a)(7)(ii)(A), however, pro-
vides a special rule applicable to estates
that are not otherwise required to file an
estate tax return under section 6018. For
these estates, the executor does not need
to report the value of certain property that
qualifies for the marital or charitable de-
duction. The 2012 temporary regulations
also included exceptions to the application
of the special rule by providing specific
circumstances under which the special
rule will not apply.

A commenter suggested that the final
regulations elaborate on the circumstances
under which a timely filed estate tax re-
turn may be considered so deficient as to
render the estate tax return incomplete for
purposes of electing portability. The Trea-
sury Department and the IRS acknowl-
edge that, as with all tax returns, some
errors or omissions made with respect to
an estate tax return will be considered
minor and correctible. However, the Trea-
sury Department and the IRS consider the
issue of whether an estate tax return is
complete and properly prepared to be de-
termined most appropriately on a case-by-
case basis by applying standards as pre-
scribed in current law. Therefore, this
suggestion has not been adopted.

A commenter recommended that the
final regulations modify the special rule in
§ 20.2010-2T(a)(7)(ii)(A) to narrow the
exceptions to the application of the special
rule, thus allowing more estates to avoid
the expense of a potentially-complicated

appraisal to value assets includible in the
gross estate. Specifically, the commenter
recommended that the special rule in
§ 20.2010-2T(a)(7)(ii)(A) should apply
to certain property, the value of which
qualifies for the marital deduction or char-
itable deduction (marital deduction prop-
erty or charitable deduction property),
when: (i) the marital deduction property
or charitable deduction property is a stated
number of shares of stock and a stated
number of shares of the same stock are
includible in the gross estate but are not
marital deduction property or charitable
deduction property; (ii) the property rep-
resents the balance of the value of shares
remaining after a non-marital or non-
charitable bequest of shares based on a
specific value; and (iii) the property rep-
resents the marital or charitable portion of
a fractional division of property, whether
by bequest, spousal election, or dis-
claimer. In the first two instances, the
value of the marital deduction property or
charitable deduction property may be rel-
evant to assessing the accuracy of the val-
uation of the nondeductible interest and
whether any valuation premium or dis-
count is warranted. In the last instance,
because any beneficiary's share of the es-
tate usually can be satisfied in a manner
other than with that beneficiary's propor-
tional share of each individual asset, it
will be necessary to know the total value
in order to verify the non-deductible por-
tion of the estate. Therefore, the Treasury
Department and the IRS continue to be-
lieve that § 20.2010-2T(a)(7)(ii)(A) ap-
propriately excludes the described cir-
cumstances from application of the
special rule. While the final regulations do
not adopt the commenter's suggestion to
narrow the exceptions to the application
of the special rule, the final regulations
provide flexibility to refine the rules in
subregulatory guidance at any time in the
future when the IRS may determine that
additional guidance would be appropriate
with regard to the application of the spe-
cial rule to particular types of transfers.

The same commenter suggested that the
exception in § 20.2010-2T(a)(7)(ii)(A)(2)
is made unnecessarily broad by its refer-
ence to "another provision of the Code."
The commenter was concerned that, be-
cause the fair market value of a be-
queathed asset determines the basis of that

asset in the hands of the legatee, the value
of all estate assets would have an impact
on section 1014, and, thus, all assets
would have to be valued. In referring to
value needed to determine an estate's el-
igibility under other Code sections such as
sections 2032 and 2032A, the Treasury
Department and the IRS did not intend to
include a basis determination under sec-
tion 1014. Accordingly, the language of
§ 20.2010-2T(a)(7)(ii)(A)(2) has been
clarified.

Finally, a commenter repeated a sug-
gestion (first made in response to a request
for comments in Notice 2011-82,
2011-42 IRB 516) that the IRS prepare a
shorter version of the estate tax return to
be used by estates that are not otherwise
required to file an estate tax return but do
so only to elect portability. The Treasury
Department and the IRS have reconsid-
ered this suggestion, taking into account
several factors including: the information
needed by the IRS to compute and verify
the DSUE amount; how such an abbrevi-
ated return would differ from a return
qualifying for the special rule regarding
valuations under § 20.2010-2(a)(7)(ii);
the past experience of the IRS regarding
the accuracy of abbreviated returns; the
administrative issues in creating and
maintaining alternate return forms; and
the reasons provided by commenters. The
Treasury Department and the IRS have
concluded that, on balance, a timely filed,
complete, and properly prepared estate tax
return affords the most efficient and ad-
ministrable method of obtaining the infor-
mation necessary to compute and verify
the DSUE amount, and the alleged bene-
fits to taxpayers from an abbreviated form
is far outweighed by the anticipated ad-
ministrative difficulties in administering
the estate tax. In addition, the "Technical
Explanation of the Revenue Provisions
Contained in the 'Tax Relief, Unemploy-
ment Insurance Reauthorization, and Job
Creation Act of 2010' Scheduled for Con-
sideration by the United States Senate," J.
Comm. on Tax'n, 111th Cong., JCX-
55-10 (December 10, 2010), suggests that
estates electing portability that are not
otherwise required to file an estate tax
return under section 6018(a) are intended
to be subject to the same filing require-
ments applicable to estates required to file
an estate tax return under section 6018(a).

For these reasons, this suggestion is not
adopted.

### 5. Special Rules for Qualified Domestic Trusts

The preamble to the 2012 regulations
discussed comments and proposals the
Treasury Department and the IRS had re-
ceived on the proper application of the
portability rules to qualified domestic
trusts (QDOTs) created for spouses who
are not U.S. citizens. The preamble noted
that each of the proposals raised issues of
fairness, complexity, and administrability.

The QDOT rules in the 2012 tempo-
rary regulations provide that the executor
of a decedent's estate claiming a marital
deduction for property passing to a QDOT
shall compute the decedent's DSUE
amount on the decedent's estate tax return
for the purpose of electing portability in
the same way the DSUE amount is com-
puted for any other decedent. However,
because the estate tax payments made
from the QDOT after the decedent's death
are part of the decedent's estate tax liabil-
ity, the decedent's DSUE amount must be
redetermined upon the final distribution or
other taxable event on which estate tax
under section 2056A is imposed (gener-
ally, this occurs upon the termination of
all QDOTs created by or funded with as-
sets passing from the decedent or upon the
death of the surviving spouse). See
§ 20.2010-2T(c)(4). The QDOT rules in
the 2012 temporary regulations further
provide that the earliest date such a dece-
dent's DSUE amount may be included in
determining the applicable exclusion
amount available to the surviving spouse
or the surviving spouse's estate is the date
of the event that triggers the final estate
tax liability of the decedent under section
2056A. See § 20.2010-3T(c)(2). The pre-
amble to the 2012 temporary regulations
requested further comments on the QDOT
issue.

A commenter challenged this delay in
the surviving spouse's ability to use the
decedent's DSUE amount if the surviving
spouse becomes a United States citizen
after the decedent's estate tax return is
filed and after property passes to a QDOT
for the benefit of that surviving spouse.

Under section 2056A(b)(12), the estate
tax imposed under section 2056A(b)(1)

will cease to apply to property held in a
QDOT if the surviving spouse becomes a
United States citizen (a fact to be certified
to the IRS under § 20.2056A-10(a)(2))
and either of the following requirements
are met: (A) the spouse was a resident of
the United States at all times after the
death of the decedent and before the
spouse becomes a citizen of the United
States, or (B) no tax was imposed by
section 2056A(b)(1)(A) with respect to
any distribution before the spouse be-
comes a citizen. If the spouse becomes a
U.S. citizen, but does not satisfy either
of these two requirements, section
2056A(b)(12)(C) provides that the section
2056A(b)(1) estate tax will cease to apply
to the QDOT if the spouse elects (i) to
treat any distribution on which tax was
imposed by section 2056A(b)(1)(A) as a
taxable gift made by the spouse during the
year in which the spouse becomes a U.S.
citizen or in any subsequent year, and
thereby including each such distribution
in the spouse's own adjusted taxable gifts
for both estate and gift tax purposes, and
(ii) to treat any reduction in the tax im-
posed by section 2056A(b)(1)(A) by rea-
son of the credit allowable under section
2010 with respect to the decedent as a
credit allowable to such surviving spouse
under section 2505 for purposes of deter-
mining the amount of the credit allowable
under section 2505 with respect to taxable
gifts made by the surviving spouse during
the year in which the spouse becomes a
U.S. citizen or any subsequent year.

The Treasury Department and the IRS
conclude that, if the surviving spouse of
the decedent becomes a citizen of the
United States and the requirements under
section 2056A(b)(12) and the correspond-
ing regulations are satisfied so that the tax
imposed by section 2056A(b)(1) no lon-
ger applies, then the decedent's DSUE
amount is no longer subject to adjustment
and will become available for transfers by
the surviving spouse as of the date the
surviving spouse becomes a citizen of the
United States. Accordingly, the final reg-
ulations make clarifying changes in
§§ 20.2010-2(c)(4), 20.2010-3(c)(3), and
25.2505-2(d)(3).

A commenter also requested clarifica-
tion of the rules in §§ 20.2010-3T(b),
25.2505-2T(b) and 25.2505-2T(c) as they
apply to a QDOT. Section 25.2505-2T(b)

provides that, in the case of a surviving
spouse making a gift, the surviving spouse
will be considered to apply any available
DSUE amount to the taxable gift before
the surviving spouse's own basic exclu-
sion amount. Sections 20.2010-3T(b) and
25.2505-2T(c) address how to compute
the DSUE amount included in the appli-
cable exclusion amount of a surviving
spouse who previously has applied a
DSUE amount of one or more deceased
spouses. These rules are applicable to all
surviving spouses but can be applied only
after the surviving spouse determines the
spouse's available DSUE amount, if any.
Sections 20.2010-3T(c)(2) and 25.2505-
2T(d)(2) provide rules governing the date
DSUE can be taken into consideration by
the surviving spouse or the surviving
spouse's estate when property passes from
a decedent for the benefit of a surviving
spouse in one or more QDOTs and the
decedent elects portability. The Treasury
Department and the IRS believe that the
impact of these rules in the context of
QDOTs is sufficiently clear. Thus, the fi-
nal regulations adopt these rules without
change, except that the rule in § 25.2505-
2T(d)(2) is now provided in § 25.2505-
2(d)(3).

### 6. Issues Related to Examination of Returns to Determine DSUE Amount

Section 2010(c)(5)(B) grants the IRS
the authority to examine returns of each
deceased spouse of the surviving spouse
to determine the DSUE amount allowed to
be included in the applicable exclusion
amount of the surviving spouse, even if
the period of limitations under section
6501 has expired for assessing gift or es-
tate tax with respect to the returns of the
deceased spouse. The Treasury Depart-
ment and the IRS received several com-
ments and recommendations related to
this examination authority.

First, a commenter requested that the
final regulations provide that, during an
examination to determine the allowable
DSUE amount, the examination authority
of the IRS be limited to issues of the
reporting and valuation of assets, and not
extend to other legal issues that may im-
pact the availability of the DSUE amount
to the surviving spouse. The Treasury De-
partment and the IRS note that section

2010(c)(5)(B) grants broad statutory au-
thority to the IRS to examine the correct-
ness of any return, without regard to the
period of limitations on assessment, "to
make determinations with respect to [the
allowable DSUE] amount for purposes of
carrying out [section 2010(c) of the
Code]." Thus, the Treasury Department
and the IRS conclude that limiting such
authority is inconsistent with the statute.
Accordingly, this suggestion is not ad-
opted.

Second, a commenter requested confir-
mation that, in the examination of a return
for the purpose of determining the allow-
able DSUE amount that takes place after
the expiration of the period of limitations
on assessment of tax, the valuation of
assets may be adjusted upward or down-
ward with a possible result that the allow-
able DSUE amount may decrease or in-
crease. The accurate valuation of assets
reported on an estate or gift tax return,
regardless of whether the valuation is
higher or lower than the reported value, is
fundamental to the examination of such a
return and fundamental to the accurate
determination of the DSUE amount avail-
able to the surviving spouse. The Treasury
Department and the IRS accordingly con-
clude no clarifying change is necessary on
this issue.

Third, a commenter suggested the final
regulations consider whether, in the exam-
ination of a return for the purpose of de-
termining the allowable DSUE amount
that takes place after the expiration of the
period of limitations on assessment of tax,
an adjustment to the value of an asset
reported on the return affects the basis of
that asset under section 1014. Section
1014 generally provides that the basis of
property acquired from a decedent is the
fair market value of such property on the
decedent's date of death. The Treasury
Department and the IRS believe that a
change to the date-of-death value of an
asset included in the estate of a decedent
survived by a spouse, made pursuant to an
examination of a return of that decedent
after the expiration of the period of limi-
tations on the assessment of tax on that
return, does not necessarily result in a
change to the basis of that asset under
section 1014. Rather, the basis of property
acquired from a decedent is determined in
accordance with the existing principles of

section 1014. The Treasury Department
and the IRS conclude that the scope of the
examination authority granted in section
2010(c)(5)(B) is sufficiently clear and,
therefore, make no change in the final
regulations.

Fourth, a commenter suggested that the
final regulations clarify the deductibility
of administrative expenses associated
with the examination to determine the al-
lowable DSUE amount. The Treasury De-
partment and the IRS conclude that any
expenses associated with an examination
to determine the DSUE amount to be in-
cluded in the applicable exclusion amount
of the surviving spouse should be treated
as any other expense associated with the
preparation of the surviving spouse's re-
turn. Thus, in the case of an examination
arising with respect to a gift tax return of
the surviving spouse, such expenses are
not deductible and, in the case of an ex-
amination arising with respect to an estate
tax return of the surviving spouse, such
expenses may be deductible if such ex-
penses meet all of the applicable require-
ments for deductibility under section
2053. The Treasury Department and the
IRS believe that the standards for deduct-
ing expenses for estate and gift tax pur-
poses are sufficiently clear so that no
change to the 2012 temporary regulations
is necessary.

Finally, a commenter suggested clari-
fying who may participate in the exami-
nation to determine the DSUE amount to
be included in the applicable exclusion
amount of the surviving spouse. In gen-
eral, pursuant to the current rules, each
taxpayer has the authority to participate in
the resolution of the issues raised in the
audit of his or her return. However, the
Treasury Department and the IRS believe
addressing this issue is outside the scope
of this final regulation and, therefore,
make no change in the final regulation.

7\. Availability of DSUE Amount by
Surviving Spouse Who Becomes a
Citizen of the United States

A commenter requested further guid-
ance on the rules in §§ 20.2010-3T(e) and
25.2505-2T(f), which prohibit a nonciti-
zen, nonresident surviving spouse, or the
estate of such a surviving spouse, from
taking into account the DSUE amount of

any deceased spouse except to the extent
allowed under any treaty obligation of the
United States. First, the commenter sug-
gested the final regulations clarify the
specificity a treaty must employ in refer-
encing portability or the DSUE amount
for the exception to apply. The Treasury
Department and the IRS consider this
question regarding the interpretation of
treaty language to be outside the scope of
these final regulations and, thus, decline to
make this change.

Next, the commenter requested that the
final regulations allow a surviving spouse
who becomes a U.S. citizen after the death
of the deceased spouse to take into ac-
count the DSUE amount of such deceased
spouse. Because a surviving spouse who
becomes a U.S. citizen is subject to the
estate and gift tax rules of chapter 11 and
12 that apply to U.S. citizens and resi-
dents, the Treasury Department and the
IRS believe it is appropriate that such a
surviving spouse be permitted to take into
account the DSUE amount available from
any deceased spouse as of the date such
surviving spouse becomes a U.S. citizen,
provided the deceased spouse's executor
has made the portability election. Accord-
ingly, the final regulations include such a
rule in §§ 20.2010-3 and 25.2505-2.

### 8. Effect of Portability Election on Application of Rev. Proc. 2001-38

Multiple commenters have requested
guidance on the application of Rev. Proc.
2001-38, 2001-24 IRB 1335, when an
estate makes a portability election under
section 2010(c)(5)(A) as well as an elec-
tion under section 2056(b)(7) to treat
qualified terminable interest property
(QTIP) as passing to the surviving spouse
for purposes of the marital deduction.

Rev. Proc. 2001-38 provides a proce-
dure by which the IRS will disregard and
treat as a nullity for Federal estate, gift,
and generation-skipping transfer tax pur-
poses a QTIP election made under section
2056(b)(7) in cases where the election
was not necessary to reduce the estate tax
liability to zero. The commenter notes
that, with the introduction of portability of
a deceased spouse's unused exclusion
amount, an executor may purposefully
elect both portability and QTIP treatment
and the rationale for the rule voiding the

election in Rev. Proc. 2001-38 (that the
election was of no benefit to the taxpayer)
is no longer applicable. The Treasury De-
partment and the IRS intend to provide
guidance, by publication in the Internal
Revenue Bulletin, to clarify whether a
QTIP election made under section
2056(b)(7) may be disregarded and
treated as null and void when an executor
has elected portability of the DSUE
amount under section 2010(c)(5)(A).

### 9. Incorrect Basic Exclusion Amount in Examples

A commenter noted that §§ 20.2010-3T
and 25.2505-2T include an incorrect basic
exclusion amount for the applicable year
in the examples. The final regulations cor-
rect this mistake.

### 10. Order of Credits

The NPRM requested comments on,
and reserved § 20.2010-2(c)(3) to pro-
vide guidance on, the impact of the credits
in sections 2012 through 2015 on comput-
ing the DSUE amount. One comment was
received, and advocated for a rule in com-
puting the DSUE amount that the tentative
tax is equal to the net estate tax after the
application of all available credits. The com-
menter stated that a deceased spouse's ap-
plicable credit amount should not be applied
to the extent one or more of the estate tax
credits are available to reduce the dece-
dent's estate tax.

The amount of the allowable credit in
sections 2012 through 2015 can be deter-
mined only after subtracting from the tax
imposed by section 2001 the applicable
credit amount determined under section
2010. Accordingly, to the extent the ap-
plicable credit amount is applied to reduce
the tax imposed by section 2001 to zero,
the credits in sections 2012 through 2015
are not available. The rule in section
2010(c)(4) for computing the DSUE
amount does not take into account any
unused credits arising under sections 2012
through 2015. Based on these consider-
ations, the Treasury Department and the
IRS conclude that no adjustment to the
computation of the DSUE amount to ac-
count for any unused credits is warranted.
Accordingly, § 20.2010-2(c)(3) of the fi-
nal regulations clarifies that eligibility for

credits against the tax imposed by section
2001 does not factor into the computation
of the DSUE amount.

## Special Analyses

It has been determined that these final
regulations are not a significant regulatory
action as defined in Executive Order
12866, as supplemented by Executive Or-
der 13563. Therefore, a regulatory flexi-
bility 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
final regulations. It is hereby certified that
the collection of information contained in
this regulation will not have a significant
economic impact on a substantial number
of small entities. This certification is
based on the fact that these regulations
primarily affect estates of a decedent
which generally are not small entities un-
der the Act. Thus, we do not expect a
substantial number of small entities to be
affected. Therefore, a Regulatory Flexibil-
ity Analysis under the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) is not re-
quired. Pursuant to section 7805(f) of the
Code, the 2012 temporary regulations, as
well as the cross-referencing notice of
proposed rulemaking preceding these final
regulations, were submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on their
impact on small entities, and no comments
were received.

## Statement of Availability for Documents Published in the Internal Revenue Bulletin

For copies of recently issued revenue
procedures, revenue rulings, notices, and
other guidance published in the Internal
Revenue Bulletin or Cumulative Bulletin,
please visit the IRS Web site at http://
www.irs.gov.

## Drafting Information

The principal author of these final reg-
ulations is Karlene Lesho, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). Other personnel
from the IRS and the Treasury Depart-
ment participated in their development.

## List of Subjects

### Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 20, 25, and
602 are amended as follows:

PART 20-ESTATE TAX; ESTATE
OF DECEDENTS DYING AFTER
AUGUST 16, 1954

Paragraph 1. The authority citation for
part 20 is amended by removing the en-
tries for §§ 20.2010-0T, 20.2010-1T,
20.2010-2T, and 20.2010-3T and adding
entries in numerical order to read in part
as follows:

Authority: 26 U.S.C. 7805.

Section 20.2010-0 also issued under
26 U.S.C. 2010(c)(6).

Section 20.2010-1 also issued under

26 U.S.C. 2010(c)(6).
Section 20.2010-2 also issued under
26 U.S.C. 2010(c)(6).
Section 20.2010-3 also issued under
26 U.S.C. 2010(c)(6).
* * * * *

Par. 2. Section 20.2001-2 is added to
read as follows:

§ 20.2001-2 Valuation of adjusted
taxable gifts for purposes of determining
the deceased spousal unused exclusion
amount of last deceased spouse.

(a) General rule. Notwithstanding
§ 20.2001-1(b), §§ 20.2010-2(d) and
20.2010-3(d) provide additional rules re-
garding the authority of the Internal Rev-
enue Service to examine any gift or other
tax return(s), even if the time within
which a tax may be assessed under section
6501 has expired, for the purpose of de-
termining the deceased spousal unused
exclusion amount available under section
2010(c) of the Internal Revenue Code.

(b) Effective/applicability date. Para-
graph (a) of this section applies to the
estates of decedents dying on or after June
12, 2015. See 26 CFR 20.2001-2T(a), as
contained in 26 CFR part 20, revised as of
April 1, 2015, for the rules applicable to
estates of decedents dying on or after Jan-
uary 1, 2011, and before June 12, 2015.

§ 20.2001-2T [Removed]

Par. 3. Section 20.2001-2T is re-
moved.

Par. 4. Section 20.2010-0 is added to
read as follows:

§ 20.2010-0 Table of contents.

This section lists the table of contents
for §§ 20.2010-1 through 20.2010-3.

§ 20.2010-1 Unified credit against
estate tax; in general.

(a) General rule.

(b) Special rule in case of certain gifts
made before 1977.

(d) Explanation of terms.

(1) Applicable credit amount.

(2) Applicable exclusion amount.

(3) Basic exclusion amount.

(4) Deceased spousal unused exclusion

(DSUE) amount.

(5) Last deceased spouse.

(e) Effective/applicability date.

§ 20.2010-2 Portability provisions
applicable to estate of a decedent
survived by a spouse.

(a) Election required for portability.

(1) Timely filing required.

(2) Portability election upon filing of
estate tax return.

(3) Portability election not made; re-
quirements for election not to apply.

(4) Election irrevocable.

(5) Estates eligible to make the election.

(6) Persons permitted to make the
election.

(7) Requirements of return.

(b) Requirement for DSUE computa-
tion on estate tax return.

(1) General rule.

(2) Special rule to consider gift taxes
paid by decedent.

(3) Impact of applicable credits.

(4) Special rule in case of property
passing to qualified domestic trust.

(5) Examples.

(d) Authority to examine returns of de-
cedent.

(e) Effective/applicability date.

§ 20.2010-3 Portability provisions
applicable to the surviving spouse's
estate.

(a) Surviving spouse's estate limited to
DSUE amount of last deceased spouse.

(1) In general.

(2) No DSUE amount available from
last deceased spouse.

(3) Identity of last deceased spouse
unchanged by subsequent marriage or
divorce.

(b) Special rule in case of multiple
deceased spouses and previously-applied
DSUE amount.

(1) In general.

(2) Example.

(1) General rule.

(2) Exception when surviving spouse
not a U.S. citizen on date of deceased
spouse's death.

(3) Special rule when property passes
to surviving spouse in a qualified domes-
tic trust.

(d) Authority to examine returns of de-
ceased spouses.

(e) Availability of DSUE amount for
estates of nonresidents who are not citi-
zens.

(f) Effective/applicability date.

# § 20.2010-0T [Removed]

Par. 5. Section 20.2010-0T is removed.

Par. 6. Section 20.2010-1 is added to
read as follows:

§ 20.2010-1 Unified credit against
estate tax; in general.

(a) General rule. Section 2010(a) al-
lows the estate of every decedent a credit
against the estate tax imposed by section
2001. The allowable credit is the applica-
ble credit amount. See paragraph (d)(1) of
this section for an explanation of the term
applicable credit amount.

(b) Special rule in case of certain gifts
made before 1977. The applicable credit
amount allowable under paragraph (a) of
this section must be reduced by an amount
equal to 20 percent of the aggregate
amount allowed as a specific exemption
under section 2521 (as in effect before its
repeal by the Tax Reform Act of 1976) for

gifts made by the decedent after Septem-
ber 8, 1976, and before January 1, 1977.

(c) Credit limitation. The applicable
credit amount allowed under paragraph
(a) of this section cannot exceed the
amount of the estate tax imposed by sec-
tion 2001.

(d) Explanation of terms. The explana-
tion of terms in this section applies to this
section and to §§ 20.2010-2 and 20.2010-3.

(1) Applicable credit amount. The term
applicable credit amount refers to the al-
lowable credit against estate tax imposed
by section 2001 and gift tax imposed by
section 2501. The applicable credit
amount equals the amount of the tentative
tax that would be determined under sec-
tion 2001(c) if the amount on which such
tentative tax is to be computed were equal
to the applicable exclusion amount. The
applicable credit amount is determined by
applying the unified rate schedule in sec-
tion 2001(c) to the applicable exclusion
amount.

(2) Applicable exclusion amount. The
applicable exclusion amount equals the
sum of the basic exclusion amount and, in
the case of a surviving spouse, the de-
ceased spousal unused exclusion (DSUE)
amount.

(3) Basic exclusion amount. The basic
exclusion amount is the sum of-

(i) For any decedent dying in calendar
year 2011, $5,000,000; and

(ii) For any decedent dying after calen-
dar year 2011, $5,000,000 multiplied by
the cost-of-living adjustment determined
under section 1(f)(3) for that calendar year
by substituting "calendar year 2010" for
"calendar year 1992" in section 1(f)(3)(B)
and by rounding to the nearest multiple of
$10,000.

(4) Deceased spousal unused exclusion
(DSUE) amount. The term DSUE amount
refers, generally, to the unused portion of
a decedent's applicable exclusion amount
to the extent this amount does not exceed
the basic exclusion amount in effect in the
year of the decedent's death. For the rules
on computing the DSUE amount, see
§§ 20.2010-2(c) and 20.2010-3(b).

(5) Last deceased spouse. The term last
deceased spouse means the most recently
deceased individual who, at that individ-
ual's death after December 31, 2010, was
married to the surviving spouse. See
§§ 20.2010-3(a) and 25.2505-2(a) for ad-

ditional rules pertaining to the identity of
the last deceased spouse for purposes of
determining the applicable exclusion
amount of the surviving spouse.

(e) Effective/applicability date. This
section applies to the estates of decedents
dying on or after June 12, 2015. See 26
CFR 20.2010-1T, as contained in 26 CFR
part 20, revised as of April 1, 2015, for the
rules applicable to estates of decedents
dying on or after January 1, 2011, and Jun
e 12, 2015.

## § 20.2010-1T [Removed]

Par. 7. Section 20.2010-1T is removed.

Par. 8. Section 20.2010-2 is added to
read as follows:

§ 20.2010-2 Portability provisions
applicable to estate of a decedent
survived by a spouse.

(a) Election required for portability.
To allow a decedent's surviving spouse to
take into account that decedent's deceased
spousal unused exclusion (DSUE)
amount, the executor of the decedent's
estate must elect portability of the DSUE
amount on a timely filed Form 706,
"United States Estate (and Generation-
Skipping Transfer) Tax Return" (estate
tax return). This election is referred to in
this section and in § 20.2010-3 as the
portability election.

(1) Timely filing required. An estate
that elects portability will be considered,
for purposes of subtitle B and subtitle F of
the Internal Revenue Code (Code), to be
required to file a return under section
6018(a). Accordingly, the due date of an
estate tax return required to elect portabil-
ity is nine months after the decedent's
date of death or the last day of the period
covered by an extension (if an extension
of time for filing has been obtained). See
§§ 20.6075-1 and 20.6081-1 for addi-
tional rules relating to the time for filing
estate tax returns. An extension of time to
elect portability under this paragraph (a)
will not be granted under § 301.9100-3 of
this chapter to an estate that is required to
file an estate tax return under section
6018(a), as determined without regard to
this paragraph (a). Such an extension,
however, may be available under the pro-
cedures applicable under §§ 301.9100-1
and 301.9100-3 of this chapter to an es-

tate that is not required to file a return
under section 6018(a), as determined
without regard to this paragraph (a).

(2) Portability election upon filing of
estate tax return. Upon the timely filing of
a complete and properly prepared estate
tax return, an executor of an estate of a
decedent survived by a spouse will have
elected portability of the decedent's
DSUE amount unless the executor
chooses not to elect portability and satis-
fies the requirement in paragraph (a)(3)(i)
of this section. See paragraph (a)(7) of this
section for the return requirements related
to the portability election.

(3) Portability election not made; re-
quirements for election not to apply. The
executor of the estate of a decedent sur-
vived by a spouse will not make or be
considered to make the portability elec-
tion if either of the following applies:

(i) The executor states affirmatively on
a timely filed estate tax return, or in an
attachment to that estate tax return, that
the estate is not electing portability under
section 2010(c)(5). The manner in which
the executor may make this affirmative
statement on the estate tax return is as set
forth in the instructions issued with re-
spect to such form ("Instructions for Form
706").

(ii) The executor does not timely file an
estate tax return in accordance with para-
graph (a)(1) of this section.

(4) Election irrevocable. An executor
of the estate of a decedent survived by a
spouse who timely files an estate tax re-
turn may make or may supersede a porta-
bility election previously made, provided
that the estate tax return reporting the
election or the superseding election is
filed on or before the due date of the
return, including extensions actually
granted. However, see paragraph (a)(6) of
this section when contrary elections are
made by more than one person permitted
to make the election. The portability elec-
tion, once made, becomes irrevocable
once the due date of the estate tax return,
including extensions actually granted, has
passed.

(5) Estates eligible to make the elec-
tion. An executor may elect portability on
behalf of the estate of a decedent survived
by a spouse if the decedent dies on or after
January 1, 2011. However, an executor of
the estate of a nonresident decedent who

was not a citizen of the United States at
the time of death may not elect portability
on behalf of that decedent, and the timely
filing of such a decedent's estate tax re-
turn will not constitute the making of a
portability election.

(6) Persons permitted to make the elec-
tion-(i) Appointed executor. An executor
or administrator of the estate of a decedent
survived by a spouse that is appointed,
qualified, and acting within the United
States, within the meaning of section 2203
(an appointed executor), may timely file
the estate tax return on behalf of the estate
of the decedent and, in so doing, elect
portability of the decedent's DSUE
amount. An appointed executor also may
elect not to have portability apply pursu-
ant to paragraph (a)(3) of this section.

(ii) Non-appointed executor. If there is
no appointed executor, any person in ac-
tual or constructive possession of any
property of the decedent (a non-appointed
executor) may timely file the estate tax
return on behalf of the estate of the dece-
dent and, in so doing, elect portability of
the decedent's DSUE amount, or, by com-
plying with paragraph (a)(3) of this sec-
tion, may elect not to have portability
apply. A portability election made by a
non-appointed executor when there is no
appointed executor for that decedent's es-
tate can be superseded by a subsequent
contrary election made by an appointed
executor of that same decedent's estate on
an estate tax return filed on or before the
due date of the return, including exten-
sions actually granted. An election to al-
low portability made by a non-appointed
executor cannot be superseded by a con-
trary election to have portability not apply
made by another non-appointed executor
of that same decedent's estate (unless
such other non-appointed executor is the
successor of the non-appointed executor
who made the election). See § 20.6018-2
for additional rules relating to persons
permitted to file the estate tax return.

(7) Requirements of return-(i) Gen-
eral rule. An estate tax return will be
considered complete and properly pre-
pared for purposes of this section if it is
prepared in accordance with the instruc-
tions issued for the estate tax return (In-
structions for Form 706) and if the re-
quirements of §§ 20.6018-2, 20.6018-3,
and 20.6018-4 are satisfied. However,

see paragraph (a)(7)(ii) of this section for
reduced requirements applicable to certain
property of certain estates.

(ii) Reporting of value not required for
certain property-(A) In general. A spe-
cial rule applies with respect to certain
property of estates in which the executor
is not required to file an estate tax return
under section 6018(a), as determined
without regard to paragraph (a)(1) of this
section. With respect to such an estate, for
bequests, devises, or transfers of property
included in the gross estate, the value of
which is deductible under section 2056 or
2056A (marital deduction property) or un-
der section 2055(a) (charitable deduction
property), an executor is not required to
report a value for such property on the
estate tax return (except to the extent pro-
vided in this paragraph (a)(7)(ii)(A)) and
will be required to report only the descrip-
tion, ownership, and/or beneficiary of
such property, along with all other infor-
mation necessary to establish the right of
the estate to the deduction in accordance
with §§ 20.2056(a)-1(b)(i) through (iii)
and 20.2055-1(c), as applicable. How-
ever, this rule does not apply in certain
circumstances as provided in this para-
graph (a) and as may be further described
in guidance issued from time to time by
publication in the Internal Revenue Bul-
letin (see § 601.601(d)(2)(ii)(b) of this
chapter). In particular, this rule does not
apply to marital deduction property or
charitable deduction property if-

(1) The value of such property relates
to, affects, or is needed to determine, the
value passing from the decedent to a re-
cipient other than the recipient of the mar-
ital or charitable deduction property;

(2) The value of such property is
needed to determine the estate's eligibility
for the provisions of sections 2032,
2032A, or another estate or generation-
skipping transfer tax provision of the
Code for which the value of such property
or the value of the gross estate or adjusted
gross estate must be known (not including
section 1014 of the Code);

(3) Less than the entire value of an
interest in property includible in the dece-
dent's gross estate is marital deduction
property or charitable deduction property; or
(4) A partial disclaimer or partial qual-
ified terminable interest property (QTIP)
election is made with respect to a bequest,

devise, or transfer of property includible
in the gross estate, part of which is marital
deduction property or charitable deduc-
tion property.

(B) Return requirements when report-
ing of value not required for certain prop-
erty. Paragraph (a)(7)(ii)(A) of this sec-
tion applies only if the executor exercises
due diligence to estimate the fair market
value of the gross estate, including the prop-
erty described in paragraph (a)(7)(ii)(A) of
this section. Using the executor's best esti-
mate of the value of properties to which
paragraph (a)(7)(ii)(A) of this section ap-
plies, the executor must report on the estate
tax return, under penalties of perjury, the
amount corresponding to the particular
range within which falls the executor's best
estimate of the total gross estate, in accor-
dance with the Instructions for Form 706.

(C) Examples. The following examples
illustrate the application of paragraph
(a)(7)(ii) of this section. In each example,
assume that Husband (H) dies in 2015,
survived by his wife (W), that both H and
W are U.S. citizens, that H's gross estate
does not exceed the excess of the applica-
ble exclusion amount for the year of his
death over the total amount of H's ad-
justed taxable gifts and any specific ex-
emption under section 2521, and that H's
executor (E) timely files Form 706 solely
to make the portability election.

Example 1. (i) Facts. The assets includible in H's
gross estate consist of a parcel of real property and
bank accounts held jointly with W with rights of
survivorship, a life insurance policy payable to W,
and a survivor annuity payable to W for her life. H
made no taxable gifts during his lifetime.

(ii) Application. E files an estate tax return on
which these assets are identified on the proper sched-
ule, but E provides no information on the return with
regard to the date of death value of these assets in
accordance with paragraph (a)(7)(ii)(A) of this sec-
tion. To establish the estate's entitlement to the mar-
ital deduction in accordance with § 20.2056(a)-1(b)
(except with regard to establishing the value of the
property) and the instructions for the estate tax re-
turn, E includes with the estate tax return evidence to
verify the title of each jointly held asset, to confirm
that W is the sole beneficiary of both the life insur-
ance policy and the survivor annuity, and to verify
that the annuity is exclusively for W's life. Finally, E
reports on the estate return E's best estimate, deter-
mined by exercising due diligence, of the fair market
value of the gross estate in accordance with para-
graph (a)(7)(ii)(B) of this section. The estate tax
return is considered complete and properly prepared
and E has elected portability.

Example 2. (i) Facts. H's will, duly admitted to
probate and not subject to any proceeding to chal-
lenge its validity, provides that H's entire estate is to

be distributed outright to W. The non-probate assets
includible in H's gross estate consist of a life insur-
ance policy payable to H's children from a prior
marriage, and H's individual retirement account
(IRA) payable to W. H made no taxable gifts during
his lifetime.

(ii) Application. E files an estate tax return on
which all of the assets includible in the gross estate
are identified on the proper schedule. In the case of
the probate assets and the IRA, no information is
provided with regard to date of death value in ac-
cordance with paragraph (a)(7)(ii)(A) of this section.
However, E attaches a copy of H's will and describes
each such asset and its ownership to establish the
estate's entitlement to the marital deduction in ac-
cordance with the instructions for the estate tax re-
turn and § 20.2056(a)-1(b) (except with regard to
establishing the value of the property). In the case of
the life insurance policy payable to H's children, all
of the regular return requirements, including report-
ing and establishing the fair market value of such
asset, apply. Finally, E reports on the estate return
E's best estimate, determined by exercising due dil-
igence, of the fair market value of the gross estate in
accordance with paragraph (a)(7)(ii)(B) of this sec-
tion. The estate tax return is considered complete and
properly prepared and E has elected portability.

Example 3. (i) Facts. H's will, duly admitted to
probate and not subject to any proceeding to chal-
lenge its validity, provides that 50 percent of the
property passing under the terms of H's will is to be
paid to a marital trust for W and 50 percent is to be
paid to a trust for W and their descendants.

(ii) Application. The amount passing to the non-
marital trust cannot be verified without knowledge of
the full value of the property passing under the will.
Therefore, the value of the property of the marital
trust relates to or affects the value passing to the trust
for W and the descendants of H and W. Accordingly,
the general return requirements apply to all of the
property includible in the gross estate and the pro-
visions of paragraph (a)(7)(ii) of this section do not
apply.

(b) Requirement for DSUE computa-
tion on estate tax return. Section
2010(c)(5)(A) requires an executor of a
decedent's estate to include a computation
of the DSUE amount on the estate tax
return to elect portability and thereby al-
low the decedent's surviving spouse to
take into account that decedent's DSUE
amount. This requirement is satisfied by
the timely filing of a complete and prop-
erly prepared estate tax return, as long as
the executor has not elected out of porta-
bility as described in paragraph(a)(3)(i) of
this section. See paragraph (a)(7) of this
section for the requirements for a return to
be considered complete and properly pre-
pared.

(c) Computation of the DSUE
amount-(1) General rule. Subject to
paragraphs (c)(2) through (4) of this sec-
tion, the DSUE amount of a decedent with

a surviving spouse is the lesser of the
following amounts-

(i) The basic exclusion amount in ef-
fect in the year of the death of the dece-
dent; or

(ii) The excess of-

(A) The decedent's applicable exclu-
sion amount; over

(B) The sum of the amount of the tax-
able estate and the amount of the adjusted
taxable gifts of the decedent, which to-
gether is the amount on which the tenta-
tive tax on the decedent's estate is deter-
mined under section 2001(b)(1).

(2) Special rule to consider gift taxes
paid by decedent. Solely for purposes of
computing the decedent's DSUE amount,
the amount of the adjusted taxable gifts of
the decedent referred to in paragraph
(c)(1)(ii)(B) of this section is reduced by
the amount, if any, on which gift taxes
were paid for the calendar year of the
gift(s).

(3) Impact of applicable credits. An
estate's eligibility under sections 2012
through 2015 for credits against the tax
imposed by section 2001 does not impact
the computation of the DSUE amount.

(4) Special rule in case of property
passing to qualified domestic trust-(i) In
general. When property passes for the
benefit of a surviving spouse in a qualified
domestic trust (QDOT) as defined in sec-
tion 2056A(a), the DSUE amount of the
decedent is computed on the decedent's
estate tax return for the purpose of elect-
ing portability in the same manner as this
amount is computed under paragraph
(c)(1) of this section, but this DSUE
amount is subject to subsequent adjust-
ments. The DSUE amount of the decedent
must be redetermined upon the occurrence
of the final distribution or other event
(generally, the termination of all QDOTs
created by or funded with assets passing
from the decedent or the death of the
surviving spouse) on which estate tax is
imposed under section 2056A. See
§ 20.2056A-6 for the rules on determin-
ing the estate tax under section 2056A.
See § 20.2010-3(c)(3) regarding the tim-
ing of the availability of the decedent's
DSUE amount to the surviving spouse.

(ii) Surviving spouse becomes a U.S.
citizen. If the surviving spouse becomes a
U.S. citizen and if the requirements of
section 2056A(b)(12) and the correspond-

ing regulations are satisfied, the estate tax
imposed under section 2056A(b)(1)
ceases to apply. Accordingly, no estate tax
will be imposed under section 2056A ei-
ther on subsequent QDOT distributions or
on the property remaining in the QDOT
on the surviving spouse's death and the
decedent's DSUE amount is no longer
subject to adjustment.

(5) Examples. The following exam-
ples illustrate the application of this
paragraph (c):

Example 1. Computation of DSUE amount. (i)
Facts. In 2002, having made no prior taxable gift,
Husband (H) makes a taxable gift valued at
$1,000,000 and reports the gift on a timely filed gift
tax return. Because the amount of the gift is equal to
the applicable exclusion amount for that year
($1,000,000), $345,800 is allowed as a credit against
the tax, reducing the gift tax liability to zero. H dies
in 2015, survived by Wife (W). H and W are U.S.
citizens and neither has any prior marriage. H's
taxable estate is $1,000,000. The executor of H's
estate timely files H's estate tax return and elects
portability, thereby allowing W to benefit from H's
DSUE amount.

(ii) Application. The executor of H's estate com-
putes H's DSUE amount to be $3,430,000 (the lesser
of the $5,430,000 basic exclusion amount in 2015, or
the excess of H's $5,430,000 applicable exclusion
amount over the sum of the $1,000,000 taxable es-
tate and the $1,000,000 amount of adjusted taxable
gifts).

Example 2. Computation of DSUE amount when
gift tax paid. (i) Facts. The facts are the same as in
Example 1 of this paragraph (c)(5) except that the
value of H's taxable gift in 2002 is $2,000,000. After
application of the applicable credit amount, H owes
gift tax on $1,000,000, the amount of the gift in
excess of the applicable exclusion amount for that
year. H pays the gift tax owed on the 2002 transfer.

(ii) Application. On H's death, the executor of
H's estate computes the DSUE amount to be
$3,430,000 (the lesser of the $5,430,000 basic ex-
clusion amount in 2015, or the excess of H's
$5,430,000 applicable exclusion amount over the
sum of the $1,000,000 taxable estate and $1,000,000
of adjusted taxable gifts sheltered from tax by H's
applicable credit amount). H's adjusted taxable gifts
of $2,000,000 were reduced for purposes of this
computation by $1,000,000, the amount of taxable
gifts on which gift taxes were paid.

Example 3. Computation of DSUE amount when
QDOT created. (i) Facts. Husband (H), a U.S. citi-
zen, makes his first taxable gift in 2002, valued at
$1,000,000, and reports the gift on a timely filed gift
tax return. No gift tax is due because the applicable
exclusion amount for that year ($1,000,000) equals
the fair market value of the gift. H dies in 2015 with
a gross estate of $2,000,000. H's surviving spouse
(W) is a resident, but not a citizen, of the United
States and, under H's will, a pecuniary bequest of
$1,500,000 passes to a QDOT for the benefit of W.
H's executor timely files an estate tax return and
makes the QDOT election for the property passing to
the QDOT, and H's estate is allowed a marital de-

duction of $1,500,000 under section 2056(d) for the
value of that property. H's taxable estate is
$500,000. On H's estate tax return, H's executor
computes H's preliminary DSUE amount to be
$3,930,000 (the lesser of the $5,430,000 basic ex-
clusion amount in 2015, or the excess of H's
$5,430,000 applicable exclusion amount over the
sum of the $500,000 taxable estate and the
$1,000,000 adjusted taxable gifts). No taxable events
within the meaning of section 2056A occur during
W's lifetime with respect to the QDOT, and W
makes no taxable gifts. At all times since H's death,
W has been a U.S. resident. In 2017, W dies and the
value of the assets of the QDOT is $1,800,000.

(ii) Application. H's DSUE amount is redeter-
mined to be $2,130,000 (the lesser of the $5,430,000
basic exclusion amount in 2015, or the excess of H's
$5,430,000 applicable exclusion amount over
$3,300,000 (the sum of the $500,000 taxable estate
augmented by the $1,800,000 of QDOT assets and
the $1,000,000 adjusted taxable gifts)).

Example 4. Computation of DSUE amount when
surviving spouse with QDOT becomes a U.S. citizen.
(i) Facts. The facts are the same as in Example 3 of
this paragraph (c)(5) except that W becomes a U.S.
citizen in 2016 and dies in 2018. The U.S. Trustee of
the QDOT notifies the IRS that W has become a U.S.
citizen by timely filing a final estate tax return (Form
706-QDT). Pursuant to section 2056A(b)(12), the
estate tax under section 2056A no longer applies to
the QDOT property.

(ii) Application. Because H's DSUE amount no
longer is subject to adjustment once W becomes a
citizen of the United States, H's DSUE amount is
$3,930,000, as it was preliminarily determined as of
H's death. Upon W's death in 2018, the value of the
QDOT property is includible in W's gross estate.

(d) Authority to examine returns of de-
cedent. The IRS may examine returns of a
decedent in determining the decedent's
DSUE amount, regardless of whether the
period of limitations on assessment has
expired for that return. See § 20.2010-
3(d) for additional rules relating to the
IRS's authority to examine returns. See
also section 7602 for the IRS's authority,
when ascertaining the correctness of any
return, to examine any returns that may be
relevant or material to such inquiry.

(e) Effective/applicability date. This
section applies to the estates of decedents
dying on or after June 12, 2015. See 26
CFR 20.2010-2T, as contained in 26 CFR
part 20, revised as of April 1, 2015, for the
rule applicable to estates of decedents dy-
ing on or after January 1, 2011, and before
June 12, 2015.

## § 20.2010-2T [Removed]

Par. 9. Section 20.2010-2T is re-
moved.

Par. 10. Section 20.2010-3 is added to
read as follows:

§ 20.2010-3 Portability provisions
applicable to the surviving spouse's
estate.

(a) Surviving spouse's estate limited to
DSUE amount of last deceased spouse-
(1) In general. The deceased spousal un-
used exclusion (DSUE) amount of a de-
cedent, computed under § 20.2010-2(c),
is included in determining the surviving
spouse's applicable exclusion amount un-
der section 2010(c)(2), provided-

(i) Such decedent is the last deceased
spouse of such surviving spouse within
the meaning of § 20.2010-1(d)(5) on the
date of the death of the surviving spouse;
and

(ii) The executor of the decedent's es-
tate elected portability (see § 20.2010-
2(a) and (b) for applicable requirements).

(2) No DSUE amount available from
last deceased spouse. If the last deceased
spouse of such surviving spouse had no
DSUE amount, or if the executor of such
a decedent's estate did not make a porta-
bility election, the surviving spouse's es-
tate has no DSUE amount (except as pro-
vided in paragraph (b)(1)(ii) of this
section) to be included in determining the
applicable exclusion amount, even if the
surviving spouse previously had a DSUE
amount available from another decedent
who, prior to the death of the last deceased
spouse, was the last deceased spouse of
such surviving spouse. See paragraph (b)
of this section for a special rule in the case
of multiple deceased spouses and a previ-
ously applied DSUE amount.

(3) Identity of last deceased spouse un-
changed by subsequent marriage or di-
vorce. A decedent is the last deceased
spouse (as defined in § 20.2010-1(d)(5))
of a surviving spouse even if, on the date
of the death of the surviving spouse, the
surviving spouse is married to another
(then-living) individual. If a surviving
spouse marries again and that marriage
ends in divorce or an annulment, the sub-
sequent death of the divorced spouse does
not end the status of the prior deceased
spouse as the last deceased spouse of the
surviving spouse. The divorced spouse,
not being married to the surviving spouse
at death, is not the last deceased spouse as
that term is defined in § 20.2010-1(d)(5).

(b) Special rule in case of multiple
deceased spouses and previously-applied

DSUE amount-(1) In general. A special
rule applies to compute the DSUE amount
included in the applicable exclusion
amount of a surviving spouse who previ-
ously has applied the DSUE amount of
one or more deceased spouses to taxable
gifts in accordance with § 25.2505-2(b)
and (c). If a surviving spouse has applied
the DSUE amount of one or more (suc-
cessive) last deceased spouses to the sur-
viving spouse's transfers during life, and
if any of those last deceased spouses is
different from the surviving spouse's last
deceased spouse as defined in § 20.2010-
1(d)(5) at the time of the surviving
spouse's death, then the DSUE amount to
be included in determining the applicable
exclusion amount of the surviving spouse
at the time of the surviving spouse's death
is the sum of-

(i) The DSUE amount of the surviving
spouse's last deceased spouse as de-
scribed in paragraph (a)(1) of this section;
and

(ii) The DSUE amount of each other
deceased spouse of the surviving spouse,
to the extent that such amount was applied
to one or more taxable gifts of the surviv-
ing spouse.

(2) Example. The following example,
in which all described individuals are U.S.
citizens, illustrates the application of this
paragraph (b):

Example. (i) Facts. Husband 1 (H1) dies in 2011,
survived by Wife (W). Neither has made any taxable
gifts during Hl's lifetime. Hl's executor elects por-
tability of Hl's DSUE amount. The DSUE amount
of H1 as computed on the estate tax return filed on
behalf of Hl's estate is $5,000,000. In 2012, W
makes taxable gifts to her children valued at
$2,000,000. W reports the gifts on a timely filed gift
tax return. W is considered to have applied
$2,000,000 of H1's DSUE amount to the amount of
taxable gifts, in accordance with § 25.2505-2(c),
and, therefore, W owes no gift tax. W has an appli-
cable exclusion amount remaining in the amount of
$8,120,000 ($3,000,000 of Hl's remaining DSUE
amount plus W's own $5,120,000 basic exclusion
amount). W marries Husband 2 (H2) in 2013. H2
dies in 2014. H2's executor elects portability of H2's
DSUE amount, which is properly computed on H2's
estate tax return to be $2,000,000. W dies in 2015.

(ii) Application. The DSUE amount to be in-
cluded in determining the applicable exclusion
amount available to W's estate is $4,000,000, deter-
mined by adding the $2,000,000 DSUE amount of
H2 and the $2,000,000 DSUE amount of H1 that was
applied by W to W's 2012 taxable gifts. The
$4,000,000 DSUE amount added to W's $5,430,000
basic exclusion amount (for 2015), causes W's ap-
plicable exclusion amount to be $9,430,000.

(c) Date DSUE amount taken into con-
sideration by surviving spouse's estate-
(1) General rule. A portability election
made by an executor of a decedent's es-
tate (see § 20.2010-2(a) and (b) for ap-
plicable requirements) generally applies
as of the date of the decedent's death.
Thus, such decedent's DSUE amount is
included in the applicable exclusion
amount of the decedent's surviving
spouse under section 2010(c)(2) and will
be applicable to transfers made by the
surviving spouse after the decedent's
death (subject to the limitations in para-
graph (a) of this section). However, such
decedent's DSUE amount will not be in-
cluded in the applicable exclusion amount
of the surviving spouse, even if the sur-
viving spouse had made a transfer in reli-
ance on the availability or computation of
the decedent's DSUE amount:

(i) If the executor of the decedent's
estate supersedes the portability election
by filing a subsequent estate tax return in
accordance with § 20.2010-2(a)(4);

(ii) To the extent that the DSUE
amount subsequently is reduced by a val-
uation adjustment or the correction of an
error in calculation; or

(iii) To the extent that the surviving
spouse cannot substantiate the DSUE
amount claimed on the surviving spouse's
return.

(2) Exception when surviving spouse
not a U.S. citizen on date of deceased
spouse's death. If a surviving spouse be-
comes a citizen of the United States after
the death of the surviving spouse's last
deceased spouse, the DSUE amount of the
surviving spouse's last deceased spouse
becomes available to the surviving spouse
on the date the surviving spouse becomes
a citizen of the United States (subject to
the limitations in paragraph (a) of this
section). However, when the special rule
regarding qualified domestic trusts in
paragraph (c)(3) of this section applies,
the earliest date on which a decedent's
DSUE amount may be included in the
applicable exclusion amount of such de-
cedent's surviving spouse who becomes a
U.S. citizen is as provided in paragraph
(c)(3) of this section.

(3) Special rule when property passes
to surviving spouse in a qualified domestic
trust-(i) In general. When property
passes from a decedent for the benefit of

the decedent's surviving spouse in one or
more qualified domestic trusts (QDOT) as
defined in section 2056A(a) and the dece-
dent's executor elects portability, the
DSUE amount available to be included in
the applicable exclusion amount of the
surviving spouse under section 2010(c)(2)
is the DSUE amount of the decedent as
redetermined in accordance with
§ 20.2010-2(c)(4) (subject to the limita-
tions in paragraph (a) of this section). The
earliest date on which such decedent's
DSUE amount may be included in the
applicable exclusion amount of the sur-
viving spouse under section 2010(c)(2) is
the date of the occurrence of the final
QDOT distribution or final other event
(generally, the termination of all QDOTs
created by or funded with assets passing
from the decedent or the death of the
surviving spouse) on which tax under sec-
tion 2056A is imposed. However, the de-
cedent's DSUE amount as redetermined
in accordance with § 20.2010-2(c)(4)
may be applied to certain taxable gifts of
the surviving spouse. See § 25.2505-
2(d)(3)(i).

(ii) Surviving spouse becomes a U.S.
citizen. If a surviving spouse for whom
property has passed from a decedent in
one or more QDOTs becomes a citizen of
the United States and the requirements in
section 2056A(b)(12) and the correspond-
ing regulations are satisfied, then the date
on which such decedent's DSUE amount
may be included in the applicable exclu-
sion amount of the surviving spouse under
section 2010(c)(2) (subject the limitations
in paragraph (a) of this section) is the date
on which the surviving spouse becomes a
citizen of the United States. See
§ 20.2010-2(c)(4) for the rules for com-
puting the decedent's DSUE amount in
the case of a qualified domestic trust.

(d) Authority to examine returns of de-
ceased spouses. For the purpose of deter-
mining the DSUE amount to be included
in the applicable exclusion amount of a
surviving spouse, the Internal Revenue
Service (IRS) may examine returns of
each of the surviving spouse's deceased
spouses whose DSUE amount is claimed
to be included in the surviving spouse's
applicable exclusion amount, regardless
of whether the period of limitations on
assessment has expired for any such re-
turn. The IRS's authority to examine re-

turns of a deceased spouse applies with
respect to each transfer by the surviving
spouse to which a DSUE amount is or has
been applied. Upon examination, the IRS
may adjust or eliminate the DSUE amount
reported on such a return of a deceased
spouse; however, the IRS may assess ad-
ditional tax on that return only if that tax
is assessed within the period of limitations
on assessment under section 6501 appli-
cable to the tax shown on that return. See
also section 7602 for the IRS's authority,
when ascertaining the correctness of any
return, to examine any returns that may be
relevant or material to such inquiry. For
purposes of these examinations to deter-
mine the DSUE amount, the surviving
spouse is considered to have a material
interest that is affected by the return in-
formation of the deceased spouse within
the meaning of section 6103(e)(3).

(e) Availability of DSUE amount for
estates of nonresidents who are not citi-
zens. The estate of a nonresident surviving
spouse who is not a citizen of the United
States at the time of such surviving
spouse's death shall not take into account
the DSUE amount of any deceased spouse
of such surviving spouse within the mean-
ing of § 20.2010-1(d)(5) except to the
extent allowed under any applicable treaty
obligation of the United States. See sec-
tion 2102(b)(3).

(f) Effective/applicability date. This
section applies to the estates of decedents
dying on or after June 12, 2015. See 26
CFR 20.2010-3T, as contained in 26 CFR
part 20, revised as of April 1, 2015, for the
rules applicable to estates of decedents
dying on or after January 1, 2011, and
before June 12, 2015.

## § 20.2010-3T [Removed]

Par. 11. Section 20.2010-3T is re-
moved.

PART 25-GIFT TAX; GIFTS MADE
AFTER DECEMBER 31, 1954

Par. 12. The authority citation for part
25 is amended by adding an entry in nu-
merical order to read in part as follows:
Authority: 26 U.S.C. 7805.

Section 25.2505-2 also issued under
26 U.S.C. 2010(c)(6).

* * * * *

Par. 13. Section 25.2505-0 is added to
read as follows:

§ 25.2505-0 Table of contents.

This section lists the table of contents
for §§ 25.2505-1 and 25.2505-2.

§ 25.2505-1 Unified credit against gift
tax; in general.

(a) General rule.

(b) Applicable rate of tax.

(d) Credit limitation.

(e) Effective/applicability date.

§ 25.2505-2 Gifts made by a surviving
spouse having a DSUE amount
available.

(a) Donor who is surviving spouse is
limited to DSUE amount of last deceased
spouse.

(1) In general.

(2) No DSUE amount available from
last deceased spouse.

(3) Identity of last deceased spouse un-
changed by subsequent marriage or di-
vorce.

(b) Manner in which DSUE amount is
applied.

(1) In general.

(2) Example.

(d) Date DSUE amount taken into con-
sideration by donor who is a surviving
spouse.

(1) General rule.

(2) Exception when surviving spouse
not a U.S. citizen on date of deceased
spouse's death.

(3) Special rule when property passes
to surviving spouse in a qualified domes-
tic trust.

(e) Authority to examine returns of de-
ceased spouses.

(f) Availability of DSUE amount for
nonresidents who are not citizens.

(g) Effective/applicability date.

§ 25.2505-0T [Removed]

Par. 14. Section 25.2505-0T is re-
moved.

Par. 15. Section 25.2505-1 is added to
read as follows:

§ 25.2505-1 Unified credit against gift
tax; in general.

(a) General rule. Section 2505(a) al-
lows a citizen or resident of the United
States a credit against the tax imposed by
section 2501 for each calendar year. The
allowable credit is the applicable credit
amount in effect under section 2010(c)
that would apply if the donor died as of
the end of the calendar year, reduced by
the sum of the amounts allowable as a
credit against the gift tax due for all pre-
ceding calendar periods. See
§§ 25.2505-2, 20.2010-1, and 20.2010-2
for additional rules and definitions related
to determining the applicable credit
amount in effect under section 2010(c).

(b) Applicable rate of tax. In determin-
ing the amounts allowable as a credit
against the gift tax due for all preceding
calendar periods, the unified rate schedule
under section 2001(c) in effect for such
calendar year applies instead of the rates
of tax actually in effect for preceding cal-
endar periods. See sections 2505(a) and
2502(a)(2).

(c) Special rule in case of certain gifts
made before 1977. The applicable credit
amount allowable under paragraph (a) of
this section must be reduced by an amount
equal to 20 percent of the aggregate
amount allowed as a specific exemption
under section 2521 (as in effect before its
repeal by the Tax Reform Act of 1976) for
gifts made by the decedent after Septem-
ber 8, 1976, and before January 1, 1977.

(d) Credit limitation. The applicable
credit amount allowed under paragraph
(a) of this section for any calendar year
shall not exceed the amount of the tax
imposed by section 2501 for such calen-
dar year.

(e) Effective/applicability date. This
section applies to gifts made on or after
June 12, 2015. See 26 CFR 25.2505-1T,
as contained in 26 CFR part 25, revised as
of April 1, 2015, for the rules applicable
to gifts made on or after January 1, 2011,
and before June 12, 2015Insert.

§ 25.2505-1T [Removed]

Par. 16. Section 25.2505-1T is re-
moved.

Par. 17. Section 25.2505-2 is added to
read as follows:

§ 25.2505-2 Gifts made by a surviving
spouse having a DSUE amount
available.

(a) Donor who is surviving spouse is
limited to DSUE amount of last deceased
spouse-(1) In general. In computing a
surviving spouse's gift tax liability with
regard to a transfer subject to the tax im-
posed by section 2501 (taxable gift), a
deceased spousal unused exclusion
(DSUE) amount of a decedent, computed
under § 20.2010-2(c), is included in de-
termining the surviving spouse's applica-
ble exclusion amount under section
2010(c)(2), provided:

(i) Such decedent is the last deceased
spouse of such surviving spouse within
the meaning of § 20.2010-1(d)(5) at the
time of the surviving spouse's taxable
gift; and

(ii) The executor of the decedent's es-
tate elected portability (see § 20.2010-
2(a) and (b) for applicable requirements).

(2) No DSUE amount available from
last deceased spouse. If on the date of the
surviving spouse's taxable gift the last
deceased spouse of such surviving spouse
had no DSUE amount or if the executor of
the estate of such last deceased spouse did
not elect portability, the surviving spouse
has no DSUE amount (except as and to
the extent provided in paragraph (c)(1)(ii)
of this section) to be included in determin-
ing his or her applicable exclusion
amount, even if the surviving spouse pre-
viously had a DSUE amount available
from another decedent who, prior to the
death of the last deceased spouse, was the
last deceased spouse of such surviving
spouse. See paragraph (c) of this section
for a special rule in the case of multiple
deceased spouses.

not end the status of the prior deceased
spouse as the last deceased spouse of the
surviving spouse. The divorced spouse,
not being married to the surviving spouse
at death, is not the last deceased spouse as
that term is defined in § 20.2010-1(d)(5).

(b) Manner in which DSUE amount is
applied. If a donor who is a surviving
spouse makes a taxable gift and a DSUE
amount is included in determining the sur-
viving spouse's applicable exclusion
amount under section 2010(c)(2), such
surviving spouse will be considered to
apply such DSUE amount to the taxable
gift before the surviving spouse's own
basic exclusion amount.

(c) Special rule in case of multiple de-
ceased spouses and previously-applied
DSUE amount-(1) In general. A special
rule applies to compute the DSUE amount
included in the applicable exclusion
amount of a surviving spouse who previ-
ously has applied the DSUE amount of
one or more deceased spouses. If a sur-
viving spouse applied the DSUE amount
of one or more (successive) last deceased
spouses to the surviving spouse's previous
lifetime transfers, and if any of those last
deceased spouses is different from the sur-
viving spouse's last deceased spouse as
defined in § 20.2010-1(d)(5) at the time
of the current taxable gift by the surviving
spouse, then the DSUE amount to be in-
cluded in determining the applicable ex-
clusion amount of the surviving spouse
that will be applicable at the time of the
current taxable gift is the sum of-

(i) The DSUE amount of the surviving
spouse's last deceased spouse as de-
scribed in paragraph (a)(1) of this section;
and

(ii) The DSUE amount of each other
deceased spouse of the surviving spouse
to the extent that such amount was applied
to one or more previous taxable gifts of
the surviving spouse.

(2) Example. The following example,
in which all described individuals are U.S.
citizens, illustrates the application of this
paragraph (c):

Example. (i) Facts. Husband 1 (H1) dies in 2011,
survived by Wife (W). Neither has made any taxable
gifts during H1's lifetime. Hl's executor elects por-
tability of Hl's deceased spousal unused exclusion
(DSUE) amount. The DSUE amount of H1 as com-
puted on the estate tax return filed on behalf of Hl's
estate is $5,000,000. In 2012, W makes taxable gifts
to her children valued at $2,000,000. W reports the

gifts on a timely filed gift tax return. W is considered
to have applied $2,000,000 of H1's DSUE amount to
the 2012 taxable gifts, in accordance with paragraph
(b) of this section, and, therefore, W owes no gift
tax. W is considered to have an applicable exclusion
amount remaining in the amount of $8,120,000
($3,000,000 of H1's remaining DSUE amount plus
W's own $5,120,000 basic exclusion amount). In
2013, W marries Husband 2 (H2). H2 dies on June
30, 2015. H2's executor elects portability of H2's
DSUE amount, which is properly computed on H2's
estate tax return to be $2,000,000.

(ii) Application. The DSUE amount to be in-
cluded in determining the applicable exclusion
amount available to W for gifts during the second
half of 2015 is $4,000,000, determined by adding the
$2,000,000 DSUE amount of H2 and the $2,000,000
DSUE amount of H1 that was applied by W to W's
2012 taxable gifts. Thus, W's applicable exclusion
amount during the balance of 2015 is $9,430,000
($4,000,000 DSUE plus $5,430,000 basic exclusion
amount for 2015).

(d) Date DSUE amount taken into con-
sideration by donor who is a surviving
spouse-(1) General rule. A portability
election made by an executor of a dece-
dent's estate (see § 20.2010-2(a) and (b)
for applicable requirements) generally ap-
plies as of the date of such decedent's
death. Thus, the decedent's DSUE amount
is included in the applicable exclusion
amount of the decedent's surviving
spouse under section 2010(c)(2) and will
be applicable to transfers made by the
surviving spouse after the decedent's
death (subject to the limitations in para-
graph (a) of this section). However, such
decedent's DSUE amount will not be in-
cluded in the applicable exclusion amount
of the surviving spouse, even if the sur-
viving spouse had made a taxable gift in
reliance on the availability or computation
of the decedent's DSUE amount:

(i) If the executor of the decedent's
estate supersedes the portability election
by filing a subsequent estate tax return in
accordance with § 20.2010-2(a)(4);

(ii) To the extent that the DSUE
amount subsequently is reduced by a val-
uation adjustment or the correction of an
error in calculation; or

(iii) To the extent that the DSUE
amount claimed on the decedent's return
cannot be determined.

becomes available to the surviving spouse
on the date the surviving spouse becomes
a citizen of the United States (subject to
the limitations in paragraph (a) of this
section). However, when the special rule
regarding qualified domestic trusts in
paragraph (d)(3) of this section applies,
the earliest date on which a decedent's
DSUE amount may be included in the
applicable exclusion amount of such de-
cedent's surviving spouse who becomes a
U.S. citizen is as provided in paragraph
(d)(3) of this section.

(3) Special rule when property passes
to surviving spouse in a qualified domestic
trust-(i) In general. When property
passes from a decedent for the benefit of
the decedent's surviving spouse in one or
more qualified domestic trusts (QDOT) as
defined in section 2056A(a) and the dece-
dent's executor elects portability, the
DSUE amount available to be included in
the applicable exclusion amount of the
surviving spouse under section 2010(c)(2)
is the DSUE amount of the decedent as
redetermined in accordance with
§ 20.2010-2(c)(4) (subject to the limita-
tions in paragraph (a) of this section). The
earliest date on which such decedent's
DSUE amount may be included in the
applicable exclusion amount of the sur-
viving spouse under section 2010(c)(2) is
the date of the occurrence of the final
QDOT distribution or final other event
(generally, the termination of all QDOTs
created by or funded with assets passing
from the decedent or the death of the
surviving spouse) on which tax under sec-
tion 2056A is imposed. However, the de-
cedent's DSUE amount as redetermined
in accordance with § 20.2010-2(c)(4)
may be applied to the surviving spouse's
taxable gifts made in the year of the sur-
viving spouse's death or, if the terminat-
ing event occurs prior to the surviving
spouse's death, then in the year of that
terminating event and/or in any subse-
quent year during the surviving spouse's
life.

may be included in the applicable exclu-
sion amount of the surviving spouse under
section 2010(c)(2) (subject to the limita-
tions in paragraph (a) of this section) is
the date on which the surviving spouse
becomes a citizen of the United States.
See § 20.2010-2(c)(4) for the rules for
computing the decedent's DSUE amount
in the case of a qualified domestic trust.

(iii) Example. The following example
illustrates the application of this para-
graph (d)(3):

Example. (i) Facts. Husband (H), a U.S. citizen,
dies in 2011 having made no taxable gifts during his
lifetime. H's gross estate is $3,000,000. H's wife
(W) is not a citizen of the United States and, under
H's will, a pecuniary bequest of $2,000,000 passes to
a QDOT for the benefit of W. H's executor timely
files an estate tax return and makes the QDOT elec-
tion for the property passing to the QDOT, and H's
estate is allowed a marital deduction of $2,000,000
under section 2056(d) for the value of that property.
H's taxable estate is $1,000,000. On H's estate tax
return, H's executor computes H's preliminary
DSUE amount to be $4,000,000. No taxable events
within the meaning of section 2056A occur during
W's lifetime with respect to the QDOT, and W
resides in the United States at all times after H's
death. W makes a taxable gift of $1,000,000 to X in
2012 and a taxable gift of $1,000,000 to Y in January
2015, in each case from W's own assets rather than
from the QDOT. W dies in September 2015, not
having married again, when the value of the assets of
the QDOT is $2,200,000.

(ii) Application. H's DSUE amount is redeter-
mined to be $1,800,000 (the lesser of the $5,000,000
basic exclusion amount for 2011, or the excess of
H's $5,000,000 applicable exclusion amount over
$3,200,000 (the sum of the $1,000,000 taxable estate
augmented by the $2,200,000 of QDOT assets)). On
W's gift tax return filed for 2012, W cannot apply
any DSUE amount to the gift made to X. However,
because W's gift to Y was made in the year that W
died, W's executor will apply $1,000,000 of H's
redetermined DSUE amount to the gift on W's gift
tax return filed for 2015. The remaining $800,000 of
H's redetermined DSUE amount is included in W's
applicable exclusion amount to be used in computing
W's estate tax liability.

(e) Authority to examine returns of de-
ceased spouses. For the purpose of deter-

mining the DSUE amount to be included
in the applicable exclusion amount of a
surviving spouse, the Internal Revenue
Service (IRS) may examine returns of
each of the surviving spouse's deceased
spouses whose DSUE amount is claimed
to be included in the surviving spouse's
applicable exclusion amount, regardless
of whether the period of limitations on
assessment has expired for any such re-
turn. The IRS's authority to examine re-
turns of a deceased spouse applies with
respect to each transfer by the surviving
spouse to which a DSUE amount is or has
been applied. Upon examination, the IRS
may adjust or eliminate the DSUE amount
reported on such a return of a deceased
spouse; however, the IRS may assess ad-
ditional tax on that return only if that tax
is assessed within the period of limitations
on assessment under section 6501 appli-
cable to the tax shown on that return. See
also section 7602 for the IRS's authority,
when ascertaining the correctness of any
return, to examine any returns that may be
relevant or material to such inquiry.

(f) Availability of DSUE amount for
nonresidents who are not citizens. A non-
resident surviving spouse who was not a
citizen of the United States at the time of
making a transfer subject to tax under
chapter 12 of the Internal Revenue Code
shall not take into account the DSUE
amount of any deceased spouse except to
the extent allowed under any applicable
treaty obligation of the United States. See
section 2102(b)(3).

(g) Effective/applicability date. This
section applies to gifts made on or after
June 12, 2015. See 26 CFR 25.2505-2T,
as contained in 26 CFR part 25, revised as
of April 1, 2015, for the rules applicable
to gifts made on or after January 1, 2011,
and before June 12, 2015.

## § 25.2505-2T [Removed]

Par. 18. Section 25.2505-2T is re-
moved.

PART 602-OMB CONTROL
NUMBERS UNDER THE
PAPERWORK REDUCTION ACT

Par. 19. The authority citation for part
602 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 20. In § 602.101, paragraph (b) is
amended by:

1\. Removing the entry for 20.2010-2T.

2\. Adding in numerical order an entry
for 20.2010-2.

The addition reads as follows:

§ 602.101 OMB Control numbers.

* * * * *

(b) * * *

CFR part or section
where identified
and described
* * * * * * *

Current OMB
control No.

20.2010-2.
1545-0015

* * * * * * *

John M. Dalrymple,
Deputy Commissioner for
Services and Enforcement.

Approved June 8, 2015.

Mark J. Mazur,
Assistant Secretary of
Treasury (Tax Policy).

(Filed by the Office of the Federal Register on June 12,
2015, 4:15 p.m., and published in the issue of the Federal
Register for June 16, 2015, 80 F.R. 34279)

# Part III. Administrative, Procedural, and Miscellaneous

## Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

### Notice 2015-42

This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used un-
der § 417(e)(3), and the 24-month average
segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the interest
rate on 30-year Treasury securities under
§ 417(e)(3)(A)(ii)(II) as in effect for plan
years beginning before 2008 and the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I). The rates in
this notice reflect the application of
§ 430(h)(2)(C)(iv), which was added by
the Moving Ahead for Progress in the
21st Century Act, Public Law 112-141
(MAP-21) and amended by section
2003 of the Highway and Transportation
Funding Act of 2014, Public Law 113-
159 (HATFA).

### YIELD CURVE AND SEGMENT RATES

Generally, except for certain plans un-
der sections 104 and 105 of the Pension
Protection Act of 2006 and CSEC plans
under § 414(y), § 430 of the Code speci-
fies the minimum funding requirements
that apply to single-employer plans pursu-
ant to § 412. Section 430(h)(2) specifies
the interest rates that must be used to
determine a plan's target normal cost
and funding target. Under this provi-

sion, present value is generally deter-
mined using three 24-month average inter-
est rates ("segment rates"), each of which
applies to cash flows during specified peri-
ods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates are
adjusted by the applicable percentage of
the 25-year average segment rates for the
period ending September 30 of the year
preceding the calendar year in which the
plan year begins. However, an election
may be made under § 430(h)(2)(D)(ii) to
use the monthly yield curve in place of the
segment rates.

Notice 2007-81, 2007-44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond
segment rates used to compute the target
normal cost and the funding target. Con-
sistent with the methodology specified
in Notice 2007-81, the monthly corpo-
rate bond yield curve derived from May
2015 data is in Table I at the end of this
notice. The spot first, second, and third
segment rates for the month of May
2015 are, respectively, 1.38, 3.88, and
4.98.

The 24-month average segment rates
determined under § 430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) by the applicable per-
centage of the corresponding 25-year av-
erage segment rates. Section 2003(a) of
HATFA amended the applicable percent-
ages under § 430(h)(2)(C)(iv). This
change generally applies to plan years be-
ginning on or after January 1, 2013. How-
ever, pursuant to section 2003(e)(2) of
HATFA, a plan sponsor can elect not to
have the amendments made to the appli-
cable percentages by section 2003 of

HATFA apply to any plan year beginning
in 2013. These elections can be made ei-
ther for all purposes or, alternatively, for
purposes of determining the adjusted
funding target attainment percentage un-
der § 436. The 25-year average segment
rates for plan years beginning in 2012,
2013, 2014 and 2015 were published in
Notice 2012-55, 2012-36 I.R.B. 332, No-
tice 2013-11, 2013-11 I.R.B. 610, Notice
2013-58, 2013-40 I.R.B. 294, and Notice
2014-50, 2014-40 I.R.B. 590, respec-
tively.

For plan years beginning in years 2012
through 2017, pursuant to the changes
made by HATFA, the applicable mini-
mum percentage is 90% and the applica-
ble maximum percentage is 110%. These
applicable percentages are referred to as
HATFA applicable percentages. As de-
scribed in the preceding paragraph, a
special election is available for any plan
year beginning in 2013 under which this
change made by HATFA can be disre-
garded for all purposes or for limited
purposes. To the extent such an election
is made, the applicable minimum per-
centage for a plan year beginning in
2013 is 85% and the applicable maxi-
mum percentage for that plan year is
115%. These applicable percentages are
referred to as MAP-21 applicable per-
centages.

# 24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate
bond segment rates applicable for June
2015 without adjustment for the 25-year
average segment rate limits are as follows:

Applicable Month

First Segment

Second Segment

Third Segment

June 2015

1.30

4.07

5.11

Based on § 430(h)(2)(C)(iv) as amended by section 2003 of HATFA, the 24-month averages applicable for June 2015 adjusted
for the HATFA applicable percentages of the corresponding 25-year average segment rates, are as follows:

For Plan Years Beginning In

Adjusted 24-Month Average Segment Rates, Based on the HATFA Applicable Percentage of 25-Year Average Rates

Applicable Month

First Segment

Second Segment

Third Segment

2014

June

2015

4.99

6.32

6.99

2015

June

2015

4.72

6.11

6.81

# 30-YEAR TREASURY SECURITIES INTEREST RATES

Generally for plan years beginning af-
ter 2007, § 431 specifies the minimum
funding requirements that apply to mul-
tiemployer plans pursuant to § 412. Sec-
tion 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation de-
scribed in § 431(c)(6)(A), based on the plan's
current liability. Section 431(c)(6)(E)(ii)(I)
provides that the interest rate used to cal-
culate current liability for this purpose

must be no more than 5 percent above and
no more than 10 percent below the
weighted average of the rates of interest
on 30-year Treasury securities during the
four-year period ending on the last day
before the beginning of the plan year.
Notice 88-73, 1988-2 C.B. 383, provides
guidelines for determining the weighted
average interest rate. The rate of interest
on 30-year Treasury securities for May
2015 is 2.96 percent. The Service deter-
mined this rate as the average of the daily
determinations of yield on the 30-year

Treasury bond maturing in February 2045
determined each day through May 13,
2015, and the yield on the 30-year Trea-
sury bond maturing in May 2045 deter-
mined each day for the balance of the
month. For plan years beginning in the
month shown below, the weighted aver-
age of the rates of interest on 30-year
Treasury securities and the permissible
range of rate used to calculate current
liability are as follows:

For Plan Years Beginning in

30-Year Treasury Weighted Average

Permissible Range

Month

Year

90%

105%

June

2015

3.19

2.87

3.35

# MINIMUM PRESENT VALUE SEGMENT RATES

In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates

computed without regard to a 24-month
average. Notice 2007-81 provides guide-
lines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value seg-

ment rates determined for May 2015 are
as follows:

First Segment

Second Segment

Third Segment

1.38

3.88

4.98

# DRAFTING INFORMATION

The principal author of this notice is
Tom Morgan of the Office of the Associ-
ate Chief Counsel (Tax Exempt and Gov-

ernment Entities). However, other person-
nel from the IRS participated in the
development of this guidance. For further
information regarding this notice, contact
Mr. Morgan at 202-317-6391 or Tony

Montanaro at 202-317-8698 (not a toll-
free number).

# Table I Monthly Yield Curve for May 2015 Derived from May 2015 Data

Maturity

Yield

Maturity

Yield

Maturity

Yield

Maturity

Yield

Maturity

Yield

0.5

0.32

20.5

4.64

40.5

5.03

60.5

5.16

80.5

5.23

1.0

0.62

21.0

4.66

41.0

5.03

61.0

5.16

81.0

5.23

1.5

0.90

21.5

4.68

41.5

5.03

61.5

5.16

81.5

5.23

2.0

1.15

22.0

4.69

42.0

5.04

62.0

5.17

82.0

5.23

2.5

1.36

22.5

4.71

42.5

5.04

62.5

5.17

82.5

5.23

3.0

1.55

23.0

4.72

43.0

5.05

63.0

5.17

83.0

5.23

3.5

1.73

23.5

4.74

43.5

5.05

63.5

5.17

83.5

5.23

4.0

1.90

24.0

4.75

44.0

5.06

64.0

5.17

84.0

5.23

4.5

2.06

24.5

4.77

44.5

5.06

64.5

5.18

84.5

5.24

5.0

2.22

25.0

4.78

45.0

5.07

65.0

5.18

85.0

5.24

5.5

2.39

25.5

4.79

45.5

5.07

65.5

5.18

85.5

5.24

6.0

2.55

26.0

4.80

46.0

5.07

66.0

5.18

86.0

5.24

6.5

2.70

26.5

4.81

46.5

5.08

66.5

5.18

86.5

5.24

7.0

2.85

27.0

4.82

47.0

5.08

67.0

5.19

87.0

5.24

7.5

3.00

27.5

4.83

47.5

5.08

67.5

5.19

87.5

5.24

8.0

3.14

28.0

4.85

48.0

5.09

68.0

5.19

88.0

5.24

8.5

3.28

28.5

4.86

48.5

5.09

68.5

5.19

88.5

5.24

9.0

3.40

29.0

4.87

49.0

5.10

69.0

5.19

89.0

5.25

9.5

3.52

29.5

4.87

49.5

5.10

69.5

5.19

89.5

5.25

10.0

3.63

30.0

4.88

50.0

5.10

70.0

5.20

90.0

5.25

10.5

3.73

30.5

4.89

50.5

5.11

70.5

5.20

90.5

5.25

11.0

3.83

31.0

4.90

51.0

5.11

71.0

5.20

91.0

5.25

11.5

3.91

31.5

4.91

51.5

5.11

71.5

5.20

91.5

5.25

12.0

3.99

32.0

4.92

52.0

5.11

72.0

5.20

92.0

5.25

12.5

4.07

32.5

4.93

52.5

5.12

72.5

5.20

92.5

5.25

13.0

4.13

33.0

4.93

53.0

5.12

73.0

5.21

93.0

5.25

13.5

4.19

33.5

4.94

53.5

5.12

73.5

5.21

93.5

5.25

14.0

4.25

34.0

4.95

54.0

5.13

74.0

5.21

94.0

5.26

14.5

4.29

34.5

4.95

54.5

5.13

74.5

5.21

94.5

5.26

15.0

4.34

35.0

4.96

55.0

5.13

75.0

5.21

95.0

5.26

15.5

4.38

35.5

4.97

55.5

5.13

75.5

5.21

95.5

5.26

16.0

4.42

36.0

4.97

56.0

5.14

76.0

5.21

96.0

5.26

16.5

4.45

36.5

4.98

56.5

5.14

76.5

5.22

96.5

5.26

17.0

4.48

37.0

4.99

57.0

5.14

77.0

5.22

97.0

5.26

17.5

4.51

37.5

4.99

57.5

5.14

77.5

5.22

97.5

5.26

18.0

4.54

38.0

5.00

58.0

5.15

78.0

5.22

98.0

5.26

18.5

4.56

38.5

5.00

58.5

5.15

78.5

5.22

98.5

5.26

19.0

4.58

39.0

5.01

59.0

5.15

79.0

5.22

99.0

5.26

19.5

4.61

39.5

5.01

59.5

5.15

79.5

5.22

99.5

5.27

20.0

4.63

40.0

5.02

60.0

5.16

80.0

5.22

100.0

5.27

# Credit for Carbon Dioxide Sequestration 2015 Section 45Q Inflation Adjustment Factor

## Notice 2015-44

## SECTION 1. PURPOSE

This notice publishes the inflation ad-
justment factor for the credit for carbon
dioxide (CO2) sequestration under § 45Q
of the Internal Revenue Code (§ 45Q
credit) for calendar year 2015. The infla-
tion adjustment factor is used to determine
the amount of the credit allowable under
§ 45Q. This notice also publishes the ag-
gregate amount of qualified b>2 taken into
account for purposes of § 45Q.

## SECTION 2. BACKGROUND

Section 45Q(a)(1) allows a credit of
$20 per metric ton of qualified CO2 that is
captured by the taxpayer at a qualified
facility, disposed of by the taxpayer in
secure geological storage, and not used by
the taxpayer as a tertiary injectant. Sec-
tion 45Q(a)(2) allows a credit of $10 per
metric ton of qualified CO2 that is cap-
tured by the taxpayer at a qualified fa-
cility, used by the taxpayer as a tertiary
injectant in a qualified enhanced oil or
natural gas recovery project, and dis-
posed of by the taxpayer in secure geo-
logical storage.

Section 45Q(b)(1) defines the term
"qualified carbon dioxide" as CO2 cap-
tured from an industrial source that would
otherwise be released into the atmosphere
as industrial emission of greenhouse gas,
and that is measured at the source of cap-
ture and verified at the point of disposal or
injection. Qualified CO2 includes the ini-
tial deposit of captured CO2 used as a
tertiary injectant but does not include
CO2that is re-captured, recycled, or other-
wise re-injected as part of the enhanced
oil and natural gas recovery process.

Section 45Q(c) defines the term "qual-
ified facility" as an industrial facility that
is owned by the taxpayer, where carbon
capture equipment is placed in service,
and where at least 500,000 metric tons of
CO2 is captured during the taxable year.

Section 45Q(d)(2) provides that the
Secretary, in consultation with the Admin-

istrator of the Environmental Protection
Agency (EPA), the Secretary of Energy,
and the Secretary of the Interior, shall
establish regulations for determining ade-
quate security measures for the geological
storage of CO2 under § 45Q(a)(1)(B) or
(a)(2)(C) such that the CO2 does not es-
cape into the atmosphere. See section 5 of
Notice 2009-83, 2009-2 C.B. 588, for
procedures regarding secure geological
storage.

Section 45Q(d)(5) allows the § 45Q
credit to the person that captures and
physically or contractually ensures the
disposal of or the use as a tertiary injectant
of the qualified CO2.

Under § 45Q(d)(7), for taxable years
beginning in a calendar year after 2009,
the dollar amount contained in § 45Q(a)
must be adjusted for inflation by multiply-
ing such dollar amount by the inflation
adjustment factor for such calendar year
determined under § 43(b)(3)(B), deter-
mined by substituting "2008" for "1990."

Section 43(b)(3)(B) defines the term
"inflation adjustment factor" as, with re-
spect to any calendar year, a fraction the
numerator of which is the GNP implicit
price deflator for the preceding calendar
year and the denominator of which is the
GNP implicit price deflator for 1990. For
purposes of § 45Q(d)(7), with respect to
2015 calendar year, the inflation adjust-
ment factor is a fraction the numerator of
which is the GNP implicit price deflator
for 2014 (108.407) and the denominator
of which is the GNP implicit price deflator
for 2008 (99.239).

Section 45Q(e) provides that the § 45Q
credit will apply with respect to qualified
CO2 before the end of the calendar year in
which the Secretary, in consultation with
the EPA, certifies that 75,000,000 metric
tons of qualified CO2have been taken into
account in accordance with § 45Q(a).

## SECTION 3. INFLATION ADJUSTMENT FACTOR

The inflation adjustment factor for cal-
endar year 2015 is 1.0924. The § 45Q
credit for calendar year 2015 is $21.85 per
metric ton of qualified CO2 under
§ 45Q(a)(1) and $10.92 per metric ton of
qualified CO2 under § 45Q(a)(2).

## SECTION 4. TAX CREDIT UTILIZATION

Section 6 of Notice 2009-83 requires
taxpayers to file annual reports that pro-
vide (among other information) the
amounts (in metric tons) of qualified CO2
for the taxable year that has been taken
into account for purposes of claiming the
§ 45Q credit. The annual reports must be
filed with the Service not later than the
last day of the second calendar month
following the month during which the tax
return on which the § 45Q credit is
claimed was due (including extensions).

Based on the annual reports filed with
the Service as of June 9, 2015, the aggre-
gate amount of qualified CO2taken into
account for purposes of § 45Q is
34,934,796 metric tons.

## SECTION 5. DRAFTING INFORMATION

The principal author of this notice is
Jennifer C. Bernardini of the Office of
Associate Chief Counsel (Passthroughs &
Special Industries). For further informa-
tion regarding this notice contact Ms. Ber-
nardini on (202) 317-6853 (not a toll-free
number).

## 2014 Section 45K(d)(2)(C) Reference Price

## Notice 2015-45

## SECTION 1. PURPOSE

This notice publishes the reference
price under § 45K(d)(2)(C) of the Internal
Revenue Code for calendar year 2014.
The credit period for the nonconventional
source production credit under § 45K
ended on December 31, 2013, for facili-
ties producing coke or coke gas (other
than from petroleum based products).
However, the reference price continues to
apply in determining the amount of the
enhanced oil recovery credit under § 43,
the marginal well production credit under
§ 45I, and the percentage depletion in case
of oil and natural gas produced from mar-
ginal properties under § 613A.

## SECTION 2. BACKGROUND

Section 45K(d)(2)(C) provides that the
term "reference price" means, with re-
spect to a calendar year, the Secretary's
estimate of the annual average wellhead
price per barrel for all domestic crude oil
the price of which is not subject to regu-
lation by the United States.

Section 43(a) provides that, for pur-
poses of § 38, the enhanced oil recovery
credit for any taxable year is an amount
equal to 15 percent of the taxpayer's qual-
ified enhanced oil recovery costs for such
taxable year.

Section 43(b)(1) provides that the
amount of enhanced oil recovery credit
for any taxable year shall be reduced by
an amount which bears the same ratio to
the amount of such credit (determined
without regard to this paragraph) as - (A)
the amount by which the reference price
for the calendar year preceding the calen-
dar year in which the taxable year begins
exceeds $28, bears to (B) $6. Section
43(b)(2) provides that the term "reference
price" means, with respect to any calendar
year, the reference price determined for
such calendar year under § 45K(d)(2)(C).

Section 45I(a) provides that, for pur-
poses of § 38, the marginal well produc-
tion credit for any taxable year is an
amount equal to the product of the credit
amount and the qualified crude oil produc-
tion and the qualified natural gas produc-
tion which is attributable to the taxpayer.

Section 45I(b)(1) provides that the
amount of the marginal well production
credit is $3 per barrel of qualified crude
oil production, and 50 cents per 1,000
cubic feet of qualified natural gas produc-
tion.

Section 45I(b)(2) provides that the $3
and 50 cents amounts under § 45I(b)(1)
shall each be reduced (but not below zero)
by an amount which bears the same ratio
to such amount (determined without re-
gard to this paragraph) as - (i) the excess
(if any) of the applicable reference price
over $15 ($1.67 for qualified natural gas
production), bears to (ii) $3 ($0.33 for
qualified natural gas production). The ap-
plicable reference price for a taxable year
is the reference price of the calendar year
preceding the calendar year in which the
taxable year begins.

Section 45I(c) provides that the term
reference price means, with respect to any
calendar year - (i) in the case of qualified
crude oil production, the reference price
determined under § 45K(d)(2)(C).

Section 613A(c)(6)(A) provides, in
general, the allowance for depletion under
§ 611 shall be computed in accordance
with § 613 with respect to - (i) so much of
the taxpayer's average daily marginal pro-
duction of domestic crude oil as does not
exceed the taxpayer's depletable oil quan-
tity (determined without regard to para-
graph (3)(A)(ii)), and (ii) so much of the
taxpayer's average daily marginal produc-
tion of domestic natural gas as does not

exceed the taxpayer's depletable natural
gas quantity (determined without regard
to paragraph (3)(A)(ii)), and the applica-
ble percentage shall be deemed to be spec-
ified in subsection (b) of § 613 for pur-
poses of subsection (a) of that section.

Section 613A(c)(6)(C) provides that
the term "applicable percentage" means
the percentage (not greater than 25 per-
cent) equal to the sum of - (i) 15 percent,
plus (ii) 1 percentage point for each whole
dollar by which $20 exceeds the reference
price for crude oil for the calendar year
preceding the calendar year in which the
taxable year begins. For purposes of this
paragraph, the term "reference price"
means, with respect to any calendar year,
the reference price determined for such
calendar year under § 45K(d)(2)(C).

## SECTION 3. REFERENCE PRICE

The reference price under § 45K(d)(2)(C)
for calendar year 2014 is $87.39.

## SECTION 4. DRAFTING INFORMATION

The principal author of this notice is
Jennifer C. Bernardini of the Office of
Associate Chief Counsel (Passthroughs &
Special Industries). For further informa-
tion regarding this notice, contact Ms.
Bernardini on (202) 317-6853 (not a toll-
free number).

NOTE. This revenue procedure will be reproduced as the next revision of IRS Publication 1179, General Rules and Specifications
for Substitute Forms and Schedules.

26 CFR 601.602: Forms and instructions.

(Also Part 1, Sections 170, 220, 401(a), 403(a), 403(b), 408, 408A, 457(b) 529, 530, 853A, 1441, 6041, 6041A, 6042, 6043, 6044, 6045, 6047, 6049, 6050A, 6050B,
6050D, 6050E, 6050H, 6050J, 6050N, 6050P, 6050Q, 6050R, 6050S, 6050W, 1.401(a)(9), 1.408-5, 1.408-7, 1.408A-7, 1.1441-1 through 1.1441-5, 1.6041-1,
7.6041-1, 1.6042-2, 1.6042-4, 1.6044-2, 1.6044-5, 1.6045-1, 5f.6045-1, 1.6045-2, 1.6045-4, 1.6047-1, 1.6049-4, 1.6049-6, 1.6049-7, 1.6050A-1, 1.6050B-1,
1.6050D-1, 1.6050E-1, 1.6050H-1, 1.6050H-2, 1.6050J-1T, 1.6050N-1, 1.6050P-1, 1.6050W-1.)

Rev. Proc. 2015-35

## TABLE OF CONTENTS

### Part 1 - GENERAL INFORMATION

Part 2 - SPECIFICATIONS FOR SUBSTITUTE FORMS 1096 AND COPIES A OF FORMS 1097-BTC, 1098, 1099, 3921, 3922, AND 5498 (ALL FILED WITH THE IRS)

Section 1.1 - Overview of Revenue Procedure 2015-35/What's New

1142

Section 1.2 - Definitions

1145

Section 1.3 - General Requirements for Acceptable Substitute Forms 1096, 1097- BTC, 1098, 1099, 3921, 3922, 5498, W-2G, and 1042-S

1145

Section 2.1 - Specifications
1148

Section 2.2 - Instructions for Preparing Paper Forms That Will Be Filed With the IRS
1151

Section 3.1 - General

#### Part 3 - SPECIFICATIONS FOR SUBSTITUTE FORM W-2G (FILED WITH THE IRS) 1152

Section 3.2 - Specifications for Copy A of Form W-2G
1152

#### Part 4 - SUBSTITUTE STATEMENTS TO FORM RECIPIENTS AND FORM RECIPIENT COPIES

Section 4.1 - Specifications
1153

Section 4.2 - Composite Statements.
1157

Section 4.3 - Additional Information for Substitute and Composite Forms 1099-B

1158

Section 4.4 - Required Legends

1158

Section 4.5 - Miscellaneous Instructions for Copies B, C, D, E, 1, and 2

1159

Section 4.6 - Electronic Delivery of Recipient Statements
1161

### Part 5 - ADDITIONAL INSTRUCTIONS FOR SUBSTITUTE FORMS 1098, 1097-BTC, 1099, 5498, W-2G, AND 1042-S 1097-BTC, 1099, 5498, W-2G, AND 1042-S

Section 5.1 - Paper Substitutes for Form 1042-S

1161

Section 5.2 - OMB Requirements for All Forms in This Revenue Procedure
1163

Section 5.3 - Ordering Forms and Instructions.

1164

Section 5.4 - Effect on Other Revenue Procedures

1164

### Part 6 - EXHIBITS

Section 6.1 - Exhibits of Forms in the Revenue Procedure
1164

### Part 1 General Information

#### Section 1.1 - Overview of Revenue Procedure 2015-35/What's New

1.1.1
Purpose

The purpose of this revenue procedure to set forth the 2015 requirements for:

· Using official Internal Revenue Service (IRS) forms to file information returns with the IRS,

· Preparing acceptable substitutes of the official IRS forms to file information returns with the IRS,
and

· Using official or acceptable substitute forms to furnish information to recipients.

#### 1.1.2 Which Forms Are Covered?

This revenue procedure contains specifications for these information returns:

Form

Title

1096

Annual Summary and Transmittal of U.S. Information Returns

1097-BTC

Bond Tax Credit

1098

Mortgage Interest Statement

1098-C

Contributions of Motor Vehicles, Boats, and Airplanes

1098-E

Student Loan Interest Statement

1098-MA

Mortgage Assistance Payments

1098-Q

Qualifying Longevity Annuity Contract Information

1098-T

Tuition Statement

1099-A

Acquisition or Abandonment of Secured Property

1099-B

Proceeds From Broker and Barter Exchange Transactions

1099-C

Cancellation of Debt

1099-CAP

Changes in Corporate Control and Capital Structure

1099-DIV

Dividends and Distributions

1099-G

Certain Government Payments

1099-INT

Interest Income

1099-K

Payment Card and Third Party Network Transactions

1099-LTC

Long-Term Care and Accelerated Death Benefits

1099-MISC

Miscellaneous Income

1099-OID

Original Issue Discount

1099-PATR

Taxable Distributions Received From Cooperatives

1099-Q

Payments From Qualified Education Programs (Under Sections 529 and 530)

1099-R

Distributions From Pensions, Annuities, Retirement or Profit- Sharing Plans, IRAs, Insurance Contracts, etc.

1099-S

Proceeds From Real Estate Transactions

1099-SA

Distributions From an HSA, Archer MSA, or Medicare Advan- tage MSA

3921

Exercise of an Incentive Stock Option Under Section 422(b)

3922

Transfer of Stock Acquired Through An Employee Stock Pur- chase Plan Under Section 423(c)

5498

IRA Contribution Information

5498-ESA

Coverdell ESA Contribution Information

5498-SA

HSA, Archer MSA, or Medicare Advantage MSA Information

W-2G

Certain Gambling Winnings

1042-S

Foreign Person's U.S. Source Income Subject to Withholding

#### 1.1.3 Scope

For purposes of this revenue procedure, a substitute form or statement is one that is not published
by the IRS. For a substitute form or statement to be acceptable to the IRS, it must conform to the
official form or the specifications outlined in this revenue procedure. Do not submit any substitute
forms or statements listed above to the IRS for approval. Privately published forms may not state,
"This is an IRS approved form."

Filers making payments to certain recipients during a calendar year are required by the Internal
Revenue Code (the Code) to file information returns with the IRS for these payments. These filers
must also provide this information to their recipients. In some cases, this also applies to payments
received. See Part 4 for specifications that apply to recipient statements (generally Copy B).

In general, section 6011 of the Code contains requirements for filers of information returns. A filer
must file information returns electronically or on paper. A filer who is required to file 250 or more
information returns of any one type during a calendar year must file those returns electronically.

Caution. Beginning January 1, 2014, financial institutions that are required to report payments
made under chapters 3 or 4 must file Forms 1042-S electronically, regardless of the number of
forms to file.

Note. If you file electronically, do not file the same returns on paper.

Although not required, small volume filers (fewer than 250 returns during a calendar year) may
file the forms electronically. See the requirements for filing information returns (and providing a
copy to a payee) in the 2015

General Instructions for Certain Information Returns and the 2015 Instructions for Form 1042-S. In
addition, see the current revision of Publication 1220, Specifications for Electronic Filing of Forms
1097, 1098, 1099, 3921, 3922, 5498, and W-2G, for electronic filing through the IRS FIRE system.

### 1.1.4 For More Information

The IRS prints and provides the forms on which various payments must be reported. See Section
5.3, later, for ordering forms and instructions. Alternatively, filers may prepare substitute copies
of these IRS forms and use such forms to report payments to the IRS.

· The Internal Revenue Service/Information Returns Branch (IRS/IRB) maintains a centralized
customer service call site to answer questions related to information returns (Forms W-2, W-3,
W-2c, W-3c, 1099 series, 1096, etc.). You can reach the call site at 1-866-455-7438(toll-free) or
outside the U. S. 304-263-8700 (not a toll-free number). Persons with a hearing or speech disability
with access to TTY/TDD equipment can call 304-579-4827 (not a toll-free number). You may also
send questions to the call site via the Internet at mccirp@irs.gov.

Note. IRS/IRB does not process information returns which are filed on paper forms. See Publication
1220, Specifications for Electronic Filing of Forms 1097-BTC, 1098, 1099, 3921, 3922, 5498, and
W-2G, for information on waivers and extensions of time.

· For other tax information related to business returns or accounts, call1-800-829-4933. Persons with
hearing or speech disabilities with access to TTY/TDD equipment can call 1-800-829-4059 to ask
tax account questions or to order forms and publications.

Note. Further information impacting Publication 1179, such as issues arising after its final release, will
be posted on IRS.gov at www.irs.gov/pub1179.

### 1.1.5 What's New

The following changes have been made to this year's revenue procedure.

FATCA filing requirements of certain foreign financial institutions (FFIs). An FFI with a
chapter 4 requirement to report a U.S. account maintained by the FFI that is held by a specified
U.S. person may satisfy this requirement by reporting on Form(s) 1099 (listed below) under the
election described in Regulations section 1.1471-4(d)(5)(i)(A) or (B). Additionally, a U.S. payer
may satisfy its chapter 4 requirement to report such a U.S. account by reporting on Form(s) 1099.
See Regulations section 1.1471-4(d)(2)(iii)(A).

Information for these FFIs has been added to the General Instructions for Certain Information
Returns.

· Form 1099-DIV Dividends and Distributions,

· Form 1099-INT Interest Income,

· Form 1099-MISC Miscellaneous Income,

· Form 1099-OID Original Issue Discount, and

· Form 1042-S Foreign Person's U.S. Source Income Subject to Withholding.

Truncating taxpayer identifying numbers on payee statements. Final regulations have been issued
that allow issuers to truncate payee identifying numbers on all payee statements covered by these
instructions, except for Form W2-G. See Recipient Information under Instructions for Preparing Paper
Forms That Will Be Filed With the IRS, later.

Substitute forms for Form 1042-S. As of 2015 paper substitutes for Form 1042-S
may no longer contain multiple income types for the same recipient (except Copy E retained
by the withholding agent). Copies B, C, and D must be identical to the IRS form. See Part
5, later.

New Form 1098-Q. New Form 1098-Q, Qualifying Longevity Annuity Contract Informa-
tion, is used to report the status of longevity annuity contracts held by defined contribution
plans, IRAs, and eligible governmental plans, to participants. See Form 1098-Q and its
instructions for more information available at www.irs.gov/form1098q.

Editorial changes. We made editorial changes throughout, including updated references.
Redundancies were eliminated as much as possible.

### Section 1.2 - Definitions

#### 1.2.1 Form Recipient

Form recipient means the person to whom you are required by law to furnish a copy of the official
form or information statement. The form recipient may be referred to by different names on
various Forms 1099 and related forms (" beneficiary," "borrower," "debtor," "donor," "em-
ployee," "homeowner", "insured," "participant," "payee," "payer/borrower," "policyholder,"
"shareholder," "student," "transferor," or, in the case of Form W-2G, the "winner"). See Section
1.3.4.

#### 1.2.2 Filer

Filer means the person or organization required by law to file with the IRS a form listed in
Section 1.1.2 with the IRS. As outlined earlier, a filer may be a payer, creditor, payment
settlement entity, recipient of mortgage or student loan interest payments, educational
institution, broker, barter exchange, person reporting real estate transactions; trustee or issuer
of any educational savings account, individual retirement arrangement or medical savings
account; lender who acquires an interest in secured property or who has reason to know that
the property has been abandoned, corporation reporting a change in control and capital
structure or transfer of stock to an employee, or certain donees of motor vehicles, boats, and
airplanes.

#### 1.2.3 Substitute Form

Substitute form means a paper substitute of Copy A of an official form listed in Section 1.1.2 that
totally conforms to the provisions in this revenue procedure.

#### 1.2.4 Substitute Form Recipient Statement

Substitute form recipient statement means a paper statement of the information reported on a form
listed in Section 1.1.2. This statement must be furnished to a person (form recipient), as defined
under the applicable provisions of the Code and the applicable regulations.

#### 1.2.5 Composite Substitute Statement

Composite substitute statement means one in which two or more required statements (for
example, Forms 1099-INT and 1099-DIV) are furnished to the recipient on one document.
However, each statement must be designated separately and must contain all the requisite Form
1099 information except as provided under Section 4.2. A composite statement may not be filed
with the IRS.

### Section 1.3 - General Requirements for Acceptable Substitute Forms 1096, 1097-BTC, 1098, 1099, 3921, 3922, 5498, W-2G, and 1042-S

1.3.1

Paper substitutes for Form 1096 and Copy A of Forms 1097-BTC, 1098, 1099, 3921, 3922,

Introduction

5498, W-2G, and 1042-S that totally conform to the specifications listed in this revenue procedure may be privately printed and filed as returns with the IRS. The reference to the Department of the Treasury-Internal Revenue Service should be included on all such forms. If you are uncertain of any specification and want it clarified, you may submit a letter citing the specification, stating your understanding and interpretation of the specification, and enclosing an example of the form (if appropriate) to:

Internal Revenue Service
Attn: Substitute Forms Program
SE:W:CAR:MP:P:TP
5000 Ellin Road, C6-440
Lanham, MD 20706

Note. Allow at least 30 days for the IRS to respond.

You may also contact the Substitute Forms Program via e-mail at

substituteforms@irs.gov. Please enter "Substitute Forms" on the Subject Line.

Forms 1096, 1097-BTC, 1098, 1099, 3921, 3922, 5498, W-2G, and 1042-S are subject to
annual review and possible change. Therefore, filers are cautioned against overstocking
supplies of privately printed substitutes.

### 1.3.2 Logos, Slogans, and Advertisements

Some Forms 1097-BTC, 1098, 1099, 3921, 3922, 5498, W-2G, and 1042-S that include logos,
slogans and advertisements may not be recognized as important tax documents. A payee may not
recognize the importance of the payee copy for tax reporting purposes due to the use of logos,
slogans, and advertisements. Thus, the IRS has determined that logos, slogans and advertising
will not be allowed on Forms 1096 or Copy A of Forms 1097-BTC, 1098, 1099, 3921, 3922,
5498, W-2G, 1042-S, or any payee copies, with the following exceptions:

· The exact name of the payer, broker, or agent, primary trade name, trademark, service mark, or
symbol of the payer, broker, or agent, an embossment or watermark on the information return and
payee copies that is a representation of the name, a primary trade name, trademark, service mark,
or symbol of the payer, broker, or agent,

· Presented in any typeface, font, stylized fashion, or print color normally used by the payer, broker,
or agent, and used in a non-intrusive manner, and

· As long as these items do not materially interfere with the ability of the recipient to recognize,
understand, and use the tax information on the payee copies.

The IRS e-file logo on the IRS official payee copies may be included, but it is not required, on any
of the substitute form copies.

The information return and payee copies must clearly identify the payer's name associated with
its employer identification number.

Logos and slogans, may be used on permissible enclosures, such as a check or account statement,
other than information returns and payee copies.

As indicated in Sections 1.3.1 and 5.1.3, of this revenue procedure, Forms 1096, 1097-BTC,
1098, 1099, 3921, 3922, 5498, W-2G, and 1042-S are subject to annual review and possible
change. If you have comments about the restrictions on including logos, slogans, and advertising
on information returns and payee copies, send or email your comments to: Internal Revenue
Service, Attn: Substitute Forms Program, SE:W:CAR:MP:P:TP, 5000 Ellin Road, C6-440,
Lanham, MD 20706 or substituteforms@irs.gov.

### 1.3.3 Copy A Specifications

Proposed substitutes of Copy A must be exact replicas of the official IRS form with respect to
layout and content. Proposed substitutes for Copy A that do not conform to the specifications in
this revenue procedure are not acceptable. Further, if you file such forms with the IRS, you may
be subject to a penalty for failure to file a correct information return under section 6721 of the
Code. The amount of the penalty is based on when you file the correct information return. The
penalty is:

· $30 per information return if you correctly file within 30 days of the due date of the return;
maximum penalty $250,000 per year ($75,000 for small businesses).

· $60 per information return if you correctly file more than 30 days after the due date but by August
1; maximum penalty $500,000 per year ($200,000 for small businesses).

## 1.3.4 Copy B and Copy C Specifications

· $100 per information return if you file after August 1 or you do not file required information
returns; maximum penalty $1.5 million per year ($500,000 for small businesses).

Copy B and Copy C of the following forms must contain the information in Part 4 to be
considered a "statement" or "official form" under the applicable provisions of the Code. The
format of this information is at the discretion of the filer with the exception of the location of the
tax year, form number, form name, and the information for composite Form 1099 statements as
outlined under Section 4.2.

Copy B, of the forms below, are for the following recipients.

Form

Recipient

1098

For Payer/Borrower

1098-C

For Donor

1098-E; 1099-A

For Borrower

1098-MA

For Homeowner

1098-Q

For Participant

1098-T

For Student

1099-C

For Debtor

1099-CAP

For Shareholder

1099-K

For Payee

1099-LTC

For Policyholder

1099-R; W-2G

Indicates that these forms may re- quire Copy B to be attached to the federal income tax return.

1099-S

For Transferor

All remaining

For Recipient

Forms 1099; 1097- BTC; 1042-S;

3921; 3922

For Employee

5498; 5498-SA

For Participant

5498-ESA

For Beneficiary

Copy C of the following forms are:

Form

Recipient

1097-BTC;

For Payer

1098

For Recipient/Lender

1098-C

For Donor's Records

1098-E; 1042-S

For Recipient

1098-MA; 1098-T;

For Filer

1099-K

1098-Q

For Issuer

1099-CAP; 3921;

For Corporation

3922

1099-LTC

For Insured

1099-R

For Recipient's Records

All other Forms

See Section 4.5.2

1099

5498

For Trustee or Insurer

5498-ESA, 5498-SA

For Trustee

W-2G

For Winner's Records

Note. On Copy C, Form 1099-LTC, you may reverse the locations of the policyholder's and the in-
sured's name, street address, city, state, and ZIP code for easier mailing.

## Part 2 Specifications for Substitute Forms 1096 and Copies A of Forms 1097-BTC, 1098, 1099, 3921, 3922, and 5498 (All Filed With the IRS)

### Section 2.1 - Specifications

#### 2.1.1 General Requirements

Form identifying numbers (for example, 9191 for Form 1099-DIV) must be printed in nonre-
flective black carbon-based ink in print positions 15 through 19 using an OCR A font. The check
boxes to the right of the form identifying numbers must be 10-point boxes. The "VOID" checkbox
is in print position 25 (1.9" from left vertical line of the form). The "CORRECTED" check box
is in print position 33 (2.7" from left vertical line of the form). Measurements are generally from
the left edge of the paper, not including the perforated strip.

The substitute form Copy A must be an exact replica of the official IRS form with respect to
layout and content. To determine the correct form measurements, see Exhibits A through EE at
the end of this publication.

Hot wax and cold carbon spots are not permitted on any of the internal form plies. These spots
are permitted on the back of a mailer top envelope ply.

Use of chemical transfer paper for Copy A is acceptable.

The Government Printing Office (GPO) symbol must be deleted.

#### 2.1.2 Color and Paper v

Color and paper quality for Copy A (cut sheets and continuous pinfeed forms) as specified by JCP
Code 0-25, dated November 29, 1978, must be white 100% bleached chemical wood, optical
character recognition (OCR) bond produced in accordance with the following specifications.

Note. Reclaimed fiber in any percentage is permitted provided the requirements of this standard are met.

Acidity: Ph value, average, not less than

4.5

Basis Weight: 17 x 22-500 cut sheets

18-20

Metric equivalent-g/m2

A tolerance of ±5 pct. is allowed.

Stiffness: Average, each direction, not less than-milligrams

Tearing strength: Average, each direction, not less than-grams

Opacity: Average, not less than-percent

Thickness: Average-inch

0.0038

Metric equivalent-mn

0.097

A tolerance of +0.0005 inch (0.0127 mm) is allowed. Paper cannot vary more than 0.0004 inch (0.0102 mm) from one edge to the other.

Porosity: Average, not less than-seconds

Finish (smoothness): Average, each side-seconds

20-55

For information only, the Sheffield equivalent-units

170-100

Dirt: Average, each side, not to exceed-parts per million

2.1.3
Chemical Transfer
Paper

Chemical transfer paper is permitted for Copy A only if the following standards are met:

· Only chemically backed paper is acceptable for Copy A. Front and back chemically treated paper
cannot be processed properly by machine.

· Carbon-coated forms are not permitted.

· Chemically transferred images must be black.

All copies must be clearly legible. Fading must be minimized to assure legibility.

### 2.1.4 Printing

All print on Copy A of Forms 1097-BTC, 1098, 1099, 3921, 3922, 5498, and the print on Form
1096 above the statements, "Return this entire page to the Internal Revenue Service. Photocopies
are not acceptable." must be in Flint J-6983 red OCR dropout ink or an exact match. However,
the four-digit form identifying number must be in nonreflective carbon-based black ink in OCR
A font.

The shaded areas of any substitute form should generally correspond to the format of the official
form.

The printing for the Form 1096 statement and the following text may be in any shade or tone of
black ink. Black ink should only appear on the lower part of the reverse side of Form 1096, where
it will not bleed through and interfere with scanning.

Note. The instructions on the front and back of Form 1096, which include filing addresses, must
be printed.

Separation between fields must be 0.1 inch.

Other printing requirements are discussed below.

### 2.1.5 OCR Specifications

You must initiate or have a quality control program to assure OCR ink density. Readings will be made
when printed on approved 20 lb. white OCR bond with a reflectance of not less than 80%. Black ink must
not have a reflectance greater than 15%. These readings are based on requirements of the "Scan-Optics
Series 9000" Optical Scanner using Flint J-6983 red OCR dropout ink or an exact match.

The following testers and ranges are acceptable:

Important information: The forms produced under these specifications must be guaranteed to
function properly when processed through High Speed Scan-Optics 9000 mm scanners. Forms require
precision spacing, printing, and trimming.

Density readings on the solid J-6983 (red) must be between the ranges of 0.95 to 0.90. The optimal
scanning range is 0.93. Density readings on the solid black must be between the ranges of 112 to 108.
The optimal scanning range is 110.

Note. The readings are taken using an Ex-Rite 500 series densitometer, in Status T with Obsolute or
\- paper setting under an Illuminate 5000 Kelvin Watt Light. You must maintain print contrast
specification of ink and densitometer reflectivity reading throughout entire production run.

· MacBeth PCM-II. The tested Print Contrast Signal (PCS) values when using the MacBeth PCM-II
tester on the "C" scale must range from .01 minimum to .06 maximum.

· Kidder 082A. The tested PCS values when using the Kidder 082A tester on the Infra Red (IR) scale
must range from .12 minimum to .21 maximum. White calibration disc must be 100%. Sensitivity
must be set at one (1).

· Alternative testers must be approved by the IRS to establish tested PCS values. You may obtain
approval by writing to the following address:

Commissioner of Internal Revenue
Attn: SE:W:CAR:MP:P:TP
Business Publishing - Tax Products
5000 Ellin Road
Lanham, MD 20706

2.1.6

Type must be substantially identical in size and shape to the official form. All rules are either

Typography

1/2-point or 3/4-point. Rules must be identical to those on the official IRS form.

Note. The form identifying number must be nonreflective carbon-based black ink in OCR A font.

2.1.7

Generally, three copies A of Forms 1098, 1099, 3921, and 3922 are contained on a single page,

Dimensions

8 inches wide (without any snap-stubs and/or pinfeed holes) by 11 inches deep.

Exceptions. Forms 1097-BTC, 1098-Q, 1099-B, 1099-DIV, 1099-INT, 1099-K, 1099-
MISC, 1099-OID, 1099-R, 5498, and 1042-S contain two documents per page. Form 1098-C
is a single page document.

There is a .33 inch top margin from the top of the corrected box, and a .2 to .25 inch right
margin, with a +/- 1/20 (0.05) inch tolerance for the right margin. If the right and top
margins are properly aligned, the left margin for all forms will be correct. All margins must
be free of print. See Exhibits A through EE in this revenue procedure for correct form
measurements.

These measurements are constant for certain Forms 1098, 1099, and 5498. These
measurements are shown only once in this publication, on Form 1098 (Exhibit C).
Exceptions to these measurements and form-specific measurements are shown on the rest of
the exhibits.

The depth of the individual trim size of each form on a page must be 32 3 inches, the same
depth as the official form, or otherwise indicated.

Exceptions. The depth of Forms 1097-BTC, 1098-Q, 1099-B, 1099-DIV, 1099-INT,
1099-K, 1099-MISC, 1099-OID, 1099-R, 5498, and 1042-S is 5-1/2 inches.

### 2.1.8 Perforation

Copy A (three per page and two per page) of privately printed continuous substitute forms must
be perforated at each 11" page depth. No perforations are allowed between forms on the Copy A
page.

Exception: Copy A of Form W-2G may be perforated.

The words "Do Not Cut or Separate Forms on This Page" must be printed in red dropout ink (as
required by form specifications) between the three or two forms per page. This statement should
not be included after the last form on the page.

Separations are required between all the other individual copies (Copies B and C, and Copies 1
and 2 of Forms 1099-B, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099-MISC, 1099-OID,
1099-R, and copy D for Forms 1099-LTC, 1099-R, and 1042-S) in the set. Any recipient copies
printed on a single sheet of paper must be easily separated. The best method of separation is to
provide perforations between the individual copies. Each copy should be easily distinguished
whatever method of separation is used.

Note. Perforation does not apply to printouts of copies that are furnished electronically to
recipients (as described in Regulations section 31.6051-1(k)). However, these recipients should
be cautioned to carefully separate any copies. See Section 4.6.1, later, for information on
electronically furnishing statements to recipients.

### 2.1.9 Required Inclusions/ Exclusions

You must include the OMB Number on Copies A and Form 1096 in the same location as on the
official form.

The following Privacy Act and Paperwork Reduction Act Notice phrases must be printed on Copy
A of the forms as follows. It also must be printed on the copy of the form (C, D, or E) retained
by the filer.

. "For Privacy Act and Paperwork Reduction Act Notice, see the current version of the General
Instructions for Certain Information Returns" on Forms 3921 and 3922;

. "For more information and the Privacy Act and Paperwork Reduction Act Notice, see the 2015
General Instructions for Certain Information Returns" on Form 1096;

. "For Privacy Act and Paperwork Reduction Act Notice, see instructions" on Form 1042-S; and

. "For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for
Certain Information Returns" must be printed on all other forms listed in Section 1.1.2.

A postal indicia may be used if it meets the following criteria:

. It is printed in the OCR ink color prescribed for the form, and

· No part of the indicia is within one print position of the scannable area.

The printer's symbol (GPO) must not be printed on substitute Copy A. Instead, the employer
identification number (EIN) of the form's printer must be entered in the bottom margin on the face
of each individual form of Copy A, or on the bottom margin on the back of each Form 1096.

The Catalog Number (Cat. No.) shown on the forms is used for IRS distribution purposes and
should not be printed on any substitute forms.

The form must not contain the statement "IRS approved" or any similar statement.

#### Section 2.2 - Instructions for Preparing Paper Forms That Will Be Filed With the IRS

#### 2.2.1 Recipien Informationt

The form recipient's name, street address, city, state, ZIP code, and telephone number (if
required) should be typed or machine printed in black ink in the same format as shown on the
official IRS form. The city, state, and ZIP code must be on the same line.

The following rules apply to the form recipient's name(s):

· The name of the appropriate form recipient must be shown on the first or second name line in the
area provided for the form recipient's name.

· No descriptive information or other name may precede the form recipient's name.

. Only one form recipient's name may appear on the first name line of the form.

· If multiple recipients' names are required on the form, enter on the first name line the
recipient name that corresponds to the recipient taxpayer identification number (TIN)
shown on the form. Place the other form recipients' names on the second name line (only
2 name lines are allowable).

Because certain states require that trust accounts be provided in a different format, filers generally
should provide information returns reflecting payments to trust accounts with the:

· Trust's employer identification number (EIN) in the recipient's TIN area,

· Trust's name on the recipient's first name line, and

· Name of the trustee on the recipient's second name line.

Although handwritten forms will be accepted, the IRS prefers that filers type or machine print data
entries. Also, filers should insert data as directed by shading, or in the middle of blocks, well
separated from other printing and guidelines, and take measures to guarantee clear, dark black,
sharp images. Photocopies are not acceptable.

Truncating payee identification number on payee statements. Where permitted, filers may
truncate a payee's identification number (SSN, ITIN, ATIN, or EIN) on the payee statement
(including substitute and composite substitute statements) furnished to the payee in paper form or
electronically. Generally, the payee statement is that copy of an information return designated
"Copy B" on the form. To truncate where allowed, replace the first 5 digits of the 9-digit number
with asterisks (\*) or Xs (for example, an SSN xxx-xx-xxxx would appear on the paper payee
statement as * * * _\* *- xxxx or XXX-XX-xxxx). See Treasury Decision 9675, 2014-31 I.R.B.
242, available at www.irs.gov/irb/2014-31_IRB/ ar07.html.

Caution. Recipient TINs must not be truncated on Copy A filed with the IRS.

2.2.2
Account Number Box

Use the account number box on all Forms 1098, 1099, 3921, 3922, 5498, and W-2G for an
account number designation when required by the official IRS form. The account number is
required if you have multiple accounts for a recipient for whom you are filing more than one
information return of the same type. Additionally, the IRS encourages you to include the
recipients' account numbers on paper forms if your system of records uses the account number
rather than the name or TIN for identification purposes. Also, the IRS will include the account
number in future notices to you about backup withholding. If you are using window envelopes to

mail statements to recipients and using reduced rate mail, be sure the account number does not appear in the window. The Postal Service may not accept these for reduced rate mail. Exception. Form 1098-T can have third-party provider information.

2.2.3 Specifications and Restrictions

Machine-printed forms should be printed using a 6 lines/inch option, and should be printed in 10 pitch pica (10 print positions per inch) or 12 pitch elite (12 print positions per inch). Proportional spaced fonts are unacceptable.

Substitute forms prepared in continuous or strip form must be burst and stripped to conform to the size specified for a single sheet before they are filed with the IRS. The size specified does not include pin feed holes. Pin feed holes must not be present on forms filed with the IRS.

· Do not use a felt tip marker. The machine used to "read" paper forms generally cannot read this ink type.

· Do not use dollar signs ($), ampersands (&amp;), asterisks (*), commas (,), or other special characters in the numbered money boxes. Exception. Use decimal points to indicate dollars and cents (for example, 2000.00 is acceptable). · Do not use apostrophes ('), asterisks (*), or other special characters on the payee name line. . Do not fold Forms 1097-BTC, 1098, 1099, 3921, 3922, or 5498 mailed to the IRS. Mail these forms flat in an appropriately sized envelope or box. Folded documents cannot be readily moved through the machine used in IRS processing. · Do not staple Forms 1096 to the transmitted returns. Any staple holes near the return code number may impair the IRS's ability to machine scan the type of documents. . Do not type other information on Copy A. . Do not cut or separate the individual forms on the sheet of forms of Copy A (except Forms W-2G).

2.2.4

Mail completed paper forms to the IRS service center shown in the Instructions for Form 1096 and in the 2015 General Instructions for Certain Information Returns. Specific information needed to complete the forms mentioned in this revenue procedure are given in the specific form instructions. A chart showing which form must be filed to report a particular payment is included in the 2015 General Instructions for Certain Information Returns. Part 3

Where To File

Specifications for Substitute Form W-2G (Filed With the IRS)

Section 3.1 - General

3.1.1 Purpose

The following specifications give the format requirements for substitute Form W-2G (Copy A only), which is filed with the IRS.

A filer may use a substitute Form W-2G to file with the IRS (referred to as "substitute Copy A"). The substitute form must be an exact replica of the official form with respect to layout and content.

##### Section 3.2 - Specifications for Copy A of Form W-2G

3.2.1
Substitute Form
W-2G (Copy A)

You must follow these specifications when printing substitute Copy A of the Form W-2G.

Caution. The payee's TIN (SSN, ITIN, ATIN, or EIN) must not be truncated on Form W2-G.

Item

Substitute Form W-2G (Copy A)

Paper Color and Quality

Paper for Copy A must be white chemical wood bond, or equivalent, 20 pound (basis 17 x 22-500), plus or minus 5 percent. The paper must consist substantially of bleached chemical wood pulp. It must be free from unbleached or ground wood pulp or post-consumer recycled paper. It also must be suitably sized to accept ink without feathering.

Ink Color and Quality

All printing must be in a high quality non gloss black ink.

Typography Dimensions

The type must be substantially identical in size and shape to the official form. All rules on the document are either 1/2 point (.007 inch), 1 point (0.015 inch), or 3 point (0.045). Vertical rules must be parallel to the left edge of the docu- ment, horizontal rules to the top edge.

The official form is 8 inches wide x 51/2 inches deep, exclu- sive of a snap stub. Any substitute Copy A can be between 8 inches and 81/2 inches wide by 51/2 inches deep. The snap feature is not required on substitutes. All margins must be free of print. There is a .33 inch top margin from the top of the corrected box, and a 1/2 inch left margin. If the top and left margins are properly aligned, the right margin for all forms will be correct. If the substitute forms are in continu- ous or strip form, they must be burst and stripped to conform to the size specified for a single form.

Hot Wax and Cold Carbon Spots

Hot wax and cold carbon spots are not permitted on any of the internal form plies. These spots are permitted on the back of a mailer top envelope ply.

Printer's Symbol

The Government Printing Office (GPO) symbol must not be printed on substitute Forms W-2G. Instead, the employer identification number (EIN) of the forms printer must be printed in the bottom margin on the face of each individual Copy A on a sheet. The form must not contain the statement "IRS approved" or any similar statement.

Catalog Number

The Catalog Number (Cat. No.) shown on Form W-2G is used for IRS distribution purposes and should not be printed on any substitute forms.

## Part 4 Substitute Statements to Form Recipients and Form Recipient Copies

Section 4.1 - Specifications

### 4.1.1 Introduction

If you do not use the official IRS form to furnish statements to recipients, you must furnish an
acceptable substitute statement. Information presented in substitute statements should be in a
point size large enough to be easily read by recipients. To be acceptable, your substitute statement
must comply with the rules in this Part. If you are furnishing a substitute form, see Regulations
sections 1.6042-4, 1.6044-5, 1.6049-6, and 1.6050N-1 to determine how the following state-
ments must be provided to recipients for most Forms 1099-DIV and 1099-INT, all Forms
1099-OID and 1099-PATR, and Form 1099-MISC or 1099-S for royalties. Generally, infor-
mation returns may be furnished electronically with the consent of the recipient. See Section
4.6.1.

Note. A trustee of a grantor-type trust may choose to file Forms 1099 and furnish a statement to
the grantor under Regulations sections 1.671-4(b)(2)(iii) and (b)(3)(ii). The statement required by
those regulations is not subject to the requirements outlined in this section.

4.1.2
Substitute Statements to
Recipients for Certain
Forms 1099-B, 1099- DIV,
1099-INT, 1099-OID and
1099-PATR

The rules in this section apply to Form 1099-B, 1099-DIV (except for section 404(k) dividends),
1099-INT (except for interest reportable under section 6041), 1099-OID, and 1099-PATR only.
You may furnish form recipients with Copy B of the official Form 1099 or a substitute Form 1099
(form recipient statement) if it contains the same information as the official IRS form (such as
aggregate amounts paid to the form recipient, any backup withholding, the name, address, and
TIN of the person making the return, and any other information required by the official form).
Information not required by the official form should not be included on the substitute form except
for state income tax withholding information.

Note. Many of the information returns now include boxes for providing state withholding
information as part of the official form, with additional copies for convenience. payers may,
however, provide the state withholding information separately (such as on a separate page or
section) in order to assist the payee with completing a state income tax return that requires the
attachment of any information return that includes state withholding amounts and payer numbers.

Exception for supplementary information. The substitute form may include supplementary
information that will assist the payee with completing his or her tax return. Such information
could include expense and cost basis factors related to the reporting for widely held fixed
investment trusts (WHFITs), as required under Regulation section 1.671-5. The substitute
statement should disclose to the payee that such supplementary information is not furnished to the
IRS. See Section 4.3 for additional requirements when providing supplemental information with
the Form 1099-B that is not furnished to the IRS.

Form 1099-B. For transactions reportable on Form 8949, brokers that use substitute statements
should segregate dispositions of noncovered securities from covered securities, and further
segregate long-term and short-term dispositions of covered securities. They may also segregate
long-term from short-term dispositions of noncovered securities, to the extent that date acquired
is known. For 2015 dispositions, the substitute Forms 1099-B may have up to five separate
sections, each with a heading identifying which securities are included in the list, and each
separately totaled. Each section, after totaling or within the heading for the section, should
indicate how to report the transactions on Form 8949, as indicated.

1\. Short-term transactions for which basis is reported to the IRS- - Report on Form 8949, Part I,
with Box A checked.

2\. Short-term transactions for which basis is not reported to the IRS- - Report on Form 8949, Part
I, with Box B checked.

3\. Long-term transactions for which basis is reported to the IRS- - Report on Form 8949, Part II,
with Box D checked.

4\. Long-term transactions for which basis is not reported to the IRS- - Report on Form 8949, Part
II, with Box E checked.

5\. Transactions for which basis is not reported to the IRS and for which short-term or long-term
determination is unknown (to Broker)-You must determine short-term or long-term based on your
records and report on Form 8949, Part I, with Box B checked, or on Form 8949, Part II, with Box
E checked, as appropriate.

For each section, each transaction may include information not reported to the IRS, such as basis, date
acquired, and gain or loss. Therefore, for short-term dispositions where basis was not reported to the
IRS, basis and date acquired may be shown just as it would be shown for short-term dispositions where
basis was reported to the IRS.

For 2015 dispositions, each of the applicable sections must have Sales Price and Cost or Other Basis
(if known) separately totaled. Net gain or loss, if included for any of the sections, may also be totaled.

Brokers may also use substitute Form 1099-B for transactions that are not directly reported on Form
8949. Examples include transactions involving regulated futures contracts, foreign currency contracts,
and section 1256 option contracts. Any additional sections created for this purpose should be
segregated from those transactions reportable on Form 8949.

The substitute form requirements in the following paragraphs also apply to Form 1099-B.

Form 1099-INT, DIV, OID, and PATR. A substitute form recipient statement for Forms 1099-
INT, 1099-DIV, 1099-OID, or 1099-PATR must comply with the following requirements:

1\. Box captions and numbers that are applicable must be clearly identified, using the same wording
and numbering as on the official form.

2\. The form recipient statement (Copy B) must contain all applicable form recipient instructions
provided on the front and back of the official IRS form. You may provide those instructions on a
separate sheet of paper.

3\. The form recipient statement must contain the following in bold and conspicuous type:
This is important tax information and is being furnished to the Internal Revenue Service
(except as indicated). If you are required to file a return, a negligence penalty or other
sanction may be imposed on you if this income is taxable and the IRS determines that it has
not been reported.

4\. The box caption "Federal income tax withheld" must be in boldface type or otherwise high-
lighted on the form recipient statement.

5\. The form recipient statement must contain the Office of Management and Budget (OMB) number
as shown on the official IRS form. See Part 5.

6\. The form recipient statement must contain the tax year (for example, 2015), form number (for
example, Form 1099-INT), and form name (for example, Interest Income) of the official IRS
Form 1099. This information must be displayed prominently together in one area of the statement.
For example, the tax year, form number, and form name could be shown in the upper right part
of the statement. Each copy must be appropriately labeled (such as Copy B, For Recipient). See
Section 4.5 for applicable labels and arrangement of assembly of forms. Note. Do not include the
words "Substitute for" or "In lieu of" on the form recipient statement.

7\. Layout and format of the form is at the discretion of the filer. However, the IRS encourages the
use of boxes so that the statement has the appearance of a form and can be easily distinguished
from other non-tax statements.

8\. Each recipient statement of Forms 1099-B, 1099-DIV, 1099-INT, 1099-OID, and 1099-PATR
must include the direct access telephone number of an individual who can answer questions about
the statement. Include that telephone number conspicuously anywhere on the recipient statement.

9\. A mutual fund family may state separately on one document (for example, one piece of paper) the
dividend income earned by a recipient from each fund within the family of funds as required by
Form 1099-DIV. However, each fund and its earnings must be stated separately. The form must
contain an instruction to the recipient that each fund's dividends and name, not the name of the
mutual fund family, must be reported on the recipients tax return. The form cannot contain an
aggregate total of all funds. In addition, a mutual fund family may furnish a single statement (as
a single filer) for Forms 1099-INT, 1099-DIV, and 1099-OID information. Each fund and its
earnings must be stated separately. The form must contain an instruction to the recipient that each
fund's earnings and name, not the name of the mutual fund family, must be reported on the
recipients tax return. The form cannot contain an aggregate total of all funds.

You may enter a total of the individual accounts listed on the form only if they have been paid by the
same payer. For example, if you are listing interest paid on several accounts by one financial institution
on Form 1099-INT, you may also enter the total interest amount. You may also enter a date next to
the corrected box if that box is checked.

### 4.1.3 Substitute Statements to Recipients for Certain Forms 1098, 1099, 5498, and W-2G

Statements to form recipients for Forms 1097-BTC, 1098, 1098-C, 1098-E, 1098-MA,
1098-Q, 1098-T, 1099-A, 1099-C, 1099-CAP, 1099-G, 1099-K, 1099-LTC, 1099-MISC,
1099-Q, 1099-R, 1099-S, 1099-SA, 3921, 3922, 5498, 5498-ESA, 5498-SA, W-2G, 1099-
DIV (only for section 404(k) dividends reportable under section 6047), and 1099-INT (only for
interest of $600 or more made in the course of a trade or business reportable under section 6041)
can be copies of the official forms or an acceptable substitute.

Caution. The IRS does not require a donee to use Form 1098-C as the written acknowledgment
for contributions of motor vehicles, boats, and airplanes. However, if you choose to use copies of
Form 1098-C or an acceptable substitute as the written acknowledgment, then you must follow
the requirements of this Section 4.1.3.

To be acceptable, a substitute form recipient statement must meet the following requirements.

1\. The tax year, form number, and form name must be the same as the official form and must be
displayed prominently together in one area on the statement. For example, they may be shown in
the upper right part of the statement.

2\. The statement must contain the same information as the official IRS form, such as aggregate
amounts paid to the form recipient, any backup withholding, the name, address, and TIN of the
filer and of the recipient, and any other information required by the official form.

3\. Each substitute recipient statement for Forms W-2G, 1097-BTC, 1098, 1098-C, 1098-E,
1098-T, 1099-A, 1099-C, 1099-CAP, 1099-DIV, 1099-G (excluding state and local income
tax refunds), 1099-K, 1099-INT, 1099-LTC, 1099-MISC (excluding fishing boat proceeds),
1099-Q, 1099-S, 1099-SA, and 5498-SA must include the direct access telephone number of an
individual who can answer questions about the statement. Include the telephone number conspic-
uously anywhere on the recipient statement. Although not required, payers reporting on Forms
1099-R, 3921, 3922, 5498, and 5498-ESA are encouraged to furnish telephone numbers at which
recipients of the forms(s) can reach a person familiar with information reported.

4\. All applicable money amounts and information, including box numbers, required to be reported to
the form recipient must be titled on the form recipient statement in substantially the same manner
as those on the official IRS form. The box caption "Federal income tax withheld" must be in
boldface type on the form recipient statement.

Exception. If you are reporting a payment as "Other income" in box 3 of Form 1099-MISC, you
may substitute appropriate language for the box title. For example, for payments of accrued wages
and leave to a beneficiary of a deceased employee, you might change the title of box 3 to
"Beneficiary payments" or something similar. Note. You cannot make this change on Copy A.

Note. If federal income tax is withheld and shown on Form 1099-R or W-2G, Copy B and Copy
C must be furnished to the recipient. If federal income tax is not withheld, only Copy C of Form
1099-R and W-2G must be furnished. However, for Form 1099-R, instructions similar to those on
the back of the official Copy B and Copy C of Form 1099-R must be furnished to the recipient. For
convenience, you may choose to provide both Copies B and C of Form 1099-R to the recipient.

5\. You must provide appropriate instructions to the form recipient similar to those on the official IRS form,
to aid in the proper reporting on the form recipients income tax return. For payments reported on Forms
1099-B, and 1099-CAP, the requirement to include instructions substantially similar to those on
the official IRS form may be satisfied by providing form recipients with a single set of instructions
for all Forms 1099-B and 1099-CAP statements required to be furnished in a calendar year.

6\. If you use carbonless sets to produce recipient statements, the quality of each copy in the set must
meet the following standards:

· All copies must be clearly legible,

· All copies must be able to be photocopied, and

· Fading must not diminish legibility and the ability to photocopy.

In general, black chemical transfer inks are preferred, but other colors are permitted if the above
standards are met. Hot wax and cold carbon spots are not permitted on any of the internal form
plies. The back of a mailer top envelope ply may contain these spots.

7\. You may use a Settlement Statement (under the Real Estate Settlement Procedures Act of 1974
(RESPA)) for Form 1099-S. The Settlement Statement is acceptable as the written statement to
the transferor if you include the legend for Form 1099-S found in Section 4.4.2 and indicate which
information on the Settlement Statement is being reported to the IRS on Form 1099-S.

8\. For reporting state income tax withholding and state payments, you may add an additional box(es)
to recipient copies as appropriate. In addition, the state withholding information may be provided
separate and apart from the other information in the event the recipient must attach a copy to the
recipient's tax return. Note. You cannot make this change on Copy A.

9\. On Copy C of Form 1099-LTC, you may reverse the location of the policyholder's and the
insured's name, street address, city, state, and ZIP code for easier mailing.

10\. If an institution insurer uses a third party service provider to file Form 1098-T, then in addition
to the institution or insurers name, address, and telephone number, the same information may be
included for the third party service provider in the space provided on the form.

11\. Forms 1099-A and 1099-C transactions, if related, may be combined on Form 1099-C.

## Section 4.2 - Composite Statements

4.2.1
Composite Substitute
Statements for Certain
Forms 1099-B, 1099- DIV,
1099-INT, 1099-MISC,
1099-OID, 1099- PATR and
1099-S

A composite form recipient statement is permitted for reportable payments consisting of the
proceeds of brokerage and barter transactions, dividends, interest, original issue discount, pa-
tronage dividends, and royalties. The following forms may be included on a composite substitute
statement, when one payer is reporting more than one of these payments during a calendar year
to the same form recipient.

· Form 1099-B.

· Form 1099-DIV (except for section 404(k) dividends).

· Form 1099-INT (except for interest reportable under section 6041).

· Form 1099-MISC (only for royalties or substitute payments in lieu of dividends and interest).

· Form 1099-OID.

· Form 1099-PATR.

· Form 1099-S (only for royalties).

Generally, do not include any other Form 1099 information (for example, 1098 or 1099-A) on
a composite statement with the information required on the forms listed in the preceding sentence.

Although the composite form recipient statement may be on one sheet, the format of the
composite form recipient statement must satisfy the following requirements in addition to the
requirements listed earlier in Section 4.1.2, 4.3 and 4.4, as applicable.

· All information pertaining to a particular type of payment must be located and blocked together on
the form and separate from any information covering other types of payments included on the
form. For example, if you are reporting interest and dividends, the Form 1099-INT information
must be presented separately from the Form 1099-DIV information.

· The composite form recipient statement must prominently display the form number and form name
of the official IRS form together in one area at the beginning of each appropriate block of
information. The tax year must only be placed on each block of information if it is not prominently
displayed elsewhere on the page on which the information appears.

· Any information required by the official IRS forms that would otherwise be repeated in each
information block is required to be listed only once in the first information block on the composite
form. For example, there is no requirement to report the name of the filer in each information block.
This rule does not apply to any money amounts (for example, federal income tax withheld) or to
any other information that applies to money amounts.

· A composite statement is an acceptable substitute only if the type of payment and the recipient's
tax obligation with respect to the payment are as clear as if each required statement were furnished
separately on an official form.

4.2.2
Composite Substitute
Statements to Recipients for
Forms Specified in Section
4.1.3

A composite form recipient statement for the forms specified in Section 4.1.3 is permitted when
one filer is reporting more than one type of payment during a calendar year to the same form
recipient. A composite statement is not allowed for a combination of forms listed in Section 4.1.3
and forms listed in Section 4.1.2.

### Exceptions:

· Substitute payments in lieu of dividends or interest reported in Box 8 of Form 1099-MISC may
be reported on a composite substitute statement with Form 1099-DIV.

· Form 1099-B information may be reported on a composite form with the forms specified in
Section 4.1.2 as described in Section 4.2.1.

· Royalties reported on Form 1099-MISC or 1099-S may be reported on a composite form only
with the forms specified in Section 4.1.2.

Although the composite form recipient statement may be on one sheet, the format of the
composite form recipient statement must satisfy the requirements listed in Section 4.2.1 as well
as the requirements in Section 4.1.3. A composite statement of Forms 1098 and 1099-INT (for
interest reportable under section 6049) is not allowed.

## Section 4.3 - Additional Information for Substitute and Composite Forms 1099- B

4.3.1

A filer may include Form 1099-B information on a composite form with the forms listed in

General Requirements for Presenting Additional 1099- B Information

Section 4.1.2. Therefore, supporting, explanatory, or comparable relevant information for covered and noncovered lots on the 1099-B portion of the composite statement can be included. This information includes display on the payee statement of data elements such as basis for noncovered lots, explanatory remarks on permissible basis adjustments for covered lots descriptions of the type of transaction (merger, buy to close, redemption, etc.), identification of contingent payment debt obligations, and lot relief methods. If you wish to provide additional information to the investor on the same substitute recipient Form 1099-B, the form must follow the rules set forth in this Section 4.3 and should clearly delineate how the information is presented. Any information presented should make reference to its corresponding number on the official form as appropriate. You should clearly categorize each type of information you are reporting.

4.3.2

An additional separate legend is required that explains exactly which pieces of information are

Added Legend for Providing Additional 1099- B Information

and which are not reported to the IRS to the extent, if any, the information is not already identified as not being reported to the IRS as described in Section 4.1.2. It should clearly explain how the information is presented. You may present this legend in a way that is consistent with your design as long as it clearly indicates which information is being provided to the IRS. Additionally, a reminder to taxpayers that they are ultimately responsible for the accuracy of their tax returns is also required.

## Section 4.4 - Required Legends

### 4.4.1 Required Legends for Forms 1098

Form 1098 recipient statements (Copy B) must contain the following legends:

· Form 1098

1\. "The information in boxes 1, 2, and 3 is important tax information and is being furnished to
the Internal Revenue Service. If you are required to file a return, a negligence penalty or other
sanction may be imposed on you if the IRS determines that an underpayment of tax results
because you overstated a deduction for this mortgage interest or for these points or because you
did not report this refund of interest on your return."

2\. Caution. "The amount shown may not be fully deductible by you. Limits based on the loan
amount and the cost and value of the secured property may apply. Also, you may only deduct
interest to the extent it was incurred by you, actually paid by you, and not reimbursed by
another person."

· Form 1098-C -: Copy B -"In order to take a deduction of more than $500 for this contribution, you
must attach this copy to your federal tax return. Unless box 5a or 5b is checked, your deduction
cannot exceed the amount in box 4c." Copy C -"This information is being furnished to the
Internal Revenue Service unless box 7 is checked."

· Form 1098-E -"This is important tax information and is being furnished to the Internal Revenue
Service. If you are required to file a return, a negligence penalty or other sanction may be imposed
on you if the IRS determines that an underpayment of tax results because you overstated a
deduction for student loan interest."

· Form 1098-MA -"This is important tax information and is being furnished to the Internal Revenue
Service."

· Form 1098-Q -"This information is being furnished to the Internal

· Revenue Service."

· Form 1098-T -"This is important tax information and is being furnished to the Internal Revenue
Service."

4.4.2
Required Legends
for Forms 1099 and W-2G

· Forms 1099-A, 1099-C, and 1099-CAP: Copy B -"This is important tax information and is
being furnished to the Internal Revenue Service. If you are required to file a return, a
negligence penalty or other sanction may be imposed on you if taxable income results from
this transaction and the IRS determines that it has not been reported."

· Forms 1099-B, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099-MISC, 1099-OID, 1099-
PATR, and 1099-Q: Copy B- "This is important tax information and is being furnished to the

Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction
may be imposed on you if this income is taxable and the IRS determines that it has not been
reported."

· Form 1099-LTC: Copy B - "This is important tax information and is being furnished to the
Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction
may be imposed on you if this item is required to be reported and the IRS determines that it has
not been reported." Copy C - "Copy C is provided to you for information only. Only the
policyholder is required to report this information on a tax return."

· Form 1099-R: Copy B - "Report this income on your federal tax return. If this form shows federal
income tax withheld in box 4, attach this copy to your return." Copy C - "This information is being
furnished to the Internal Revenue Service."

· Form 1099-S: Copy B - "This is important tax information and is being furnished to the Internal
Revenue Service. If you are required to file a return, a negligence penalty or other sanction may
be imposed on you if this item is required to be reported and the IRS determines that it has not been
reported."

· Form 1099-SA: Copy B - "This information is being furnished to the Internal Revenue Service."

· Form W-2G: Copy B - "This information is being furnished to the Internal Revenue Service.
Report this income on your federal tax return. If this form shows federal income tax withheld in
box 2, attach this copy to your return." Copy C- "This is important tax information and is being
furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty
or other sanction may be imposed on you if this income is taxable and the IRS determines that it
has not been reported."

4.4.3
Required Legends
for Forms 1097-BTC,
3921, 3922, and 5498

Recipient statements for these forms must contain the following legends:

· Form 1097-BTC -"This is important tax information and is being furnished to the Internal
Revenue Service. If you are required to file a return, a negligence penalty or other sanction may
be imposed on you if an amount of tax credit exceeding the amount reported on this form is
claimed on your income tax return."

· Form 3921: Copy B -"This is important tax information and is being furnished to the Internal
Revenue Service. If you are required to file a return, a negligence penalty or other sanction may
be imposed on you if this item is required to be reported and the IRS determines that it has not been
reported." Copy C- "This copy should be retained by the corporation whose stock has been
transferred under Section 422(b)."

· Form 3922: Copy B -"This is important tax information and is being furnished to the Internal
Revenue Service." Copy C- "This copy should be retained by the corporation."

· Form 5498 -"This information is being provided to the Internal Revenue Service." Note. If you do
not provide another statement to the participant because no contributions were made for the year,
the statement of the fair market value and any required minimum distribution, of the account must
contain this legend and a designation of which information is being provided to the IRS.

· Form 5498-ESA -"The information in boxes 1 and 2 is being furnished to the Internal Revenue
Service."

· Form 5498-SA -"The information in boxes 1 through 6 is being furnished to the Internal Revenue
Service."

## Section 4.5 - Miscellaneous Instructions for Copies B, C, D, E, 1, and 2

### 4.5.1 Copies

Copies B, C, and in some cases, D, E, 1, and 2 are included in the official assembly for the
convenience of the filer. You are not legally required to include all these copies with the privately
printed substitute forms. Furnishing Copies B and, in some cases, C will satisfy the legal
requirement to provide statements of information to form recipients.

Note. If an amount of federal income tax withheld is shown on Form 1099-R or W-2G, Copy
B (to be attached to the tax return) and Copy C must be furnished to the recipient. Copy D (Forms
1099-R and W-2G) may be used for payer records. Only Copy A should be filed with the IRS.

### 4.5.2 Arrangement of Assembly

Copy A ("For Internal Revenue Service Center") of all forms must be on top. The rest of the
assembly must be arranged, from top to bottom, as follows. For:

Form

Title

1098

Copy B "For Payer/Borrower"; Copy C "For Recipient/ Lender."

1098-C

Copy B "For Donor"; Copy C "For Donor's Records"; Copy D "For Donee."

1098-E

Copy B "For Borrower"; Copy C "For Recipient."

1098-MA

Copy B "For Homeowner"; Copy C "For Filer."

1098-Q

Copy B "For Participant"; Copy C "For Issuer"

1098-T

Copy B "For Student"; Copy C "For Filer."

1099-A

Copy B "For Borrower"; Copy C "For Lender."

1097-BTC, 1099-PATR,

Copy B "For Recipient"; Copy C "For Payer."

and 1099-Q

1099-C

Copy B "For Debtor"; Copy C "For Creditor."

1099-CAP

Copy B "For Shareholder"; Copy C "For Corporation."

1099-

Copy 1"For State Tax Department"; Copy B "For Recipient";

B,1099-DIV,

Copy 2 "To be filed with recipient's state income tax return,

1099-G, 1099-INT, 1099-MISC and 1099-

when required"; and Copy C "For Payer."

OID

1099-K

Copy 1 "For State Tax Department"; Copy B "For Payee"; Copy 2 "To be filed with the recipient's state income tax return, when required"; Copy C "For Filer".

1099-LTC

Copy B "For Policyholder"; Copy C "For Insured"; and Copy D "For Payer."

1099-R

Copy 1 "For State, City, or Local Tax Department"; Copy B "Report this income on your federal tax return. If this form shows federal income tax withheld in box 4, attach this copy to your return"; Copy C "For Recipient's Records"; Copy 2 "File this copy with your state, city, or local income tax return, when required"; Copy D "For Payer."

1099-S

Copy B "For Transferor"; Copy C "For Filer."

1099-SA

Copy B "For Recipient"; Copy C "For Trustee/Payer."

3921

Copy B "For Employee"; Copy C "For Corporation"; Copy D "For Transferor."

3922

Copy B "For Employee"; Copy C "For Corporation."

5498

Copy B "For Participant"; Copy C "For Trustee or Issuer."

5498-ESA

Copy B "For Beneficiary"; Copy C "For Trustee."

5498-SA

Copy B "For Participant"; Copy C "For Trustee."

W-2G

Copy 1 "For State, City, or Local Tax Department"; Copy B "Report this income on your federal tax return. If this form shows federal income tax withheld in box 2, attach this copy to your return"; Copy C "For Winner's Records"; Copy 2 "Attach this copy to your state, city, or local income tax return, if re- quired"; Copy D "For Payer."

1042-S

Copy B "For Recipient"; Copies C and D "For Recipient" and "Attach to any Federal Tax return you file"; Copy E: "For With- holding Agent".

## 4.5.3 Perforations

Instructions for perforation of forms can be found in Section 2.1.8, earlier.

## Section 4.6 - Electronic Delivery of Recipient Statements

### 4.6.1 Electronic Recipient Statements

If you are required to furnish a written statement (Copy B or an acceptable substitute) to a
recipient, then you may furnish the statement electronically instead of on paper. This includes
furnishing the statement to recipients of Forms 1098, 1098-E, 1098-MA, 1098-Q, 1098-T,
1099-A, 1099-B, 1099-C, CAP, DIV, G, H, INT, K, LTC, MISC, OID, PATR, Q, R, S, SA,
3921, 3922, 5498, 5498-ESA, and 5498-SA. It also includes Form W-2G (except for horse and
dog racing, jai alai, sweepstakes, wagering pools, and lotteries).

Note. Until further guidance is issued, you can not furnish Form 1098-C electronically. Perforation
(see Section 2.1.8) does not apply to printouts of copies of forms that are furnished electronically to
recipients. However, recipients should be cautioned to carefully separate the copies.

If you meet the requirements listed below, you are treated as furnishing the statement timely.

### 4.6.2 Consent

The recipient must consent in the affirmative and not have withdrawn the consent before the
statement is furnished. The consent by the recipient must be made electronically in a way that
shows that he or she can access the statement in the electronic format in which it will be furnished.
You must notify the recipient of any hardware or software changes prior to furnishing the
statement. A new consent to receive the statement electronically is required after the new
hardware or software is put into service. Prior to furnishing the statements electronically, you
must provide the recipient a statement with the following statements prominently displayed:

· If the recipient does not consent to receive the statement electronically, a paper copy will be
provided.

· The scope and duration of the consent. For example, whether the consent applies to every year the
statement is furnished or only for the January 31 (February 15 for Forms 1099-B, 1099-S, and
1099-MISC with payments reported in boxes 8 or 14) immediately following the date of the consent.

· How to obtain a paper copy after giving consent.

· How to withdraw the consent. The consent may be withdrawn at any time by furnishing the
withdrawal in writing (electronically or on paper) to the person whose name appears on the
statement. Confirmation of the withdrawal also will be in writing (electronically or on paper).

· Notice of termination. The notice must state under what conditions the statements will no longer
be furnished to the recipient.

· Procedures to update the recipients information.

· A description of the hardware and software required to access, print and retain a statement, and a
date the statement will no longer be available on the website.

#### 4.6.3 Format, Posting, and Notification

Additionally, you must:

· Ensure the electronic format contains all the required information and complies with the guidelines
in this document.

· Post, on or before the January 31 (February 15 for Forms 1099-B, 1099-S, and 1099-MISC with
payments reported in boxes 8 or 14) due date, the applicable statement on a website accessible to
the recipient through October 15 of that year.

· Inform the recipient, electronically or by mail, of the posting and how to access and print the statement.

For more information, see Regulations section 31.6051-1. For electronic furnishing of Forms
1098-E and 1098-T, see Regulations sections 1.6050S-2 and 1.6050S-4. For electronic fur-
nishing of Forms 1099-R, 1099-SA, 1099-Q, 5498, 5498-ESA, and 5498-SA, see Notice
2004-10, 2004-1 C.B. 433.

## Part 5 Additional Instructions for Substitute Forms 1098, 1097-BTC, 1099, 5498, W-2G, and 1042-S

### Section 5.1 - Paper Substitutes for Form 1042-S

#### 5.1.1 Paper Substitutes

Paper substitutes of Copies A, B, C, and D for Form 1042-S, Foreign Person's U.S. Source
Income Subject to Withholding, that totally conform to the format and size of the official form
may be privately printed without prior approval from the Internal Revenue Service.

5.1.2
Revisions

#### 5.1.3 Obtaining Copies

#### 5.1.4 Instructions For Withholding Agents

Note. Copies A, B, C, and D of Form 1042-S may not contain multiple income types for the same
recipient, that is, multiple rows of the top boxes 1-11 of the form.

Form 1042-S is subject to annual review and possible change. Withholding agents and form
suppliers are cautioned against overstocking supplies of the privately printed substitutes.

Copies of the official form for the reporting year may be obtained from most Service offices. The
Service provides only cut sheets of these forms. Continuous fan-fold/pin-fed forms are not
provided.

Instructions for withholding agents:

· Only original copies may be filed with the Service. Reproductions are not acceptable.

· The term "Recipient's U.S. TIN" for an individual means the social security number (SSN) or
IRS individual taxpayer identification number (ITIN), consisting of nine digits separated by
hyphens as follows: 000-00-0000. For all other recipients, the term means employer identi-
fication number (EIN) or qualified intermediary employer identification number (QI-EIN).
The QI-EIN designation includes a withholding foreign partnership employer identification
number (WP-EIN) and a withholding foreign trust employer identification number (WT-
EIN). The EIN and QI-EIN consist of nine digits separated by a hyphen as follows:
00-0000000. The taxpayer identification number (TIN) must be in one of these formats. Note.
Digits must be separated by hyphens on paper statements in the formats listed.

· The term "Recipient's GIIN" means the global intermediary identification number assigned to
a recipient that is a participating FFI (including a reporting Model 2 FFI), registered
deemed-compliant FFI (including a reporting Model 1 FFI), or other entity for chapter 4
purposes.

· Withholding agents are requested to type or machine print whenever possible, provide quality
data entries on the forms (that is, use black ink and insert data in the middle of blocks well
separated from other printing and guidelines), and take other measures to guarantee a clear,
sharp image. Withholding agents are not required, however, to acquire special equipment
solely for the purpose of preparing these forms.

· The "AMENDED" and "PRO-RATA BASIS REPORTING" boxes must be printed at the top
center of the form under the title and checked, if applicable.

· Substitute forms prepared in continuous or strip form must be burst and stripped to conform to the
size specified for a single form before they are filed with the Service. The dimensions are found
in Section 5.1.6, following. Computer cards are acceptable provided they meet all requirements
regarding layout, content, and size.

5.1.5
Substitute Form
1042-S Format
Requirements

Property

Substitute Form 1042-S Format Requirements

Printing

Privately printed substitute Forms 1042-S must be exact replicas of the official forms with respect to layout and content. Only the di- mensions of the substitute form may differ. The Government Print- ing Office (GPO) symbol must be deleted. The exact dimensions are found below.

Box Entries

Only one type of income may be represented on Copies A, B, C, and D submitted to the IRS or furnished to recipients. Multiple income types may be shown on Copy E retained by withholding agents. All boxes on Copy A file with the IRS, and Copies B, C, and D furnished to recipients on the substitute form, must conform to the official IRS form.

Color and Quality of Ink

All printing must be in high quality non-gloss black ink.

Property

Substitute Form 1042-S Format Requirements

Typography

Type must be substantially identical in size and shape to corre- sponding type on the official form. All rules on the document are either 1 point (0.015“) or 3 point (0.045"). Vertical rules must be parallel to the left edge of the document; horizontal rules must be parallel to the top edge.

Assembly

If all five parts are present, the parts of the assembly shall be ar- ranged from top to bottom as follows: Copy A (Original) "for In- ternal Revenue Service," Copies B, C, and D "for Recipient," and Copy E "for Withholding Agent."

Color Quality ofPaper

Paper for Copy A must be white chemical wood bond, or equiva- lent, 20 pound (basis 17 x 22-500), plus or minus 5 percent; or offset book paper, 50 pound (basis 25 x 38-500). No optical brighteners may be added to the pulp or paper during manufacture. The paper must consist of principally bleached chemical wood pulp or recycled printed paper. It also must be suitably sized to accept ink without feathering.

Dimensions

· The dimensions for substitute Copies A, B, C, and Dmust match the IRS Form 1042-S in size and format.

. The official form is 8 inches wide x 51/2 inches deep, exclusive of a 1/2 inch snap stub on the left side of the form. The snap fea- ture is not required on substitutes. · Copies A, B, C, and D, must conform to the official IRS form. No size variations are permitted.

Other Copies

Copies B, C, and D must be furnished for the convenience of pay- ees who must send a copy of the form with other federal and state returns they file. Copy E may be used as a withholding agent's record/copy.

### Section 5.2 - OMB Requirements for All Forms in This Revenue Procedure

#### 5.2.1 OMB Requirements

The Paperwork Reduction Act (the Act) of 1995 (Public Law 104-13) requires that:

· OMB approves all IRS tax forms that are subject to the Act. Each IRS form contains (in or
near the upper right corner) the OMB approval number, if any. (The official OMB
numbers may be found on the official IRS printed forms and are also shown on the forms
in the exhibits in Part 6.)

· Each IRS form (or its instructions) states:

1\. Why the IRS needs the information,

2\. How it will be used, and

3\. Whether or not the information is required to be furnished to the IRS.

This information must be provided to any users of official or substitute IRS forms or instructions.

#### 5.2.2 Substitute Form Requirements

The OMB requirements for substitute IRS forms are:

· Any substitute form or substitute statement to a recipient must show the OMB number as it appears
on the official IRS form.

. For Copy A, the OMB number must appear exactly as shown on the official IRS form.

. For any copy other than Copy A, the OMB number must use one of the following formats.

1\. OMB No. 1545-xxxx (preferred), or

2\. OMB # 1545-xxxx (acceptable).

Caution. These requirements do not apply to substitute Forms 1042-S. See Section 5.1.5,
earlier.

5.2.3
Required Explanation
to Users

All substitute forms must state the Privacy Act and Paperwork Reduction Act Notice as listed in
Section 2.1.9, earlier.

If no instructions are provided to users of your forms, you must furnish them with the exact text
of the Privacy Act and Paperwork Reduction Act Notice.

## Section 5.3 - Ordering Forms and Instructions

You can order official IRS Forms (Forms 1096, 1098, 1099's, W-2G, 1042S, and any other forms
mentioned in this publication), instructions, and information copies of federal tax material by
going to www.irs.gov/Forms- &- Pubs/Order-Products.

Note. Some forms on the internet are intended as information only and may not be submitted as
an official IRS form (for example, Forms 1099, W-2, and W-3). Form 1096 and Copy A of 1098
series, 1099 series, 5498 series, and Forms 3921 and 3922 cannot be used for filing with the IRS
when printed from a conventional printer. These forms contain drop-out ink requirements as
described in Part 2 of this publication.

Exception. Forms 1098-MA and 1042-S can be printed in black ink as specified in Section 5.1.6,
earlier.

## Section 5.4 - Effect on Other Revenue Procedures

### 5.4.1 Revenue Procedure 2014-44, 2014-32, I.R.B. 270, dated August 4, 2014, is superseded by this Other Revenue procedures revenue procedure.

Part 6
Exhibits

#### Section 6.1 - Exhibits of Forms in the Revenue Procedure

6.1.1 Purpose

Exhibits A through EE illustrate some of the specifications that were discussed earlier in this revenue procedure. The dimensions apply to the actual size forms, but the exhibits have been reduced in size.

Generally, the illustrated dimensions apply to all like forms. For example, Exhibit C shows 11.00" from the top edge to the bottom edge of Form 1098 and .85" between the bottom rule of the top form and the top rule of the second form on the page. These dimensions apply to all forms that are printed three to a page.

Exhibit B contains the general measurements for forms printed 2-to-a-page. All 2-to-1-page forms, except Form 1042-S, are 4.5" in height within the border lines. Form 1042-S is 4.25" in height within the border lines. Exhibit C contains the general measurements for forms printed 3-to-a-page. All 3-to-a- page forms are 2.83" in height within the border lines. The printed area of all forms is 7.3" wide. All of the exhibits in this publication were updated to include all of the 2015 revisions for those forms that have been revised.

6.1.2 Guidelines

Keep in mind the following guidelines when printing substitute forms. · Closely follow the specifications to avoid delays in processing the forms. · Always use the specifications as outlined in this revenue procedure and illustrated in the exhibits. . Do not add the text line "Do Not Cut or Separate Forms on This Page" to the bottom form. This will be inconsistent with the specifications.

6.2 Exhibits

The following exhibits provide specifications for the forms listed in the Section 1.1.2. Exhibits A through D contain the general measurements for all of the forms. The remaining exhibits represent the images and may contain unique measurements as required by the form.

# Exhibit A

Telephone number

Fax number

6 Enter an X" in only one box below to indicate the type of form being fled.

7 If this is your final return, enter an ☒ here 0 ☐

W-2G 32

1097-BTC 50

1098 81

1098-C 78

1098-E 84

1098-Q 74

1098-T 83

1099-A 80

1099-B 79

1099-C 85

1099-CAP 73

1099-DIV 91

1099-G 86

1099-INT 92

☐

1099-K 10

1099-LTC 93

1099-MISC 95

1099-OID 96

1099-PATR 97

1099-Q 31

1099-R 98

1099-S

1099-SA 94

3921 25

3922 26

5498 28

5498-ESA

5498-SA 27

☐

50 in

Do Not Staple
6969

Form
1096

Annual Summary and Transmittal of
U.S. Information Returns

OMB No. 1545-0108

Department of the Treasury
Internal Revenue Service

2015

FILER'S name

1.33 in

2.14 in

Street address (including room or suite number)

7.30 in

City or town, state or province, country, and ZIP or foreign postal code

4.50 in

Name of person to contact

For OfficialUse Only

Email address

1 Employer identification number 2 Social security number

1.40 in

3 Total number of forms
1.20 in

4 Federal income tax withheld
1.40 in

5 Total amount reported with this Form 1096
1.90 in

25
5

Return this entire page to the Internal Revenue Service. Photocopies are not acceptable.

Under penalties of perjury, I declare that I have examined this return and accompanying documents, and, to the best of my knowledge and belief, they are true, correct,
and complete.

11.0 in

8.00 in

Signature 0
☐

Title 0
☐

Date
☐

Instructions

When to file. File Form 1096 as follows.

Future developments. For the latest information about developments
related to Form 1096, such as legislation enacted after it was
published, go to www.irs.gov/form1096.

· With Forms 1097, 1098, 1099, 3921, 3922, or W-2G, file by February
29, 2016.

· With Forms 5498, file by May 31, 2016.

Reminder. The only acceptable method of fling information returns
with Internal Revenue Service/Information Returns Branch is
electronically through the FIRE system. See Pub. 1220, Specifcations
for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and
W-2G.

Where To File
Send all information returns fled on paper with Form 1096 to the
following.

Purpose of form. Use this form to transmit paper Forms 1097, 1098,
1099, 3921, 3922, 5498, and W-2G to the Internal Revenue Service.
Do not use Form 1096 to transmit electronically. For electronic
submissions, see Pub. 1220.

If your principal business, office
or agency, or legal residence in
the case of an individual, is
located in

Use the following
three-line address

Caution. If you are required to fle 250 or more information returns of
any one type, you must fle electronically. If you are required to fle
electronically but fail to do so, and you do not have an approved
waiver, you may be subject to a penalty. For more information, see
part F in the 2015 General Instructions for Certain Information Returns.

Alabama, Arizona, Arkansas,
Connecticut, Delaware, Florida, Georgia,
Kentucky, Louisiana, Maine,
Massachusetts, Mississippi, New
Hampshire, New Jersey, New Mexico,
New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, Texas,
Vermont, Virginia, West Virginia

Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301

Who must file. The name, address, and TIN of the fler on this form
must be the same as those you enter in the upper left area of Forms
1097, 1098, 1099, 3921, 3922, 5498, or W-2G. A fler is any person or
entity who fles any of the forms shown in line 6 above.

Enter the fler's name, address (including room, suite, or other unit
number), and TIN in the spaces provided on the form.

For more information and the Privacy Act and Paperwork Reduction Act Notice,
see the 2015 General Instructions for Certain Information Returns.

Cat. No. 144000

Form 1096 (2015)

# Exhibit B

province

FORM097-BTC ISSUER'S country, ZIP or foreign

name, postal

street address, city or town, state or code, and telephone no.

1 Total

OMB No. 1545-2197

1.33 in 4.50 in

2015

2a Code

Bond Tax Credit

Form 1097-BTC

2b Unique Identifer 2.80 in

FORM identifcation

1097-BTC ISSUER'S federal number

RECIPIENT'S federal identifcation number

3 Bond type

1.40 in

Copy A

RECIPIENT'S

name

5a January

5b February

For Internal Revenue

3.40 in

5c March

5d April

Service Center

Street

address (including apt. no.)

File with Form 1096.

5e May

5f June

7.30 in $

City or

town, state or province, country, and ZIP or foreign postal code

5g July

5h August

For Privacy Act and Paperwork

i September

5j October

Reduction Act

Form

1097-BTC issuer is (check one): Issuer of bond or its agent fling 2015 Form 1097-BTC for credit being reported 1 in entity or a person that received or should have received 2015 Form 1097-BTC and is distributing part or all of that edit to others

Notice, see the 2015 General

5k November

51 December

Instructions for Certain Information Returns.

☐

6 Comments

Ah a ☐

50504
☐
VOID
☐
CORRECTED
6.25in

Form 1097-BTC

Cat. No. 54293T
www.irs.gov/form1097btc
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

5050
☐
VOID
☐
CORRECTED

Form 1097-BTC

Cat. No. 54293T

www.irs.gov/form1097btc

Department of the Treasury - Internal Revenue Service

FORM 1097-BTC ISSUER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Total

OMB No. 1545-2197

2015

Bond Tax Credit

2a Code

Form 1097-BTC

2b Unique Identifier

FORM 1097-BTC ISSUER'S federal identification number

RECIPIENT &amp; federal identification

number

3 Bond type

Copy A

RECIPIENT'S name

5a January

5b February

For Internal Revenue Service Center File with Form 1096.

5c March

5d April

Street address (including apt. no.)

5e May

5f June $

City or town, state or province, country, and ZIP or foreign postal code

5g July

5h August $

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information

5i September

5j October $

Form 1097-BTC issuer is (check one):

☐ Issuer of band or its ugerrt fling 2018 Form 1097-BTC for credit being reported ☐ An entity or a person that received or should have received a 2015 Form 1097-BTC and is distributing part or all of that credit to others

5k November

51 December $

6 Comments

Returns.

## Exhibit C

.33 in

50 in

8181
☐
VOID
☐
CORRECTED

RECIPIENT'S/LENDER'S name, street address, city or town, state or province,
country, ZIP or foreign postal code, and telephone number

OMB No. 1545-0901

Mortgage
Interest
Statement

3.33 in

1 in

2015

Form 1098

RECIPIEN

"'S federal identifcatio
1.70 in

no.
PAYER'S social security number

1 Mortgage interest received from payer(s)/borrower(s)
$
2.80 in

Copy AF
For
Internal Revenue
Service Center
File with Form 1096.
For Privacy Act
and Paperwork
Reduction Act

PAYER'S/BORROWER'S name

2 Points paid on purchase of principal residence
2.83 in

3.40 in

Street address (including apt. |no.)

3
Refund

of overpaid interest

7.30 in

Notice, see the
2015 General
Instructions for
Certain
Information
Returns.

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

Form 1098

Cat. No. 14402K
www.irs.gov/form1098
Do Not Cut or Separate Forms on This Page - Do Not Cut or

Department of the Treasury - Internal Revenue Service
Separate Forms on This Page
.85 in

8181

☐
VOID
☐
CORRECTED

4.75 in

8181
☐
VOID
☐
CORRECTED

Form 1098

Cat. No. 14402K

www.irs.gov/form1098

Department of the Treasury - Internal Revenue Service

RECIPIENT'S/LENDER'S name, country, ZIP or foreign postal code,

street address, city or town, state or province, and telephone number

8.00 in

OMB No. 1545-0901

Mortgage

2015 Form 1098

Interest Statement

RECIPIENT'S federal identification no

PAYER'S social security number

1 Mortgage interest received from payer(s)/borrower(s) $

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

PAYER'S/BORROWER'S name 11.00

2 Points paid on purchase of principal residence $

Street address (including apt. nq1)

3 Refund of overpaid interest $

City or town, state or province,

country, and ZIP or foreign postal code

Account number (see instructions)

Form 1098 Do Not Cut or

Separate Forms on This Page - Do Not Cut or Separate Forms on This Page Cat. No. 14402K www.irs.gov/form1098 Department of the Treasury - Internal Revenue Service

RECIPIENT'S/LENDER'S name, country, ZIP or foreign postal code

street address, city or town, state or province, and telephone number

OMB No. 1545-0901 2015 Form 1098

Mortgage Interest Statement

RECIPIENT'S federal identification ne

PAYER'S social security number

1 Mortgage interest received from payer(s)/borrower(s) $

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act

PAYER'S/BORROWER'S name

2 Points paid on purchase of principal residence $

Street address (including apt. no)

3 Refund of overpaid interest $

and Paperwork Reduction Act Notice, see the 2015 General Instructions for

City or town, state or province,

country, and ZIP or foreign postal code

Account number (see instructions)

Certain Information Returns.

## Exhibit D

7878
☐
VOID
☐
CORRECTED

Form 1098-C

Cat. No. 39732R

www.irs.gov/form1098c

Department of the Treasury - Internal Revenue Service

DONEE'S name, street or foreign postal code,

address, city or town, state or province, country, ZIP and telephone no.

| 1 Date of contribution

OMB No. 1545-1959 2015

Contributions of Motor Vehicles, Boats, and Airplanes

2a Odometer mileage

Form 1098-C

2b Year

2c Make

2d Model

DONEE'S federal number

identifcation

DONOR'S identifcation number 3.40 in

3 Vehicle or other identifcation 2.80 in

number

DONOR'S name 7.16 in

4a ☐ Donee certifes that vehicle was sold in arm's length transaction to unrelated party

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

Street address (including

apt. no.)

4b Date of sale

City or town, state or

province, country, and ZIP or foreign postal code

4c Gross proceeds from sale (see instructions) $

5a ☐ Donee certifes improvements

that vehicle will not be transferred for money, other property, or services before completion of material or signifcant intervening use

5b ☐ Donee certifes donee's charitable

that vehicle is to be transferred to a needy individual for purpose

significantly below fair market value in furtherance of

5c Donee certifes the

following detailed description of material improvements 7.30

or significant intervening use and duration of use

6a Did you provide

goods or services in exchange for the vehicle ?.

Yes ☐ No ☐

6b Value of goods and $

services provided in exchange for the vehicle

6c Describe the goods consisted solely of

and services, if any, that were provided. If this box is checked, donee certifes that the goods and services intangible religious benefts ☐

7 Under the law, the

donor may not claim a deduction of more than $500 for this vehicle if this box is checked

☐

### Exhibit E

8484
☐
VOID
☐
CORRECTED

RECIPIENT'S/LENDER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number

OMB No. 1545-1576 2015 Form 1098-E

Student Loan Interest Statement

RECIPIENT'S federal identifcation no.

BORROWER'S social security number

1 Student loan interest received by lender $

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information 1.17 in Returns.

BORROWER'S name

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

2 Check if box 1 does not include loan origination fees and/or capitalized interest, and the loan was made before September 1, 2004 ☐

Form 1098-E
Cat. No. 25088U
www.irs.gov/form1098e
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

8484
☐
VOID
☐
CORRECTED

RECIPIENT'S/LENDER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number

OMB No. 1545-1576 2015 Form 1098-E

Student Loan Interest Statement

RECIPIENT'S federal identifcation no.

BORROWER'S social security number

1 Student loan interest received by lender $

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

BORROWER'S name

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

2 Check if box 1 does not include loan origination fees and/or capitalized interest, and the loan was made before September 1, 2004

☐

Form 1098-E

Cat. No. 25088U

www.irs.gov/form 1098e
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

8484
☐
VOID
☐
CORRECTED

RECIPIENT'S/LENDER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number

OMB No. 1545-1576 2015 Form 1098-E

RECIPIENT'S federal Identification no

BORROWER'S social security number

1 Student loan interest received by lender $

BORROWER'S name

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

2 Check if box 1 does not include loan origination fees and/or capitalized interest, and the loan was made before September 1, 2004 ☐

Student
Loan Interest
Statement

Copy A
For
Internal Revenue
Service Center
File with Form 1096.
For Privacy Act and
Paperwork Reduction
Act Notice, see the
2015 General
Instructions for
Certain Information
Returns.

Form 1098-E

Cat. No. 25088U

www.irs.gov/form 1098e

Department of the Treasury - Internal Revenue Service

### Exhibit F

☐
VOID
☐
CORRECTED

4.95 in

FILER'S name, street address, city, state, ZIP code, and telephone no.

OMB No. 1545-2221

Mortgage Assistance Payments

2015 Form 1098-MA

FILER'S federal identifcation no.

HOMEOWNER'S federal identifcation no.

1. Total State HFA/HUD and homeowner mortgage payments $

Copy A For Internal Revenue Service Center For Privacy Act and Paperwork Reduction Act

HOMEOWNER'S name

2. State HFA/HUD mortgage assistance payments $

Street address (including apt. no.) (optional)

3. Homeowner mortgage payments $

City, state, and ZIP code (optional)

Notice, see the 2015 General Instructions for Certain Information Returns.

Account number (optional)

Form 1098-MA
Cat. No. 58017D

Department of the Treasury - Internal Revenue Service
www.irs.gov/form1098ma

Do Not Cut or Separate Forms on This Page
Do Not Cut or Separate Forms on This Page

☐
VOID
☐
CORRECTED

FILER'S name, street address, city, state, ZIP code, and telephone no.

OMB No. 1545-2221

2015 Form 1098-MA

FILER'S federal identifcation no.

HOMEOWNER'S federal identifcation no.

1. Total State HFA/HUD and homeowner mortgage payments $

HOMEOWNER'S name

2. State HFA/HUD mortgage assistance payments $

Street address (including apt. no.) (optional)

3. Homeowner mortgage payments $

City, state, and ZIP code (optional)

Account number (optional)

Mortgage
Assistance
Payments

Copy A
For
Internal Revenue
Service Center

For Privacy Act
and Paperwork
Reduction Aci
Notice, see
the 2015 General
Instructions for
Certain Information
Returns.

Form 1098-MA
Cat. No. 58017D
www.irs.gov/form 1098ma

Department of the Treasury - Internal Revenue Service

Do Not Cut or Separate Forms on This Page
\-
Do Not Cut or Separate Forms on This Page

☐
VOID
☐
CORRECTED

FILER'S name, street address, city, state, ZIP code, and telephone no.

OMB No. 1545-2221

2015 Form 1098-MA

FILER S fscoral icontifosi on no.

HOMEOWNER'S federal Identification no.

1. Total State HFA/HUD and homeowner mortgage payments $

HOMEOWNER'S name

2. State HFA/HUD mortgage assistance payments $

Street address (including apt. no.) (optional)

3. Homeowner mortgage payments $

City, state, and ZIP code (optional)

Account number (optional)

Mortgage
Assistance
Payments

Copy A
For
Internal Revenue
Service Center

For Privacy Act
and Paperwork
Reduction Aci
Notice, see
the 2015 General
Instructions for
Certain Information
Returns.

Form 1098-MA

Cat. No. 58017D

www.irs.gov/form1098ma

Department of the Treasury - Internal Revenue Service

### Exhibit G

7474
☐
VOID
☐
CORRECTED

ISSUER'S name, street address, city or tow
or foreign postal code, and telephone no.

state or province, country, ZIP

ISSUER'S federal identifcation no
OMB No. 1545-2234

PARTICIPANT'S tagpaye
identifcation no.

payer
0.50 in

2015

Qualifying
Longevity Annuity
Contract
Information

1.5 in

1a Annuity amount on start date
$

Form 1098-Q

1b Annuity start date

2 Check if st
t date may be
accelerated
☐
0.4 in

Copy A
For
Internal Revenue
Service Center

0.6 in

3 Total premiums
$

4 FMV of QLAC
$

0.4 in

PARTICIPANT'S name

5a January
$

5b Februa
$

File with Form 1096.

0.5 in

0.34 in

5c March
$

5d April
$

For Privacy Act
and Paperwork
Reduction Act Notice,
see the
2015 General
Instructions for
Certain Information
Returns.

Street address (including apt. no.)

0.6 in

5e May
$

5f June
$

5g July
$

City or town, state or province, country, and ZIP or foreign postal code
0.3 in

5h August
$

Account number (see instructions)

0.5 in
I

5i September
$

5j October
$

Plan no.

5k November

51 December
$

$
1.0 in

0.4 in

Name of plan

Plan sponsor's employer
identifcation no.

0.5 in

Form 1098-Q
Cat. No. 67073Z
Do Not Cut or Separate Forms on This Page

www.irs.gov/form1098q

Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page

7474
☐
VOID
☐
CORRECTED

ISSUER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

IOBJERT'S fudarul identHorton no.

OMB No. 1545-2234

Qualifying Longevity Annuity Contract Information

PARTICIPANT'S taxpayer identification no.

2015

1a Annuity amount on $

start date

Form 1098-Q

1b Annuity start date

2 Check if start date may be accelerated ☐

Copy A For Internal Revenue Service Center

3 Total premiums

4 FMV of QLAC $

PARTICIPANT'S name

5a January

5b February

File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

5c March

5d April

Street address (including apt. no.)

5e May

5f June

5g July

5h August

City or town, state or province, country, and ZIP or foreign postal code

5i September

5j October

Account number (see instructions)

Plan no.

5k November

51 December

Name of plan

Plan sponsor's employer
identification no.

Form 1098-Q

Cat. No. 67073Z

www.irs.gov/form1098q

Department of the Treasury - Internal Revenue Service

### Exhibit H

8383
☐
VOID
☐
CORRECTED

FILER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number

1 Payments received for qualifed tuition and related expenses

OMB No. 1545-1574

2015 Form 1098-T

Tuition Statement

2 Amounts billed for qualifed tuition and related expenses

FILER'S federal identifcation no.

STUDENT'S social security number

3 Check if you have changed your reporting method for 2015 ☐

Copy A For

STUDENT'S name

4 Adjustments made for a prior year $

5 Scholarships or grants $

Internal Revenue Service Center File with Form 1096.

Street address (including apt. no.)

6 Adjustments to scholarships or grants

7 Check this box if the amount in box 1 or 2 includes amounts for an academic period beginning January - March 2016 0 ☐

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

for a prior year $

Service Provider/Acct. No. (see instr.)

8 Check if at least half-time student ☐

9 Check if a graduate student ☐

10 Ins. contract reimb./refund $

Form 1098-T
Cat. No. 25087J
Do Not Cut or Separate Forms on This Page

www.irs.gov/form1098t
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page

8383
☐
VOID
☐
CORRECTED

FILER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number

1 Payments received for qualifed tuition and related expenses $

OMB No. 1545-1574 2015 Form 1098-T

Tuition Statement

2 Amounts billed for qualifed tuition and related expenses $

FILER'S federal identifcation no.

STUDENT'S social security number

3 Check if you have changed reporting method for 2015

your ☐

Copy A For

STUDENT'S name

4 Adjustments made for a prior year $

5 Scholarships or grants $

Internal Revenue Service Center File with Form 1096.

Street address (including apt. no.)

6 Adjustments to scholarships or grants for a prior year $

7 Check this box if the amount in box 1 or 2 includes amounts for an academic period beginning January - March 2016 0 ☐

For Privacy Act and Paperwork Reduction

City or town, state or province, country, and ZIP or foreign postal code

Act Notice, see the 2015 General Instructions for Certain Information Returns.

Service Provider/Acct. No. (see instr.)

8 Check if at least half-time student ☐

9 Check if a graduate student ☐

10 Ins. contract reimb./refund $

Form 1098-T
Cat. No. 25087J
www.irs.gov/form1098t
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page
Do Not Cut or Separate Forms on This Page

8383

☐ VOID ☐ CORRECTED

FILER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number

1 Payments received for qualifed tuition and related expenses $

OMB No. 1545-1574 2015 Form 1098-T

2 Amounts billed for qualifed tuition and related expenses

FILER'S federal identifcation no. STUDENT'S social security number

3 Check if you have changed your reporting method for 2015 ☐

STUDENT'S name

4 Adjustments made for a prior year $

5 Scholarships or grants $

Street address (including apt. no.)

6 Adjustments to scholarships or grants for a prior year

7 Check this box if the amount in box 1 or 2 includes amounts for an academic period beginning January - March 2016 0 ☐

City or town, state or province, country, and ZIP or foreign postal code

Service Provider/Acct. No. (see instr.)

8 Check if at least half-time student ☐

9 Check if a graduate student ☐

10 Ins. contract reimb./refund $

Tuition
Statement

Copy A
For
Internal Revenue
Service Center
File with Form 1096.
For Privacy Act and
Paperwork Reduction
Act Notice, see the
2015 General
Instructions for
Certain Information
Returns.

Form 1098-T
Cat. No. 25087J
www.irs.gov/form1098t
Department of the Treasury - Internal Revenue Service

### Exhibit

8080

☐

VOID

☐

CORRECTED

LENDER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

OMB No. 1545-0877 2015 Form 1099-A

Acquisition or Abandonment of Secured Property

1 Date of lender's acquisition or knowledge of abandonment

2 Balance of principal outstanding $

Copy A For Internal Revenue

LENDER'S federal identifcation number

BORROWER'S identifcation number

BORROWER'S name

4 Fair market value of property $

Service Center File with Form 1096. For Privacy Act

Street address (including apt. no.)

5 If checked, the borrower was of the debt

personally liable for repayment ☒

and Paperwork Reduction Aci Notice, see the

City or town, state or province, country,

and ZIP or foreign postal code

6 Description of property

2015 General Instructions for

Account number (see instructions)

Certain Information

Returns.

1.30 in

Form 1099-A
Cat. No. 14412G

www.irs.gov/form1099a
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

8080
☐
VOID
☐
CORRECTED

LENDER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

OMB No. 1545-0877 2015 Acquisition or Abandonment of Secured Property Form 1099-A

1 Date of lender's acquisition or knowledge of abandonment

2 Balance of principal outstanding $

Copy A For Internal Revenue

LENDER'S federal identifcation number

BORROWER'S identifcation number

BORROWER'S name

4 Fair market value of property $

Service Center File with Form 1096. For Privacy Act

Street address (including apt. no.)

5 If checked, the borrower was of the debt

personally liable for repayment ☐

and Paperwork Reduction Act Notice, see the

City or town, state or province, country, and ZIP or foreign postal code

6 Description of property

2015 General Instructions for

Account number (see instructions)

Certain Information Returns.

Form 1099-A

Cat. No. 14412G

www.irs.gov/form1099a
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

8080
☐
VOID
☐
CORRECTED

LENDER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

OMB No. 1545-0877 2015 Acquisition or Abandonment of Secured Property Form 1099-A

1 Date of lender's acquisition or knowledge of abandonment

2 Balance of principal outstanding $

Copy A For Internal Revenue

LENDER'S federal identifcation number

BORROWER'S identifcation number

BORROWER'S name

4 Fair market value of property $

Service Center File with Form 1096. For Privacy Act

Street address (including apt. no.)

5 If checked, the borrower was personally liable for repayment of the debt ☐

and Paperwork Reduction Aci Notice, see the

City or town, state or province, country, and ZIP or foreign postal code

6 Description of property

2015 General Instructions for Certain Information Returns.

Account number (see instructions)

Form 1099-A

Cat. No. 14412G

www.irs.gov/form1099a

Department of the Treasury - Internal Revenue Service

### Exhibit J

7979

☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP
or foreign postal code, and telephone no.

Applicable check box on Form 8949

OMB No. 1545-0715

2015
Form 1099-B

Proceeds From
Broker and
Barter Exchange
Transactions

1a Description of property (Example 100 sh. XYZ Co.)

Copy A
For
Internal Revenue
Service Center
File with Form 1096.
1.27 in

RECIPIENT'S name

Street address (including apt. no.)

For Privacy Act
and Paperwork
Reduction Act
Notice, see the
2015 General
Instructions for
Certain
Information
Returns.

City or town, state or province, country, and ZIP or foreign postal code

14 State name

15 State identifcation no.
16 State tax withheld
$
$

Form 1099-B

www.irs.gov/form1099b
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

Cat. No. 14411V

7979
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP
or foreign postal code, and telephone no.

1a Description of property (Example 100 sh. XYZ Co.)

Copy A
For
Internal Revenue
Service Center
File with Form 1096.

RECIPIENT'S name

Street address (including apt. no.)

For Privacy Act
and Paperwork
Reduction Act
Notice, see the
2015 General
Instructions for

City or town, state or province, country, and ZIP or foreign postal code

Certain

Information
Returns.

14 State name

15 State identifcation no

16 State tax withheld

Form 1099-B

Cat. No. 14411V

www.irs.gov/form1099b

Department of the Treasury - Internal Revenue Service

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

1b Date acquired

1c Date sold or disposed

1d Proceeds $

1e Cost or other basis $

1f Code, if any

1g Adjustments $

2 Type of gain or loss: Short-term ☐ Long-term ☐

3 Check if basis reported to IRS ☒

4 Federal income tax withheld $

5 Check if noncovered security ☐

6 Reported to IRS: Gross proceeds ☐ Net proceeds ☒

7 Check if loss is not allowed based on amount in 1d 2.60 in ☒

8 Proft or (loss) realized in 2015 on closed contracts $

9 Unrealized proft or (loss) on open contracts-12/31/2014 $

10 Unrealized proft or (loss) on open contracts-12/31/2015 $

11 Aggregate proft or (loss) on contracts $

13 Bartering $

Account number (see instructions)

2nd TIN not. ☐

CUSIP number

0.60 in

Applicable check box on Form 8949

OMB No. 1545-0715

Proceeds From

2015 Form 1099-B

Broker and Barter Exchange Transactions

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

Account number (see instructions)

2nd TIN not.

☐

CUSIP number

1b Date acquired

1c Date sold or disposed

1d Proceeds $

1e Cost or other basis $

1f Code, if any

1g Adjustments $

2 Type of gain or loss: Short-term ☐ Long-term ☐

3 Check if basis reported to IRS ☐

4 Federal income tax withheld $

5 Check if noncovered security ☐

6 Reported to IRS: Gross proceeds ☐ Net proceeds ☐

7 Check if loss is not allowed based on amount in 1d ☐

8 Proft or (loss) realized in 2015 on closed contracts $

9 Unrealized proft or (loss) on open contracts-12/31/2014 $

40 Linrealized proft or floss) on open contracts-12/31/2015 $

11 A4 Regine proft or (loss) on contracts $

13 Bartering $

### Exhibit K

8585
☐
VOID
☐
CORRECTED

CREDITOR'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Date of identifable event

OMB No. 1545-1424 2015 Form 1099-C

Cancellation of Debt

2 Amount of debt discharged $

3 Interest if included in box 2 $

CREDITOR'S federal identification number

DEBTOR'S identifcation number

4 Debt description

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

DEBTOR'S name

Street address (including apt. no.)

5 Check here if the debtor was personally liable for repayment of the debt 0 ☐

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

6 Identifable event code

7 Fair market value of property $

Form 1099-C
Cat. No. 26280W

www.irs.gov/form1099c
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

8585
☐
VOID
☐
CORRECTED

CREDITOR'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Date of identifable event

OMB No. 1545-1424 2015 Form 1099-C

Cancellation of Debt

2 Amount of debt discharged $

3 Interest if included in box 2 $

CREDITOR'S federal identification number DEBTOR'S identifcation number

4 Debt description

Copy A For Internal Revenue Service Center File with Form 1096.

DEBTOR'S name

Street address (including apt. no.)

5 Check here if the debtor was personally liable for repayment of the debt 0 ☐

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

6 Identifable event code

7 Fair market value of property $

Form 1099-C

Cat. No. 26280W

www.irs.gov/form1099c
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

8585
☐
VOID
☐
CORRECTED

CREDITOR'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Date of identifable event

OMB No. 1545-1424 2015 Form 1099-C

Cancellation of Debt

2 Amount of debt discharged $

3 Interest if included in box 2 $

CREDITOR'S federal identification number

DEBTOR'S identifcation number

4 Debt description

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

DEBTOR'S name

Street address (including apt. no.)

5 Check here if the debtor was personally liable for repayment of the debt 0 ☐

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

6 Identifable event code

7 Fair market value of property $

Form 1099-C

Cat. No. 26280W

www.irs.gov/form1099c

Department of the Treasury - Internal Revenue Service

### Exhibit L

CORPORATION'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Date of sale or exchange

OMB No. 1545-1814 2015 Form 1099-CAP

Changes in Corporate Control and Capital Structure

2 Aggregate amount rec'd* $

3 No. of shares exchanged

4 Classes of stock exchanged

Copy A

CORPORATION'S federal identifcation no.

SHAREHOLDER'S identifcation no.

For Internal Revenue Service Center File with Form 1096. For Paperwork Reduction Act Notice, see the

SHAREHOLDER'S name

Street address (including apt. no.)

2015 General Instructions for Certain Information

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

* The shareholder cannot claim a loss based on the amount in box 2.

Returns.

CORPORATION'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Date of sale or exchange

OMB No. 1545-1814 2015 Form 1099-CAP

Changes in Corporate Control and Capital Structure

2 Aggregate amount rec'd* $

3 No. of shares exchanged

4 Classes of stock exchanged

Copy A

CORPORATION'S federal identifcation no.

SHAREHOLDER'S identifcation no.

For Internal Revenue Service Center

SHAREHOLDER'S name

File with Form 1096. For Paperwork Reduction Act Notice, see the

Street address (including apt. no.)

2015 General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

* The shareholder cannot amount in box 2.

claim a loss based on the

7373
☐
VOID
☐
CORRECTED

Form 1099-CAP

Cat. No. 35115M
www.irs.gov/form1099cap
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

7373
☐
VOID
☐
CORRECTED

Form 1099-CAP

www.irs.gov/form1099cap
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

Cat. No. 35115M

7373
☐
VOID
☐
CORRECTED

CORPORATION'S name, street address, city or town, state or province, country,
ZIP or foreign postal code, and telephone no.

1
Date of sale or exchange

OMB No. 1545-1814

Changes in
Corporate
Control and
Capital Structure

2 Aggregate amount rec'd*
$

2015
Form 1099-CAP

3
No. of shares exchanged

4 Classes of stock exchanged

Copy A
For
Internal Revenue
Service Center
File with Form 1096.
For Paperwork
Reduction Aci
Notice, see the
2015 General
Instructions for
Certain Information
Returns.

CORPORATION'S federal identifcation no.

SHAREHOLDER'S identifcation no.

SHAREHOLDER'S name

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

\* The shareholder cannot claim a loss based on the
amount in box 2.

Form 1099-CAP

Cat. No. 35115M

www.irs.gov/form1099cap

Department of the Treasury - Internal Revenue Service

### Exhibit M

9191
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP
or foreign postal code, and telephone no.

Dividends and
Distributions

Copy A
For
Internal Revenue
Service Center
File with Form 1096.

RECIPIENT'S name

50 in

For Privacy Act
and Paperwork
Reduction Act
Notice, see the
2015 General
Instructions for

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Certain
Information
Returns.

FATCA fling
requirement
☐
2nd TIN not.
☐

Account number (see instructions)

Form 1099-DIV

Cat. No. 14415N
Do Not Cut or Separate Forms on This Page

60 in

Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page

www.irs.gov/form1099div

9191
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP
or foreign postal code, and telephone no.

Dividends and
Distributions

Copy A
For
Internal Revenue
Service Center
File with Form 1096.

RECIPIENT'S name

For Privacy Act
and Paperwork
Reduction Act
Notice, see the
2015 General
Instructions for

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Certain
Information
Returns.

FATCA fling
requirement
☐
2nd TIN not.
☐

Account number (see instructions)

Form 1099-DIV

Cat. No. 14415N

www.irs.gov/form1099div

Department of the Treasury - Internal Revenue Service

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

1a Total ordinary dividends

OMB No. 1545-0110

2015

1b Qualifed dividends

Form 1099-DIV

2a Total capital gain distr. $

2b Unrecap. Sec. 1250 gain $

2c Section 1202 gain $

2d Collectibles (28%) gain $

3 Vandividend distributions $ .33 in

4 Federal income tax withheld $

5 Investment expenses $

6 Foreign tax paid $

7 Forei country or U.S. possession 50 in

8 Cash liquidation distributions $

9 Noncash liquidation distributions $

10 Exempt-interest dividends $

11 Specifed private activity bond interest dividends $

12 State 13 State identification no

14 State tax withheld $

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

1a Total ordinary dividends

OMB No. 1545-0110

2015 Form 1099-DIV

Ib Qualifed dividends

2a Total capital gain distr. $

2b Unrecap. Sec. 1250 gain $

2c Section 1202 gain

2d Collectibles (28%) gain $

3 Nondividend distributions $

4 Federal income tax withheld $

5 Investment expenses $

6 Foreign tax paid

7 Foreign country or U.S. possession

8 Cash liquidation distributions $

9 Noncash liquidation distributions $

10 Exempt-interest dividends $

11 Specifed private activity bond interest dividends $

12 State

13 State identification no

14 State tax withheld $

8686
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Unemployment compensation

OMB No. 1545-0120 2015 Certain Government Payments Form 1099-G

2 State or local income tax refunds, credits, or offsets $

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

3 Box 2 amount is for tax year

4 Federal income tax withheld $

Copy A For

RECIPIENT'S name

5 RTAA payments $

6 Taxable grants $

Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

7 Agriculture payments $

8 Check if box 2 is trade or business income ☐

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

9 Market gain $

10a State

10b State identifcation

no.

11 State income tax withheld $

Account number (see instructions)

Form 1099-G
Cat. No. 14438M
www.irs.gov/form1099g
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

8686
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Unemployment compensation

OMB No. 1545-0120 2015 Certain Government Payments Form 1099-G

2 State or local income tax refunds, credits, or offsets $

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

3 Box 2 amount is for tax year

4 Federal income tax withheld $

Copy A For

RECIPIENT'S name

5 RTAA payments $

6 Taxable grants $

Internal Revenue Service Center

7 Agriculture payments $

8 Check if box 2 is trade or business income ☐

File with Form 1096. For Privacy Act

Street address (including apt. no.)

9 Market gain $

and Paperwork Reduction Aci Notice, see the 2015

City or town, state or province, country, and ZIP or foreign postal code

10a State

10b State identifcation

no.

11 State income tax withheld

General

Account number (see instructions)

Instructions for Certain Information Returns.

Form 1099-G
Cat. No. 14438M

www.irs.gov/form1099g
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

8686 ☐ VOID ☐ CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Unemployment compensation

OMB No. 1545-0120

Certain 2015 Government Payments Form 1099-G

2 State or local income tax refunds, credits, or offsets $

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

3 Box 2 amount is for tax year

4 Federal income tax withheld $

Copy A For

RECIPIENT'S name

5 RTAA payments $

6 Taxable grants $

Internal Revenue Service Center

7 Agriculture payments $

8 Check if box 2 is trade or business income ☐

File with Form 1096. For Privacy Act

Street address (including apt. no.)

9 Market gain $

and Paperwork Reduction Aci Notice, see the 2015 General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

10a State

10b State identifcation

no.

11 State income tax withheld $

Account number (see instructions)

Form 1099-G

Cat. No. 14438M

www.irs.gov/form1099g

Department of the Treasury - Internal Revenue Service

#### Exhibit

9292
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP
or foreign postal code, and telephone no.

2 Early withdrawal penalty

3 Interest on U.S. Savings Bonds and Treas. obligations
$

Copy A
For
Internal Revenue
Service Center

RECIPIENT'S name

File with Form 1096.
For Privacy Act
and Paperwork
Reduction Act
Notice, see the
2015 General
Instructions for
Certain
Information
Returns.

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

FATCA fling
requirement
☐
2nd TIN not.
☐

13 Bond premium on tax-exempt bond
$

Account number (see instructions)

14 Tax-exempt and tax credit
bond CUSIP no.

16 State identifcation no.
:40 in1.00 in$

15 State

17 State tax withheld
$

Form 1099-INT

Cat. No. 14410K
Do Not Cut or Separate Forms on This Page

www.irs.gov/form1099int

Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page

9292
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP
or foreign postal code, and telephone no.

2 Early withdrawal penalty

Copy A
For
Internal Revenue
Service Center

3 Interest on U.S. Savings Bonds and Treas. obligations
$

RECIPIENT'S name

File with Form 1096.
For Privacy Act
and Paperwork
Reduction Act
Notice, see the
2015 General
Instructions for
Certain
Information
Returns.

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

FATCA fling
requirement
☐
2nd TIN not.
☐

Account number (see instructions)

14 Tax-exempt and tax credit
bond CUSIP no.

15 State

16 State identifcation no.

17 State tax withheld
$

4.15 in

Form 1099-INT

Cat. No. 14410K

www.irs.gov/form1099int

Department of the Treasury - Internal Revenue Service

Payer's RTN (optional)

OMB No. 1545-0112

Interest Income

2015

1 Interest income $

Form 1099-INT

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

4 Federal income tax withheld $

5 Investment expenses $

6 Foreign tax paid $

7 Foreign country or U.S. possession

8 Tax-exempt interest $

9 Specifed private activity bond interest $

10 Market discount $

11 Bond premium $

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

Payer's RTN (optional)

OMB No. 1545-0112

Interest Income

2015

1 Interest income

Form 1099-INT

4 Federal income tax withheld $

5 Investment expenses $

6 Foreign tax paid $

7 Foreign country or U.S. possession

8 Tax-exempt interest $

9 Specifed private activity bond interest $

10 Market discount $

11 Bond premium $

13 Bond premium on tax-exempt bond

### Exhibit P

FILER'S name, street address, city or tow state or province, country, ZIP or foreign postal code, and telephone no. 1.40 in

FILER'S federal identifcation no. 0.33 in

OMB No. 1545-2205

Payment Card and Third Party Network Transactions

PAYEE'S taxpayer identifcation no.

2015

1a Gross amount of payment card/third party network transactions $ 0.50 in

Form 1099-K

1b Card Not Present transactions $

2 Merchant category code 0.42in

Copy A For

Check to indicate if FILER is a (an):

Check to indicate transactions reported are: Payment card ☐ 0.11 in Third party network ☐

Payment settlement entity (PSE) ☐ Electronic Payment Facilitator (EPF)/Other third party ☐

3 Number of payment transactions 0.42in

4 Federal income ax withheld $

Internal Revenue Service Center

PAYEE'S name 1.56 in

5a January $

5b February $

File with Form 1096. For Privacy Act and Paperwork Reduction Act

5c March

5d April $ 0.33 in

Street address (including apt. no.)

5e May $

5f June $

Notice, see the 2015 General Instructions for

5g July

5h August $

Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

5i September

5j October

PSE'S name and telephone number

5k November $

51 December $

Account number (see instructions)

2nd TIN not. ☐

6 State

7 State identifcation no.

8 State income tax withheld

1010
☐
VOID
☐
CORRECTED

Form 1099-K

Cat. No. 54118B
Do Not Cut or Separate Forms on This Page

Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page

www.irs.gov/form1099k

1010
☐
VOID
☐
CORRECTED

Form 1099-K

Cat. No. 54118B

www.irs.gov/form1099k

Department of the Treasury - Internal Revenue Service

FILER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

FILER'S federal identifcation no.

OMB No. 1545-2205

Payment Card and

PAYEE'S taxpayer identifcation no.

2015 Form 1099-K

Third Party

1a Gross amount of payment card/third party network transactions $

Network Transactions

1b Card Not Present transactions $

2 Merchant category code

Copy A For

Check to indicate if FILER is a (an): Payment settlement entity (PSE) ☐ Electronic Payment Facilitator (EPF)/Other third party ☐

Check to indicate transactions reported are: Payment card ☐ Third party network ☐

3 Number of payment transactions

4 Federal income tax withheld $

Internal Revenue Service Center

PAYEE'S name

5a January $

5b February $

File with Form 1096.

Street address (including apt. no.)

5c March $

5d April $

For Privacy Act and Paperwork Reduction Act

5e May $

5f June $

Notice, see the 2015 General Instructions for

5g July

5h August $

Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

5i September

5j October $

PSE'S name and telephone number

5k November $

51 December $

Account number (see instructions)

2nd TIN not. ☐

6 State

7 State identifcation no.

8 State income tax withheld

## Exhibit Q

9393
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Gross long-term care benefts paid .67 in $

OMB No. 1545-1519 2015 Form 1099-LTC

Long-Term Care and Accelerated Death Benefits

2 Accelerated death benefts paid 50 in $

PAYER'S federal identifcation number

POLICYHOLDER'S identifcation number

Ť INSURED'S taxpayer identifcation no. .50 in

Copy A

3 Check one: ☐ Per Reimbursed diem ☐ amount

For Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for

POLICYHOLDER'S name

INSURED'S name IT

.33 in

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

4 Qualifed contract ☐ (optional)

5 Check, if applicable: ☐ Chronically ill (optional) ☐ Terminally ill

Date certifed

Certain Information Returns.

Form 1099-LTC
Cat. No. 23021Z

www.irs.gov/form1099ltc
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

9393
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Gross long-term care benefts paid

OMB No. 1545-1519

Long-Term Care and Accelerated Death Benefits

2015

2 Accelerated death benefts paid

Form 1099-LTC

PAYER'S federal identifcation number

POLICYHOLDER'S identifcation number

INSURED'S taxpayer identification no.

Copy A

3 Check one: ☐ Per Reimbursed diem ☐ amount

For Internal Revenue Service Center

POLICYHOLDER'S name

INSURED'S name

File with Form 1096. For Privacy Act

Street address (including apt. no.)

and Paperwork Reduction Act Notice, see the

City or town, state or province, country, and ZIP or foreign postal code

2015 General Instructions for Certain Information Returns.

Account number (see instructions)

4 Qualifed contract ☐ (optional)

5 Check, if applicable: ☐ (optional) ☐

Chronically ill Terminally ill

Date certifed

Form 1099-LTC
Cat. No. 23021Z

www.irs.gov/form1099ltc
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

9393
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Gross long-term care benefts paid $

OMB No. 1545-1519

Long-Term Care and Accelerated Death Benefits

2015

2 Accelerated death benefts paid

Form 1099-LTC

PAYER'S federal identifcation number

POLICYHOLDER'S identifcation number

INSURED'S taxpayer identifcation no.

Copy A

3 Check one: ☐ Per Reimbursed diem ☐ amount

For Internal Revenue Service Center File with Form 1096. For Privacy Act

POLICYHOLDER'S name

INSURED'S name

Street address (including apt. no.)

and Paperwork Reduction Act Notice, see the

City or town, state or province, country, and ZIP or foreign postal code

2015 General Instructions for

Account number (see instructions)

4 Qualifed contract ☐ (optional)

5 Check, if applicable: ☐ (optional) ☐

Chronically ill Terminally ill

Date certifed

Certain Information Returns.

Form 1099-LTC

Cat. No. 23021Z

www.irs.gov/form1099ltc

Department of the Treasury - Internal Revenue Service

## Exhibit R

9595

☐
VOID
☐
CORRECTED

45 in

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Rents

OMB No. 1545-0115

2015 Miscellaneous Income Form 1099-MISC

2 Royalties $

3 Other income $

4 Federal income tax withheld $

Copy A For

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

5 Fishing boat proceeds

6 Medical and health care payments

Internal Revenue Service Center

File with Form 1096.

RECIPIENT'S name

7 Nonemployee compensation

8 Substitute payments in lieu of dividends or interest

For Privacy Act and Paperwork Reduction Act

Street address (including apt. no.)

Notice, see the 2015 General Instructions for Certain Information Returns.

.50 in City or town, state or province, country, and ZIP or foreign postal code

9 Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale 0 ☐

10 Crop insurance proceeds $

Account number (see instructions)

FATCA fling requirement ☐

2nd TIN not. ☐

13 Excess golden parachute payments $

14 Gross proceeds paid to an attorney $

15a Section 409A deferrals

15b Section 409A income

16 State tax withheld $

17 State/Payer's state no.

18 State income $

Form 1099-MISC
gat. No. 14425J

www.irs.gov/form1099misc
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

1.00 in
!

9595
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Rents

OMB No. 1545-0115

2015 Form 1099-MISC

Miscellaneous

2 Royalties $

Income

3 Other income $

4 Federal income tax withheld $

Copy A For

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

5 Fishing boat proceeds

6 Medical and health care payments

Internal Revenue

Service Center

File with Form 1096.

RECIPIENT'S name

7 Nonemployee compensation

8 Substitute payments in lieu of dividends or interest

For Privacy Act and Paperwork Reduction Act

Street address (including apt. no.)

Notice, see the

City or town, state or province, country, and ZIP or foreign postal code

9 Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale 0 ☐

10 Crop insurance proceeds $

2015 General Instructions for Certain

Information Returns.

Account number (see instructions)

FATCA fling requirement ☐

2nd TIN not. ☐

13 Excess golden parachute payments $

14 Gross proceeds paid to an attorney $

15a Section 409A deferrals

15b Section 409A income

16 State tax withheld

17 State/Payer's state no.

18 State income

Form 1099-MISC

Cat. No. 14425J

www.irs.gov/form1099misc

Department of the Treasury - Internal Revenue Service

### Exhibit S

9696

☐ VOID ☐ CORRECTED

PAYER'S name, street address, city or town, state or foreign postal code, and telephone no.

or province, country, ZIP

1 Original

issue discount for

OMB No. 1545-0117

2015

2015 Form 1099-OID

Original Issue Discount

2 Other periodic interest

3 Early withdrawal penalty

4 Federal income tax withheld

Copy A

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

For Internal Revenue

5 Market discount

6 Acquisition premium

RECIPIENT'S name

Service Center

7 Description

File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

8 Original issue discount on U.S. Treasury obligations

FATCA fling requirement ☐

9 Investment expenses

Account number (see instructions)

2nd TIN not. ☐

10 State

11 State identifcation

no. 12 State tax withheld $

Form 1099-OID

Cat. No. 14421R
www.irs.gov/form1099oid
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

Form 1099-OID

3 Early withdrawal penalty

4 Federal income tax withheld

5 Market discount

6 Acquisition premium

9696
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP
or foreign postal code, and telephone no.

1 Original issue discount for
2015

OMB No. 1545-0117

Original Issue
Discount

2 Other periodic interest

2015

Copy A

For
Internal Revenue
Service Center

RECIPIENT'S name

7 Description

File with Form 1096.

Street address (including apt. no.)

For Privacy Act
and Paperwork
Reduction Aci
Notice, see the
2015 General
Instructions for
Certain
Information
Returns.

City or town, state or province, country, and ZIP or foreign postal code

8 Original issue discount on U.S. Treasury obligations

FATCA fling
requirement
☐

9 Investment expenses

Account number (see instructions)

2nd TIN not.
☐

Form 1099-OID

Cat. No. 14421R

www.irs.gov/form1099oid

Department of the Treasury - Internal Revenue Service

10 State

11 State identifcation no.

12 State tax withheld $

Exhibit T

9797
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Patronage dividends $

OMB No. 1545-0118 2015 Form 1099-PATR

Taxable Distributions Received From Cooperatives

2 Nonpatronage distributions $

3 Per-unit retain allocations $

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

4 Federal income tax withheld $

Copy A For Internal Revenue Service Center File with Form 1096.

RECIPIENT'S name

5 Redemption of nonqualifed notices and retain allocations $

6 Domestic production activities deduction $

Street address (including apt. no.)

7 Investment credit $

For Privacy Act and Paperwork Reduction Aci Notice, see the 2015 General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

8 Work opportunity credit $

9 Patron's AMT adjustment $

Account number (see instructions)

2nd TIN not. ☐

10 Other credits and deductions $

Form 1099-PATR
Cat. No. 14435F
www.irs.gov/form1099patr
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

9797 ☐ VOID ☐ CORRECTED

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Patronage dividends $

OMB No. 1545-0118

Taxable

2 Nonpatronage distributions $

2015 Form 1099-PATR

Distributions Received From Cooperatives

3 Per-unit retain allocations $

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

4 Federal income tax withheld $

Copy A For

RECIPIENT'S name

5 Redemption of nonqualifed notices and retain allocations $

6 Domestic production activities deduction $

Internal Revenue Service Center File with Form 1096.

Street address (including apt. no.)

7 Investment credit $

For Privacy Act and Paperwork Reduction Aci

City or town, state or province, country, and ZIP or foreign postal code

8 Work opportunity credit $

9 Patron's AMT adjustment $

Notice, see the 2015 General

Account number (see instructions)

2nd TIN not. ☐

10 Other credits and deductions $

Instructions for Certain Information Returns.

Form 1099-PATR

Cat. No. 14435F

www.irs.gov/form1099patr
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

9797
VOID
CORRECTED

☐ ☐ PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Patronage dividends $

OMB No. 1545-0118

2 Nonpatronage distributions $

2015 Form 1099-PATR

3 Per-unit retain allocations $

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

4 Federal income tax withheld $

RECIPIENT'S name

5 Redemption of nonqualifed notices and retain allocations $

6 Domestic production activities deduction $

Street address (including apt. no.)

7 Investment credit $

City or town, state or province, country, and ZIP or foreign postal code

8 Work opportunity credit $

9 Patron's AMT adjustment $

Account number (see instructions)

2nd TIN not. ☐

10 Other credits and deductions $

Taxable
Distributions
Received From
Cooperatives

Copy A
For
Internal Revenue
Service Center
File with Form 1096.
For Privacy Act
and Paperwork
Reduction Aci
Notice, see the
2015 General
Instructions for
Certain Information
Returns.

Form 1099-PATR

Cat. No. 14435F

www.irs.gov/form1099patr

Department of the Treasury - Internal Revenue Service

#### Exhibit U

3131

☐
VOID
☐
CORRECTED

PAYER'S/TRUSTEE'S name, street address, city or town, state or province, country,
ZIP or foreign postal code, and telephone no.

1 Gross distribution

OMB No. 1545-1760

Payments From
Qualified
Education
Programs
(Under Sections
529 and 530)

2015

2 Earnings

Form 1099-Q

PAYER'S/TRUSTEE'S federal identifcation no.

RECIPIENT'S social security number

3 Basis
$

4 Trustee-to-trustee
transfer
☒
6 Check if the recipient is
not the designated
benefciary
☐

Copy A
1.17 in=For
Internal Revenue
Service Center
File with Form 1096.
For Privacy Act
and Paperwork
Reduction Act
Notice, see the
2015 General
Instructions for
Certain Information
Returns.

RECIPIENT'S name

5 Check one:

· Qualified tuition program-
☐
Private

or State
☐

3.30 in

Street address (including apt. no.)

· Coverdell ESA
☒
2.55 in

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

Form 1099-Q

Cat. No. 32223J
www.irs.gov/form1099q
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

Form 1099-Q

Cat. No. 32223J
www.irs.gov/form1099q
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

3131
☐
VOID
☐
CORRECTED

PAYER'S/TRUSTEE'S name, street address, city or town, state or province, country,
ZIP or foreign postal code, and telephone no.

1 Gross distribution

OMB No. 1545-1760

Payments From
Qualified
Education
Programs
(Under Sections
529 and 530)

2015

2 Earnings

Form 1099-Q

PAYER'S/TRUSTEE'S federal identification no.

RECIPIENT'S social security number

Copy A
For
Internal Revenue
Service Center
File with Form 1096.
For Privacy Act
and Paperwork
Reduction Act
Notice, see the
2015 General
Instructions for
Certain Information
Returns.

RECIPIENT'S name

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

Form 1099-Q

Cat. No. 32223J

www.irs.gov/form1099q

Department of the Treasury - Internal Revenue Service

3131 ☐ VOID ☐ CORRECTED

PAYER'S/TRUSTEE'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no.

1 Gross distribution

OMB No. 1545-1760

Payments From

2015

Qualified Education Programs (Under Sections 529 and 530)

2 Earnings

Form 1099-Q

PAYER'S/TRUSTEE'S federal identification no.

RECIPIENT'S social security number

3 Basis $

4 Trustee-to-trustee transfer ☐

Copy A For

RECIPIENT'S name

5 Check one: · Qualified tuition program-

6 Check if the recipient is not the designated benefciary ☐

Internal Revenue Service Center File with Form 1096.

Private ☐ or State ☐

Street address (including apt. no.)

· Coverdell ESA ☐

For Privacy Act and Paperwork

City or town, state or province, country, and ZIP or foreign postal code

Reduction Act Notice, see the 2015 General

Account number (see instructions)

Instructions for Certain Information Returns.

3 Basis $

4 Trustee-to-trustee transfer ☐

5 Check one: · Qualified tuition program-

6 Check if the recipient is not the designated benefciary ☐

Private ☐ or State ☐

· Coverdell ESA ☐

#### Exhibit V

9898

☐ VOID ☐ CORRECTED

PAYER'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 Gross distribution

OMB No. 1545-0119

Distributions From Pensions, Annuities,

2015

Retirement or

2a Taxable amount

Form 1099-R

Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

2b Taxable amount Total not determined ☐ distribution ☐

Copy A For

PAYER'S federal identifcation

RECIPIENT'S identifcation

3 Capital gain (included

4 Federal income tax withheld

Internal Revenue Service Center

number

in box 2a)

File with Form 1096.

RECIPIENT'S name

5 Employee contributions /Designated Roth contributions or insurance premiums $

6 Net unrealized appreciation in employer's securities $

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information

Street address (including apt. no.)

7 Distribution code(s)

IRA/ SEP/ SIMPLE ☐

8 Other $

City or town, state or province, country, and ZIP or foreign postal code

9a Your percentage of total distribution %

9b Total employee contributions $

Returns.

10 Amount allocable to IRR within 5 years $

11 1st year of desig. Roth contrib.

12 State tax withheld $

13 State/Payer's state no.

14 State distribution $

Account number (see instructions)

15 Local tax withheld $

16 Name of locality

17 Local distribution

Form 1099-R Cat. No. 14436Q

www.irs.gov/form1099r
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

9898
☐
VOID
☐
CORRECTED

PAYER'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 Gross distribution

OMB No. 1545-0119

Pensions, Annuities, Distributions From

2015 Form 1099-R

Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

2a Taxable amount $

2b Taxable amount not determined ☐

Total distribution ☐

Copy A For

PAYER'S federal identifcation

RECIPIENT'S identifcation

3 Capital gain (included

4 Federal income tax withheld

Internal Revenue Service Center

number

in box 2a)

File with Form 1096.

RECIPIENT'S name

5 Employee contributions /Designated Roth contributions or insurance premiums $

6 Net unrealized appreciation in employer's securities $

For Privacy Act and Paperwork Reduction Act Notice, see the

Street address (including apt. no.)

7 Distribution code(s)

IRA/ SEP/ SIMPLE ☐

8 Other $ %

2015 General Instructions for Certain Information

City or town, state or province, country, and ZIP or foreign postal code

9a Your percentage of total distribution %

9b Total employee contributions $

Returns.

10 Amount allocable to IRR within 5 years $

11 1st year of desig. Roth contrib.

12 State tax withheld $

13 State/Payer's state no.

14 State distribution $

Account number (see instructions)

15 Local tax withheld $

16 Name of locality

17 Local distribution

Form 1099-R Cat. No. 14436Q

www.irs.gov/form1099r

Department of the Treasury - Internal Revenue Service

### Exhibit W

7575

☐
VOID
☐
CORRECTED

FILER'S name, street address, city or town, state or province, country, ZIP
or foreign postal code, and telephone number

OMB No. 1545-0997

2015

Proceeds From Real
Estate Transactions

Form 1099-S

Cat. No. 64292E
www.irs.gov/form1099s
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

7575
☐
VOID
☐
CORRECTED

FILER'S name, street address, city or town, state or province, country, ZIP
or foreign postal code, and telephone number

Proceeds From Real
Estate Transactions

Form 1099-S

Cat. No. 64292E
www.irs.gov/form1099s
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

7575
☐
VOID
☐
CORRECTED

FILER'S name, street address, city or town, state or province, country, ZIP
or foreign postal code, and telephone number

Proceeds From Real
Estate Transactions

Form 1099-S
Cat. No. 64292E

www.irs.gov/form1099s

Department of the Treasury - Internal Revenue Service

1 Date of closing

2 Gross proceeds

FILER'S federal identifcation number

TRANSFEROR'S identifcation number

3 Address or legal description (including city, state, and ZIP code)

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

TRANSFEROR'S name

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

4 Check here if the transferor received or will receive property or services as part of the consideration o ☐

Account or escrow number (see instructions)

5 Buyer's part of real estate tax $

1 Date of closing

OMB No. 1545-0997

2015

2 Gross proceeds

Form 1099-S

FILER'S federal identifcation number

TRANSFEROR'S identifcation number

3 Address or legal description (including city, state, and ZIP code)

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act

TRANSFEROR'S name

Street address (including apt. no.)

and Paperwork Reduction Aci Notice, see the 2015 General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

4 Check here if the transferor received or will receive property or services as part of the consideration o ☐

Account or escrow number (see instructions)

5 Buyer's part of real estate tax $

1 Date of closing

OMB No. 1545-0997

2015

2 Gross proceeds

Form 1099-S

FILER'S fadara cantification number

TRANSFERIR'S identification numixa

3 Address or legal description (including city, state, and ZIP code)

Copy A For Internal Revenue Service Center

TRANSFEROR'S name

File with Form 1096. For Privacy Act

Street address (including apt. no.)

and Paperwork Reduction Aci Notice, see the

City or town, state or province, country, and ZIP or foreign postal code

4 Check here if the transferor received or will receive property or services as part of the consideration o ☐

2015 General Instructions for Certain

Account or escrow number (see instructions)

5 Buyer's part of real estate tax $

Information Returns.

### Exhibit X

☐
VOID
☐
CORRECTED
9494

TRUSTEE'S/PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number

OMB No. 1545-1517 2015 Form 1099-SA

Distributions

Medicare Advantage From an HSA, Archer MSA, or MSA

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

1 Gross distribution $

2 Earnings on excess cont. $

Copy A

For

RECIPIENT'S name

3 Distribution code

4 FMV on date of death $

Internal Revenue Service Center File with Form 1096.

For Privacy Act

Street address (including apt. no.)

5 HSA ☐ Archer MSA ☐ MA MSA ☐

and Paperwork Reduction Aci Notice, see the

City or town, state or province, country, and ZIP or foreign postal code

2015 General Instructions for Certain

Account number (see instructions)

Information Returns.

Form 1099-SA
Cat. No. 38471D
www.irs.gov/form1099sa
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

9494
☐
VOID
☐
CORRECTED

TRUSTEE'S/PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number

OMB No. 1545-1517 2015 Form 1099-SA

Medicare Advantage Distributions From an HSA, Archer MSA, or MSA

PAYER'S federal identification number

RECIPIENT'S identifcation number

1 Gross distribution $

2 Earnings on excess cont. $

Copy A For

RECIPIENT'S name

3 Distribution code

4 FMV on date of death

Internal Revenue Service Center File with Form 1096.

For Privacy Act

Street address (including apt. no.)

5 HSA ☐ Archer MSA ☐ MA MSA ☐

and Paperwork Reduction Act Notice, see the

City or town, state or province, country, and ZIP or foreign postal code

2015 General Instructions for Certain

Account number (see instructions)

Information Returns.

Form 1099-SA

Cat. No. 38471D
www.irs.gov/form1099sa
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

9494
☐
VOID
☐
CORRECTED

TRUSTEE'S/PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number

OMB No. 1545-1517

Distributions

2015 Form 1099-SA

From an HSA, Medicare Advantage Archer MSA, or

MSA

PAYER'S federal identifcation number

RECIPIENT'S identifcation number

1 Gross distribution $

2 Earnings on excess cont. $

Copy A

For

RECIPIENT'S name

3 Distribution code

4 FMV on date of death

Internal Revenue Service Center File with Form 1096.

For Privacy Act

Street address (including apt. no.)

5 HSA ☐ Archer MSA ☐ MA MSA ☐

and Paperwork Reduction Act Notice, see the

City or town, state or province, country, and ZIP or foreign postal code

2015 General

Instructions for

Account number (see instructions)

Certain Information Returns.

Form 1099-SA

Cat. No. 38471D

www.irs.gov/form1099sa

Department of the Treasury - Internal Revenue Service

### Exhibit Y

2525
☐
VOID
☐
CORRECTED

TRANSFEROR'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 Date option granted

OMB No. 1545-2129 Form 3921 (Rev. August 2013)

Exercise of an Incentive Stock Option Under Section 422(b)

2 Date option exercised

TRANSFEROR'S federal identification number EMPLOYEE'S identifcation number EMPLOYEE'S name

3 Exercise price per share $

4 Fair market value per share on exercise date $

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Aci Notice, see the current version of the General Instructions for Certain Information Returns.

5 No. of shares transferred

Street address (including apt. no.)

6 If other than TRANSFEROR, name, address, and EIN of corporation whose stock is being transferred

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

Form 3921 (Rev. August 2013)

Cat. No. 411790

www.irs.gov/form3921
Department of the Treasury - Internal Revenue Service

Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

2525
☐
VOID
☐
CORRECTED

TRANSFEROR'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 Date option granted

OMB No. 1545-2129 Form 3921 (Rev. August 2013)

Exercise of an Incentive Stock Option Under Section 422(b)

2 Date option exercised

TRANSFEROR'S federal identifcation number

EMPLOYEE'S identifcation number

3 Exercise price per share $

4 Fair market value per share on exercise date $

Copy A For Internal Revenue Service Center File with Form 1096.

EMPLOYEE'S name

5 No. of shares transferred

Street address (including apt. no.)

6 If other than TRANSFEROR, corporation whose stock is

name, address, and EIN of being transferred

For Privacy Act and Paperwork Reduction Act Notice, see the current version of the General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

Form 3921 (Rev. August 2013)

Cat. No. 411790
www.irs.gov/form3921
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

2525
☐
VOID
☐
CORRECTED

TRANSFEROR'S name, street address, city or town, state or province, country, and
ZIP or foreign postal code

1 Date option granted

OMB No. 1545-2129

Form 3921

2 Date option exercised

(Rev. August 2013)

3 Exercise price per share $

4 Fair market value per share on exercise date $

5 No. of shares transferred

Exercise of an
Incentive Stock
Option Under
Section 422(b)

TRANSFEROR'S federal identification number

EMPLOYEE'S identifcation number

EMPLOYEE'S name

Street address (including apt. no.)

6 If other than TRANSFEROR, name, address, and EIN of
corporation whose stock is being transferred

Copy A
For
Internal Revenue
Service Center
File with Form 1096.
For Privacy Act and
Paperwork
Reduction Act
Notice, see the
current version of
the General
Instructions for
Certain Information
Returns.

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

Form 3921 (Rev. August 2013)

Cat. No. 411790

www.irs.gov/form3921

Department of the Treasury - Internal Revenue Service

### Exhibit Z

2626

☐
VOID
☐
CORRECTED

CORPORATION'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 Date option granted

OMB No. 1545-2129 Form 3922 (Rev. August 2013)

Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c)

2 Date option exercised

VAP"AATT'N'S fulcral icientfication number

EMPLOYEE'9 Identification number

3 Fair market value per share on grant date $

4 Fair market value per share on exercise date $

Copy A For Internal Revenue Service Center File with Form 1096. For Privacy Act anc Paperwork Reduction Act Notice, see the current version of the General Instructions for Certain Information Returns.

EMPLOYEE'S name

5 Exercise price paid per share $

6 No. of shares transferred

Street address (including apt. no.)

7 Date legal title transferred

City or town, state or province, country, and ZIP or foreign postal code

8 Exercise price per share determined as if the option was exercised on the date shown in box 1. $

Account number (see instructions)

Form 3922 (Rev. 8-2013)
Cat. No. 41180P

www.irs.gov/form3922
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

2626 ☐ VOID ☐ CORRECTED

CORPORATION'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 Date option granted

OMB No. 1545-2129 Form 3922 (Rev. August 2013)

Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c)

2 Date option exercised

GRIPSATIN &amp; louord kontoation nunca EMPLOYEE'S Identification number EMPLOYEE'S name

3 Fair market value per share on grant date $

4 Fair market value per share on exercise date $

Copy A For Internal Revenue Service Center File with Form 1096.

5 Exercise price paid per share $

6 No. of shares transferred

Street address (including apt. no.)

7 Date legal title transferred

For Privacy Act anc Paperwork Reduction Act Notice, see the current version of the General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

8 Exercise price per share determined as if the option was exercised on the date shown in box 1. $

Form 3922 (Rev. 8-2013)
Cat. No. 41180P

www.irs.gov/form3922
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

2626
☐
VOID
☐
CORRECTED

CORPORATION'S name, street address, city or town, state or province,
country, and ZIP or foreign postal code

OnTAPTAATT'N'S fodor icionbfication number

EMPLOYEE'S identhcation number

EMPLOYEE'S name

Street address (including apt. no.)

7 Date legal title transferred

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

8 Exercise price per share determined as if the option was
exercised on the date shown in box 1.

Form 3922 (Rev. 8-2013)

Cat. No. 41180P

www.irs.gov/form3922

Department of the Treasury - Internal Revenue Service

1 Date option granted

OMB No. 1545-2129

Form 3922 (Rev. August 2013)

2 Date option exercised

3 Fair market value per share on grant date $

4 Fair market value per share on exercise date $

5 Exercise price paid per share $

6 No. of shares transferred

Transfer of Stock
Acquired Through
an Employee
Stock Purchase
Plan Under
Section 423(c)
Copy A
For
Internal Revenue
Service Center
File with Form 1096.
For Privacy Act anc
Paperwork Reduction
Act Notice, see the
current version of the
General Instructions for
Certain Information
Returns.

### Exhibit AA

TRUSTEE'S or ISSUER'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 IRA contributions (other than amounts in boxes 2-4, 8-10, 13a, and 14a) $

OMB No. 1545-0747 2015 Form 5498

IRA Contribution Information

2 Rollover contributions $

3 Roth IRA conversion amount

I 4 Recharacterized contributions $

50 in

Copy A For Internal Revenue Service Center File with Form 1096.

TRUSTEE'S r ISSUER'S federal

PARTICIPANT'S social security

identifcation|no.

.66 in

number 1.70 in

5 Fair market value of account

6 Life insurance cost included in box 1 $

PARTICIPANT'S name

7 IRA ☐ SEP ☐ SIMPLE

☐ Roth IRA ☐

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

8 SEP contributions $

9 SIMPLE contributio IS $ .33 in

Street Address (including apt. no.) .50 in City or town, state or province, country,

10 0 Roth IRA contributions $

11 Check if RMD for 2016 ☐

and ZIP or foreign postal code

12a RMD date

12b RMD amount $

13a Postponed contribution $

13b Year

13c Code

14a Repayments $

14b Code

Account number (see instructions)

15a FMV of certain specifed assets $

15b Code(s)

2828
☐
VOID
☐
CORRECTED

Form 5498
Cat. No. 50010C

www.irs.gov/form5498
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

2828
☐
VOID
☐
CORRECTED

Form 5498

Cat. No. 50010C

www.irs.gov/form5498

Department of the Treasury - Internal Revenue Service

TRUSTEE'S or ISSUER'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 IRA contributions (other than amounts in boxes

OMB No. 1545-0747 2015 Form 5498

IRA Contribution Information

2-4, 8-10, 13a, and 14a) $

2 Rollover contributions $

3 Roth IRA conversion amount

4 Recharacterized contributions $

Copy A For Internal Revenue Service Center File with Form 1096.

TRUSTEE'S or ISSUER'S federal identifcation no.

PARTICIPANT'S social security

number

5 Fair market value of account

6 Life insurance cost included in box 1 $

PARTICIPANT'S name

7 IRA ☐ SEP ☐ SIMPLE ☐ Roth IRA ☐

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

8 SEP contributions $

9 SIMPLE contributions $

Street address (including apt. no.)

10 Roth IRA contributions $

11 Check if RMD for 2016 ☐

12a RMD date

12b RMD amount $

City or town, state or province, country, and ZIP or foreign postal code

13a Postponed contribution $

13b Year

13c Code

14a Repayments $

14b Code

Account number (see instructions)

15a FMV of certain specifed assets $

15b Code(s)

## Exhibit BB

TRUSTEE'S or ISSUER'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 Coverdell ESA contributions $

OMB No. 1545-1815 2015 Form 5498-ESA

Coverdell ESA Contribution Information

2 Rollover contributions $

TRUSTEE'S/ISSUER'S federal identifcation no.

BENEFICIARY'S social security number

Copy A For

BENEFICIARY'S name

Internal Revenue Service Center File with Form 1096.

Street address (including apt. no.)

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

7272

☐
VOID
☐
CORRECTED

Form 5498-ESA
Cat. No. 34011J

Department of the Treasury - Internal Revenue Service
www.irs.gov/form5498esa

Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

7272
☐
VOID
☐
CORRECTED

Form 5498-ESA

Cat. No. 34011J

Department of the Treasury - Internal Revenue Service
www.irs.gov/form5498esa

Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

7272
☐
VOID
☐
CORRECTED

Form 5498-ESA

Cat. No. 34011J

www.irs.gov/form5498esa

Department of the Treasury - Internal Revenue Service

TRUSTEE'S or ISSUER'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 Coverdell ESA contributions $

OMB No. 1545-1815 2015 Form 5498-ESA

Coverdell ESA Contribution Information

2 Rollover contributions $

TRUSTEE'S/ISSUER'S federal identifcation no.

BENEFICIARY'S social security number

Copy A For

BENEFICIARY'S name

Internal Revenue Service Center File with Form 1096. For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

TRUSTEE'S or ISSUER'S name, street address, city or town, state or province, country, and ZIP or foreign postal code

1 Coverdell ESA contributions $ 2 Rollover contributions $

OMB No. 1545-1815 2015 Form 5498-ESA

Coverdell ESA Contribution Information

TRUSTEE'S/ISSUER'S federal identification no.

BENEFICIARY'S social security number

Copy A For

BENEFICIARY'S name

Internal Revenue Service Center File with Form 1096.

Street address (including apt. no.)

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

## Exhibit CC

2727

☐
VOID
☐
CORRECTED

TRUSTEE'S name, street address, city or town, state or province, country,
ZIP or foreign postal code, and telephone number

1 Employee or self-employed person's Archer MSA contributions made in 2015 and 2016 for 2015 $

OMB No. 1545-1518 2015 Form 5498-SA

2 Total contributions made in 2015 $

HSA, Archer MSA, or
Medicare Advantage
MSA Information

TRUSTEE'S federal identifcation number

PARTICIPANT'S social security number

3 Total HSA or Archer MSA contributions made in 2016 for 2015 $

Copy A For

PARTICIPANT'S name

4 Rollover contributions $

5 Fair market value of HSA, Archer MSA, or MA MSA $

Internal Revenue Service Center File with Form 1096.

Street address (including apt. no.)

6 HSA ☐ Archer MSA ☐

3.00"

For Privacy Act and Paperwork

Reduction Act

City or town, state or province, country, and ZIP or foreign postal code

MA MSA ☐

Notice, see the 2015 General

Account number (see instructions)

Instructions for Certain Information Returns.

Form 5498-SA

Cat. No. 38467V

www.irs.gov/form5498sa
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

2727
☐
VOID
☐
CORRECTED

TRUSTEE'S name, street address, city or town, state or province, country,
ZIP or foreign postal code, and telephone number

1 Employee or self-employed person's Archer MSA contributions made in 2015 and 2016 for 2015 $

OMB No. 1545-1518 2015 Form 5498-SA

2 Total contributions made in 2015 $

HSA, Archer MSA, or
Medicare Advantage
MSA Information

TRUSTEE'S federal identifcation number

PARTICIPANT'S social security number

3 Total HSA or Archer MSA contributions made in 2016 for 2015 $

Copy A For

PARTICIPANT'S name

4 Rollover contributions $

5 Fair market value of HSA, Archer MSA, or MA MSA $

Internal Revenue Service Center File with Form 1096.

Street address (including apt. no.)

6 HSA ☐ Archer MSA ☐ MA MSA ☐

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

Form 5498-SA

Cat. No. 38467V
www.irs.gov/form5498sa
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

2727
☐
VOID
☐
CORRECTED

TRUSTEE'S name, street address, city or town, state or province, country,
ZIP or foreign postal code, and telephone number

1 Employee or self-employed person's Archer MSA contributions made in 2015 and 2016 for 2015 $

OMB No. 1545-1518 2015 Form 5498-SA

2 Total contributions made in 2015 $

HSA, Archer MSA, or
Medicare Advantage
MSA Information

TRUSTEE'S federal identifcation number

PARTICIPANT'S social security number

3 Total HSA or Archer MSA contributions made in 2016 for 2015
$

Copy A
For

PARTICIPANT'S name

Street address (including apt. no.)

City or town, state or province, country, and ZIP or foreign postal code

Account number (see instructions)

4 Rollover contributions $

5 Fair market value of HSA, Archer MSA, or MA MSA $

6 HSA ☐ Archer MSA ☐ MA MSA ☐

Internal Revenue
Service Center
File with Form 1096.
For Privacy Act and
Paperwork
Reduction Act
Notice, see
the 2015 General
Instructions for
Certain Information
Returns.

Form 5498-SA

Cat. No. 38467V

Department of the Treasury - Internal Revenue Service

Exhibit DD

PAYER'S name, street address, city or town, province or state, country, and ZIP or foreign postal code

1 Gross winnings $

0 0.50 in

2 Date won

OMB No. 1545-0238 2015 Form W-2G Certain Gambling Winnings

3 Type of wager

4 Federal income tax withheld $

5 Transaction

6 Race 0.33 in

7 Winnings from identical wagers $

8 Cashier

PAYER'S federal identifcation number

PAYER'S telephone number 0.67 in

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

9 Winner's taxpayer identifcation no

10 Window

WINNER'S name

11 First I.D.

0.50 in

12 Second I.D.

Street address (including apt. no.)

13 State/Payer's state identification no.

14 State winnings $

City or town, province or state, country, and ZIP or foreign postal code

15 State income tax withheld $

16 Local winnings $

File with Form 1096

17 Local income tax withheld $

18 Name of locality

Copy A For Internal Revenue Service Center

3232
☐
VOID
☐
CORRECTED

Under penalties of perjury, I declare that, to the best of my knowledge and belief, the name, address, and taxpayer identifcation number that I have furnished
correctly identify me as the recipient of this payment and any payments from identical wagers, and that no other person is entitled to any part of these payments.

Signature ...

Date

Form W-2G

Cat. No. 10138V
www.irs.gov/w2g
Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page - Do Not Cut or Separate Forms on This Page

3232
☐
VOID
☐
CORRECTED

Signature ...

Date

Form W-2G

Cat. No. 10138V

www.irs.gov/w2g

Department of the Treasury - Internal Revenue Service

PAYER'S name, street address, city or town, province or state, country, and ZIP or foreign postal code

1 Gross winnings $

2 Date won

OMB No. 1545-0238 2015

3 Type of wager

4 Federal income tax withheld $

Form W-2G Certain Gambling Winnings

5 Transaction

6 Race

7 Winnings from identical wagers $

8 Cashier

PAYER'S federal identifcation number

PAYER'S telephone number

For Privacy Act and Paperwork Reduction Act Notice, see the 2015 General Instructions for Certain Information Returns.

9 Winner's taxpayer identifcation no.

10 Window

WINNER'S name

11 First I.D.

12 Second I.D.

Street address (including apt. no.)

13 State/Payer's state identification no.

14 State winnings $

City or town, province or state, country, and ZIP or foreign postal code

15 State income tax withheld $

16 Local winnings $

File with Form 1096

17 Local income tax withheld $

18 Name of locality

Copy A For Internal Revenue Service Center

## Exhibit EE

Form
1042-S

Foreign Person's U.S. Source Income Subject to Withholding
-. Information about Form 1042-S and its separate instructions is at www.irs.gov/form1042s.

2015

OMB No. 1545-0096

Department of the Treasury
Internal Revenue Service

AMENDED

PRO-RATA BASIS REPORTING

Copy A for
Internal Revenue Service

1 Income code

2 Gross income

3 Chạp.

☒ 3: ☐

4 Chap. 4: ☐

5 Withholding allowance

Exemption code

4a Exemption code

6 Net income

Check if tax not deposited with IRS ☐ pursuant to escrow procedure

Tax rate

4b Tax rate

7 Federal tax withheld

9 Tax paid by withholding agent

11 Amount repaid to recipient

14a Primary Withholding Agent's Name (if applicable)

14b Primary Withholding Agent's EIN

15a Intermediary or fow-through entity's EIN, if any

15b Ch. 3 status code

15c Ch. 4 status code

15d Intermediary or fow-through entity's name

15e Intermediary or fow-through entity's GIIN

15f Country code

15g Foreign tax identifcation number, if any

15h Address (number and street)

15i City or town, state or province, country, ZIP or foreign postal code

13h
Recipient's GIIN

13i Recipient's foreign tax identifcation number, if any

16 Recipient's account number

17 Recipient's date of birth

18 Payer's name

19 Payer's TIN
7.30 in

20 Payer's GIIN

21 State income tax withheld

22 Payer's state tax no.

23 Name of state

For Privacy Act and Paperwork Reduction Act Notice, see instructions.

Cat. No. 11386R

Form 1042-S (2015)

Form
1042-S

Foreign Person's U.S. Source Income Subject to Withholding
... Information about Form 1042-S and its separate instructions is at www.irs.gov/form1042s.

2015

OMB No. 1545-0096

Department of the Treasury
Internal Revenue Service

AMENDED

PRO-RATA BASIS REPORTING

Copy A for
Internal Revenue Service

1 Income code

2 Gross income

3 Chap. 3: ☐

4 Chap. 4: ☐

5 Withholding allowance

3a Exemption code

4a Exemption code

6 Net income

Check if tax not deposited with IRS ☐ pursuant to escrow procedure

3b Tax rate

4b Tax rate

7 Federal tax withheld

8 Tax withheld by other agents

9 Tax paid by withholding agent

10 Total withholding credit

11 Amount repaid to recipient

12a Withholding agent's EIN

12b Ch. 3 status code

12c Ch. 4 status code

12d Withholding agent's name

15a Intermediary or fow-through entity's EIN, if any

15b Ch. 3 status code

15c Ch. 4 status code

12e Withholding agent's Global Intermediary Identifcation Number (GIIN)

15d Intermediary or fow-through entity's name

12f Country code

12g Foreign taxpayer identifcation number, if any

15e Intermediary or fow-through entity's GIIN

15f Country code

15g Foreign tax identifcation number, if any

12h
Address (number and street)

15h Address (number and street)

12i City or town, state or province, country, ZIP or foreign postal code

15i City or town, state or province, country, ZIP or foreign postal code

13a Recipient's U.S. TIN, if any

13h
Recipient's GIIN

13i Recipient's foreign tax identifcation number, if any

13b Ch. 3 status code

13c Ch. 4 status code

13d Recipient's name

13e Recipient's country code

16 Recipient's account number

17 Recipient's date of birth

13f Address (number and street)

18 Payer's name

19 Payer's TIN

20 Payer's GIIN

13g City or town, state or province, country, ZIP or foreign postal code

21 State income tax withheld

22 Payer's state tax no.

23 Name of state

For Privacy Act and Paperwork Reduction Act Notice, see instructions.

Cat. No. 11386R

Form 1042-S (2015)

0.25 in

0.45 in

8 Tax withheld by other agents

10 Total withholding credit

12a Withholding agent's EIN

12b Ch. 3 status code

12c Ch. 4 status code

12d Withholding agent's name

12e Withholding agent's Global

Intermediary Identifcation Number (GIIN)

12f Country code

12g Foreign taxpayer identifcation number, if any 4.17 in

2h Address (number and street)

12i City or town, state or province,

country, ZIP or foreign

postal code

13a Recipient's U.S. TIN, if any

13b Ch. 3 status code

13c Ch. 4 status code

13d Recipient's name

13e Recipient's country code

13f Address (number and street)

13g City or town, state or province

country, ZIP or foreign postal code

14a Primary Withholding Agent's Name (if applicable)

14b Primary Withholding Agent's EIN

26 CFR 601.201: Rulings and determination letters.
(Also Part II, § 1014)

## Rev. Proc. 2015-37

### SECTION 1. PURPOSE

This revenue procedure amplifies Rev.
Proc. 2015-3, 2015-1 I.R.B. 129, which
sets forth areas of the Internal Revenue
Code in which the Internal Revenue Ser-
vice will not issue letter rulings or deter-
mination letters.

### SECTION 2. BACKGROUND

Section 5 of Rev. Proc. 2015-3 sets
forth a list of those areas of the Internal
Revenue Code under the jurisdiction of
the Associate Chief Counsel (Corporate),
the Associate Chief Counsel (Financial
Institutions and Products), the Associate
Chief Counsel (Income Tax and Account-

ing), the Associate Chief Counsel (Pass-
throughs and Special Industries), the As-
sociate Chief Counsel (Procedure and
Administration), and the Associate Chief
Counsel (Tax Exempt and Government
Entities) relating to issues on which the
Internal Revenue Service will not issue
letter rulings or determination letters until
the Service resolves the issue through
publication of a revenue ruling, a revenue
procedure, regulations, or otherwise.

### SECTION 3. PROCEDURE

Rev. Proc. 2015-3 is amplified by add-
ing the following to section 5.01: Section
1014. Basis of Property Acquired from a
Decedent. Whether the assets in a grantor
trust receive a section 1014 basis adjust-
ment at the death of the deemed owner of
the trust for income tax purposes when
those assets are not includible in the gross

estate of that owner under chapter 11 of
subtitle B of the Internal Revenue Code.

### SECTION 4. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 2015-3 is amplified.

### SECTION 5. EFFECTIVE DATE

This revenue procedure is effective for
all requests received after June 15, 2015.

### SECTION 6. DRAFTING INFORMATION

The principal author of this revenue
procedure is Meghan Howard of the Of-
fice of Associate Chief Counsel (Pass-
throughs and Special Industries). For fur-
ther information regarding this revenue
procedure, please contact Ms. Howard at
202-317-5055 (not a toll-free number).

# Part IV. Items of General Interest

## Notice of Proposed Rulemaking Elimination of Circular Adjustments to Basis; Absorption of Losses

REG-101652-10

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Notice of proposed
rulemaking.

SUMMARY: This document contains
proposed amendments to the consolidated
return regulations. These amendments
would revise the rules concerning the use
of a consolidated group's losses in a con-
solidated return year in which stock of a
subsidiary is disposed of. The regulations
would affect corporations filing consoli-
dated returns.

DATES: Written or electronic comments,
and a request for a public hearing, must be
received by September 9, 2015.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-101652-10), room
5205, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m. to
CC:PA:LPD:PR (REG-101652-10),
Courier's Desk, Internal Revenue Service,
1111 Constitution Avenue, N.W., Wash-
ington, DC, or sent electronically via the
Federal eRulemaking Portal at http://
www.regulations.gov (IRS REG-101652-10).

### FOR FURTHER INFORMATION

CONTACT: Concerning the proposed
regulations, Robert M. Rhyne, (202) 317-
6848; concerning submissions of com-
ments or to request a public hearing, Olu-
wafunmilayo (Funmi) Taylor, (202) 317-
6901 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

## Background and Explanation of Provisions

### 1. Introduction

This document contains proposed
amendments to 26 CFR part 1 under sec-
tion 1502 of the Internal Revenue Code
(Code). Section 1502 authorizes the Sec-
retary to prescribe regulations for corpo-
rations that join in filing consolidated re-
turns to reflect clearly the income tax
liability of the group and to prevent avoid-
ance of such tax liability, and provides
that these rules may be different from the
provisions of chapter 1 of subtitle A of the
Code that would apply if the corporations
filed separate returns. Terms used in the
consolidated return regulations generally
are defined in § 1.1502-1.

These proposed regulations would pro-
vide guidance regarding the absorption of
members' losses in a consolidated return
year, and provide guidance to eliminate
the "circular basis problem" in a broader
class of transactions than under current
law.

This document also contains proposed
conforming amendments to 26 CFR part
301 under section 6402. Section 6402 au-
thorizes the Secretary to make credits and
refunds. The proposed regulations would
amend § 301.6402-7(g) (relating to
claims for refunds and application for ten-
tative carryback adjustments involving
consolidated groups that include financial
institutions) by revising the definition of
separate net operating loss of a member in
light of the proposed amendments to
§ 1.1502-21 (relating to the determination
and treatment of consolidated and sepa-
rate net operating losses, carrybacks, and
carryovers).

### 2. Allocation and Absorption of Members' Losses

In general, the consolidated taxable in-
come (CTI) or consolidated net operating
loss (CNOL) of a consolidated group is
the sum of each member's separately
computed taxable income or loss (com-
puted pursuant to § 1.1502-12) and cer-
tain items of income and deduction that

are computed on a consolidated basis pur-
suant to § 1.1502-11.

Section 1.1502-21(b)(2)(i) (relating to
carryovers and carrybacks of CNOLs to
separate return years) provides generally
that if a group has a CNOL and a portion
of the CNOL would be carried to a mem-
ber's separate return year, the CNOL must
be apportioned between the group and the
member (or members) with the separate
return year(s) in accordance with the
amount of the CNOL attributable to those
member(s). For this purpose, § 1.1502-
21(b)(2)(iv) employs a fraction to deter-
mine the percentage amount of the CNOL
attributable to a member. The numerator
of the fraction is the separate net operating
loss of the member for the consolidated
return year, and the denominator is the
sum of the separate net operating losses of
all members for that year. For this pur-
pose, the separate net operating loss of a
member is determined by computing the
CNOL, taking into account only the mem-
ber's items of income, gain, deduction,
and loss. Although the current consoli-
dated return regulations provide rules for
apportioning a CNOL among members
when a member's loss may be carried to a
separate return year, the regulations do not
expressly adopt the fraction-based meth-
odology of § 1.1502-21(b)(2)(iv) for
computing the amount of each member's
absorbed loss that is used to offset the
income of members with positive separate
taxable income or net capital gain for the
consolidated return year in which the loss
is recognized.

Furthermore, although the method pro-
vided for apportioning a CNOL under cur-
rent law generally yields appropriate re-
sults, the apportionment may produce
anomalies if capital gains are present. For
example, assume a stand-alone corpora-
tion, P, acquires the stock of corporation
S, and P and S file a consolidated return
for the first taxable year of P ending after
the acquisition. For the consolidated re-
turn year, P generates $100 of capital gain
and incurs $100 of deductible expenses. S
incurs a $100 capital loss. Thus, the group
has a $100 CNOL. Under current law, the
percentage of the CNOL attributable to
each member is determined by its relative
separate net operating loss, taking into

account only its items. The CNOL that the
group would have if only P's items were
taken into account is zero ($100 of capital
gain offset by $100 of deductible ex-
penses). If only S's items were taken into
account the group would have a consoli-
dated net capital loss, but the CNOL
would also be zero. Accordingly, because
neither P nor S has a separate net operat-
ing loss, the allocation of the group's $100
CNOL is not clear.

Both to provide an absorption rule for
apportioning ordinary and capital losses
incurred in the same consolidated return
year, and to address the CNOL apportion-
ment issue, the proposed regulations
would amend the current regulations in
the following two ways. First, the pro-
posed regulations add a new paragraph (e)
to § 1.1502-11 to clarify that the absorp-
tion of members' losses to offset income
of other members in the consolidated re-
turn year is made on a pro rata basis,
consistent with the pro rata absorption of
losses from taxable years ending on the
same date that are carried back or forward
under the rules of §§ 1.1502-21(b) and
1.1502-22(b) (relating to net capital loss
carrybacks and carryovers). Second, to
address apportionment anomalies that
may arise if capital gains are present, the
proposed regulations would provide that
the separate net operating loss of a mem-
ber, solely for apportionment purposes, is
its loss determined without regard to cap-
ital gains (or losses) or amounts treated as
capital gains. Thus, in the example in the
preceding paragraph, P would be allocated
the entire $100 CNOL. Excluding capital
gains and losses from the computation is
consistent with excluding capital gains
and losses in determining a member's sep-
arate taxable income under § 1.1502-12,
and taking capital gains and losses into
account on a group, rather than a separate
member, basis. A conforming amendment
is made to § 301.6402-7(g)(2)(ii) (relating
to refunds to certain statutory or court-
appointed fiduciaries of an insolvent fi-
nancial institution), which contains a sim-
ilar allocation rule.

### 3. Circular Adjustments to Basis

#### A. The circular basis problem and current regulations

To prevent the income, gain, deduc-
tion, or loss of a subsidiary from being
reflected more than once in a consolidated
group's income, the consolidated return
regulations adjust an owning member's
basis in a subsidiary's stock to reflect
those items. As a group takes into account
a subsidiary's items of income or gain, an
owning member's basis in the subsid-
iary's stock increases. Likewise, as a
group absorbs a subsidiary's deductions
or losses, an owning member's basis in
the subsidiary's stock decreases. These
adjustments take place under what is gen-
erally referred to as the investment adjust-
ment system. See § 1.1502-32.

If a group absorbs a portion of a sub-
sidiary's loss in the same consolidated
return year in which an owning member
disposes of that subsidiary's stock, the
owning member's basis in the subsid-
iary's stock is reduced immediately before
the disposition. Consequently, the amount
of the owning member's gain or loss on
the disposition may be affected. Any
change in the amount of gain or loss re-
sulting from the disposition may in turn
affect the amount of the subsidiary's loss
that the group absorbs. Any further ab-
sorption of the subsidiary's loss triggers
further adjustments to the basis in the sub-
sidiary's stock. These iterative computa-
tions, which may completely eliminate the
benefit of the disposed of member's
losses, are referred to as the circular basis
problem.

For example, assume P owns all the
stock of S, and the group has a $100
consolidated net capital loss carryover, all
of which is attributable to S. On Decem-
ber 31, P sells all of S's stock to a non-
member at a $10 gain. Absent the current
rules in § 1.1502-11(b), P's $10 capital
gain on the sale of S's stock would be
offset by $10 of the consolidated net cap-
ital loss carryover (all of which is attrib-
utable to S). The use of the loss would
cause P's basis in S's stock to be reduced
by $10 (immediately before the sale),
causing P to recognize $20 of gain on the
sale of S's stock. Similarly, that $20 gain
would be offset by $20 of S's consoli-

dated net capital loss carryover, and so on,
until the entire consolidated net capital
loss carryover was depleted. At the end of
these iterative calculations, the group
would still report $10 of consolidated net
capital gain. The current regulations pre-
vent this result.

The Treasury Department and the IRS
have considered a variety of approaches to
the circular basis problem since the intro-
duction of the investment adjustment sys-
tem in 1966. The options considered, and
either rejected or adopted in regulations to
date, appear to have been motivated by
differing views concerning the scope and
severity of the circular basis problem. The
circumstances in which the consolidated
return regulations have provided relief to
date have been limited to preventing the
disposed of subsidiary's loss absorption
from affecting the gain or loss recognized
on the sale of that subsidiary. This is the
case notwithstanding that many commen-
tators have criticized the scope of relief as
being too narrow, and have maintained
that relief should be extended to, for ex-
ample, the sales of brother-sister subsid-
iaries within the same consolidated return
year.

Regulations promulgated in 1966 pro-
vided no relief from the circular basis
problem, even though some relief was ini-
tially proposed. Section 1.1502-11(b),
published in 1972, provided some relief
from the circular basis problem, and those
regulations were revised in 1994 into their
current form (the circular basis rules).

To resolve the circular basis problem,
the circular basis rules require that a ten-
tative computation of CTI be made with-
out taking into account any gain or loss on
the disposition of a subsidiary's stock.
The amount of the subsidiary's losses that
would be absorbed under the tentative
computation becomes a limitation on that
subsidiary's losses that may be absorbed
in the consolidated return year of disposi-
tion or as a carryback to a prior year. The
limitation is intended to eliminate the cir-
cular basis adjustments to the subsidiary's
stock and thus prevent iterative computa-
tions.

For example, assume a consolidated
group consists of P, the common parent,
and S, its wholly owned subsidiary, and
neither P nor S had income or gain in a
prior year. At the beginning of the consol-

idated return year, P has a $500 basis in
S's stock. P sells S's stock for $520 at the
end of the year. For the year, P has $30 of
ordinary income (determined without tak-
ing into account P's gain or loss on the
disposition of S's stock) and S has $80 of
ordinary loss. To determine the limitation
on the amount of S's loss that the group
may use during the consolidated return
year or as a carryback to a prior year, CTI
is tentatively determined without taking
into account P's gain or loss on the dis-
position of S's stock. Accordingly, the use
of S's loss in the consolidated return year
of disposition is limited to $30. The group
is tentatively treated as having a CNOL of
$50 (P's $30 of income minus S's $80
loss). The absorption of $30 of S's loss
reduces P's basis in S's stock to $470, and
results in $50 [$520 - ($500 - $30)] of
gain to P on the disposition. Thus, itera-
tive computations are avoided.

Nevertheless, the circular basis rules
do not prevent iterative computations in
all cases - not even all cases in which the
stock of a single subsidiary with a loss is
disposed of. For example, if a member
other than the disposed of subsidiary also
has a loss, and the sum of the losses of the
disposed subsidiary and the other member
exceeds the income of the group (without
regard to gain on the disposed subsid-
iary's stock) a tentative computation ap-
plying a pro rata rule for absorption estab-
lishes a limitation on the use of the
disposed of subsidiary's loss. That amount
will be used to reduce the owning mem-
ber's basis in the subsidiary's stock and
determine the gain or loss on the stock
disposition. If the stock disposition results
in gain, that gain will be taken into ac-
count in an actual computation of CTI. If
the sum of the other member's loss and
the disposed of subsidiary's limited loss
still exceeds the income and gain of other
members, the pro rata absorption rule will
be applied again. That computation will
result in a lower amount for the absorption
of the disposed of subsidiary's loss, which
will be different than the amount by which
the owning member's stock basis was re-
duced. Accordingly, iterative computa-
tions would be required.

To illustrate, assume a consolidated
group consists of P, the common parent,
and its wholly owned subsidiaries, S1 and
S2. At the beginning of the consolidated

return year, P has a $500 basis in S1's
stock. P sells all of its S1 stock for $500 at
the end of the year. For the year, P has a
$60 capital gain (determined without tak-
ing into account P's gain or loss on the
disposition of S1's stock), S1 has a $40
net capital loss and S2 has an $80 net
capital loss. To determine the limitation
on the amount of S1's capital loss that the
group may use during the consolidated
return year, CTI is tentatively determined
without taking into account gain or loss on
the disposition of S1's stock, but with
regard to S2's net capital loss. Because S2
has an $80 net capital loss in addition to
S1's $40 net capital loss, $40 of S2's loss
[$60 x ($80/$120)] and $20 of S1's loss
[$60 x ($40/$120)] will be used (assuming
pro rata absorption of losses as described
in section 2 of the Explanation of Provi-
sions of this preamble). Accordingly, the
group's use of S1's loss is limited to $20.
Thus, P's basis in S1's stock is reduced by
$20 before P disposes of the stock. There-
fore, P is assumed to recognize $20 [$500
\- ($500 - $20)] of gain on the disposition
of its S1 stock, which leaves P with a total
capital gain for the year of $80. Again,
because S2 has an $80 loss in addition to
S1's $20 usable loss, a pro rata portion of
each subsidiary's losses will be absorbed
in computing the P group's CTI. Assum-
ing pro rata absorption of losses, P's $80
capital gain is offset with $16 of S1's
capital loss [$80 x ($20/$100)]. This
amount, however, is less than the $20
amount determined in the tentative com-
putation by which P's basis in S1's stock
was reduced. Thus, iterative computations
would be required.

In considering the circular basis prob-
lem, the Treasury Department and the IRS
have become aware that taxpayers have
taken a broad range of approaches in cases
in which the circular basis problem per-
sists. Some taxpayers may undertake
many iterative computations while, under
similar facts, others will undertake few.
Some commentators have suggested using
simultaneous equations. That method can
produce appropriate results in the simplest
fact patterns, but becomes highly complex
if both ordinary income and capital gains
are present, or if the stock of more than
one subsidiary is sold.

One approach that the Treasury De-
partment and IRS considered but did not

adopt in these proposed regulations was to
disallow the absorption of any losses of a
subsidiary in the year of disposition. Such
a rule would have an adverse impact on
any consolidated group with ordinary in-
come that otherwise would be offset by
the subsidiary's losses. Furthermore, a
blanket prohibition on the use of a subsid-
iary's losses would be inappropriately
harsh if a subsidiary's stock was sold at a
loss and the unified loss rules required a
stock basis reduction that was greater than
the amount of S's loss. In such a case, the
use of S's loss to offset income of other
members allowed under current law re-
duces CTI, but the basis reduction that
results from the absorption of the loss has
no net effect on the owning member's
basis in the subsidiary's stock. Prohibiting
the use of the disposed of subsidiary's
losses would simply increase the group's
CTI.

The Treasury Department and IRS also
considered but did not adopt an approach
similar to the current rules that would
compute a tentative amount of S's losses,
and then require a reduction to P's basis in
S's stock, regardless of whether S's losses
were actually absorbed. This approach
could lead to non-economic consequences
when another subsidiary's losses are actu-
ally absorbed instead of S's according to
the general rules of the Code and regula-
tions, but S's losses are nonetheless
treated as absorbed for purposes of reduc-
ing P's basis in S's stock.

A third approach that the Treasury De-
partment and IRS considered but did not
adopt was to turn-off the investment ad-
justment rules for losses of a subsidiary
used in the year of disposition. Such an
approach would allow a double deduction
and undermine a bedrock principle of con-
solidated returns as articulated by the Su-
preme Court in Charles Ilfeld Co. v. Her-
nandez, 292 U.S. 62 (1934).

### B. Proposed circular basis rules

#### i. In general.

The proposed regulations would pro-
vide relief and certainty to cases in which
the circular basis problem persists, yet
adhere to underlying consolidated return
concepts without undue complexity. To
prevent iterative computations for a con-

solidated return year in which the stock of
one or more subsidiaries is disposed of,
these proposed regulations require a group
to first determine the amount of each dis-
posed subsidiary's loss that will be ab-
sorbed by computing CTI without regard
to gain or loss on the disposition of the
stock of any subsidiary (the absorbed
amount). Once the amount of a subsid-
iary's absorbed loss is determined under
that computation, the absorbed amount for
each disposed of subsidiary is not redeter-
mined. Determining each disposed of sub-
sidiary's absorbed amount establishes an
immutable number that will also be the
amount of reduction to the basis of S's
stock taken into account in computing the
owning member's gain or loss on the dis-
position of S's stock. After the absorbed
amount is determined, the owning mem-
ber's basis of the S stock is adjusted under
§ 1.1502-32 (and § 1.1502-36 as rele-
vant). The actual computation of CTI can
then be made, taking into account losses
of each disposed of subsidiary equal to
that amount. In some cases, however, ap-
plying the generally applicable rules of
the Code and regulations would result in
less than all of a disposed of subsidiary's
absorbed amount being used.

For example, assume S has an ordinary
loss of $100 and P has capital gain net
income of $100 (unrelated to its disposi-
tion of S stock), then S's absorbed amount
would be determined to be $100. If after
taking into account S's $100 absorbed
amount P would have a $100 capital loss
on a sale of S's stock, P's capital loss on
its S stock would offset P's $100 capital
gain, and S's ordinary loss would not be
used in that year and would become a
CNOL carryover (assuming no ability to
carry back the loss). If an amount of S's
losses equal to its absorbed amount were
not used, P's basis in its S stock would not
be reduced by the absorbed amount, and
the amount of P's loss on S's stock would
be changed.

The proposed regulations prevent such
a result by providing for an alternative
four-step computation of CTI if, applying
the general ordering rules of the Code and
regulations, less than all of a disposed of
subsidiary's absorbed amount would be
used. See Examples 5, 6, 7, 8 and 9 of
§ 1.1502-11(b)(2)(vi) as proposed herein.

Under the first step, any income, gain,
or loss on any share of subsidiary stock is
excluded from the computation of CTI
and the group uses losses of each disposed
of subsidiary equal in both amount and
character and from the same taxable years
as those used in the computation of its
absorbed amount. Thus, by excluding any
income, gain, or loss on a stock disposi-
tion, and by giving priority to the losses of
all disposed of subsidiaries, the proposed
regulations would solve the circularity
problem.

Under the second step, a disposing
member offsets its gain on subsidiary
stock with its losses on subsidiary stock
(determined after applying § 1.1502-
36(b) and (c), and so much of § 1.1502-
36(d) as is necessary to give effect to an
election actually made under § 1.1502-
36(d)(6)). If the disposing member has net
income or gain on the subsidiary stock,
and if the disposing member also has a
loss of the same character (determined
without regard to the stock net income or
gain), the disposing member's loss is used
to offset the net income or gain on the
subsidiary stock to the extent of such in-
come or gain. Any remaining net income
or gain is added to the group's remaining
income or gain as determined under the
first step. Giving priority to S's losses
ahead of other members' losses and ex-
cluding gain or loss on subsidiary stock
are departures from the general rules that
require a member to net its income and
gain with its own losses before those
amounts are combined in a consolidated
computation. These departures may dis-
tort the amount of absorbed losses of a
disposing member relative to the absorbed
losses of other members. Thus, in order to
put losses of a disposing member (unre-
lated to its loss on a stock disposition) on
a par with losses of other members, the
proposed regulations allow P's losses to
offset the group's income before other
members, but only to the extent of the
gain (or income) on the disposed of sub-
sidiary's stock.

Under the third step if, after the appli-
cation of the second step of the alternative
computation, the group has remaining in-
come or gain and a disposing member has
a net loss on subsidiary stock (determined
after applying § 1.1502-36(b) and (c), and
so much of § 1.1502-36(d) as is necessary

to give effect to an election actually made
under § 1.1502-36(d)(6)), that income or
gain is then offset by the loss on the
disposition of subsidiary stock, subject to
generally applicable rules of the Code and
regulations. The amount of the offset,
however, is limited to the lesser of the
total remaining ordinary income or capital
gain of the group (determined after the
application of the second step) or the
amount of the disposing member's ordi-
nary income or capital gain (determined
without regard to the stock loss).

Finally, under the fourth step, if the
group has remaining income or gain, the
unused losses of all members are applied
on a pro rata basis.

The Treasury Department and the IRS
recognize that the special rules in these
proposed regulations may in certain cases
alter the general rule under section
1211(a) that allows the deduction of
losses from the sale or exchange of capital
assets to the extent of capital gains. How-
ever, giving priority to the absorption of a
disposed subsidiary's losses will prevent
the need for iterative computations.

The Treasury Department and the IRS
also recognize that the proposed regula-
tions may increase the number of cases in
which the general ordering rules for the
absorption of members' losses will be al-
tered and may in certain cases result in
more gain (or less loss) on the sale of a
subsidiary's stock than under current law.
However, the Treasury Department and
the IRS believe that the benefits derived
from the certainty that the proposed rules
achieve generally outweigh the potential
detriments of these deviations from the
general rules. Comments are requested on
whether there are alternative approaches
that would both eliminate the circular ba-
sis problem and preserve the general rule
for the absorption of capital and ordinary
losses.

#### ii. Higher-tier subsidiaries.

Under § 1.1502-11(b)(4)(ii) of the cur-
rent regulations, if S is a higher-tier sub-
sidiary of another subsidiary (T), the use
of T's losses is subject to the circular basis
rules upon a disposition of S's stock, but
only if 100 percent of T's items of in-
come, gain, deduction, and loss would be
reflected in the basis of S's stock in the

hands of the owning member (100-percent
requirement). If another member of S's
consolidated group or a nonmember owns
any stock of either S or T, the circular
basis rules do not apply.

These proposed regulations would re-
move the 100-percent requirement. Thus,
if any stock of a higher-tier subsidiary is
disposed of, the absorption of losses of a
lower-tier subsidiary is subject to the pro-
posed circular basis rules by treating the
lower-tier subsidiary as if its stock had
been disposed of. The Treasury Depart-
ment and the IRS request comments re-
garding whether, and under what circum-
stances, the 100-percent requirement
should be retained.

### C. Other Provisions

Ordinary income and deductions are
generally taken into account on a separate
company basis before the computation of
CTI occurs. A member's separate taxable
income under § 1.1502-12 is computed in
accordance with the provisions of the
Code subject to certain modifications.
These modifications generally relate to
items that are determined on a consoli-
dated basis (for example, the use of capital
losses and the limitation on charitable
contribution deductions). Although gain
or loss on the disposition of a subsidiary's
stock is usually capital, a worthless stock
deduction could be ordinary if the condi-
tions of section 165(g)(3) are satisfied. In
addition, a gain on the disposition of such
stock can be ordinary if the recapture rules
of section 1017(d) apply. Under these pro-
posed regulations, gain and loss on the
disposition of subsidiary stock are disre-
garded in determining the subsidiary's ab-
sorbed amount, and in an alternative com-
putation of CTI. Consequently, if stock of
a subsidiary is disposed of, these proposed
regulations may require a departure from
the general rules for the computation of an
owning member's separate taxable in-
come. The Treasury Department and the
IRS believe that this departure from the
general rules is necessary to avoid itera-
tive computations and request comments
as to whether an alternative methodology
would be preferable.

These proposed regulations clarify the
interaction of the Unified Loss Rule of
§ 1.1502-36 with the circular basis rules.

Adjustments under § 1.1502-36(b), (c),
and (d)(6) (if an election is made to reat-
tribute losses or reduce stock basis) will
affect the computation of CTI. Therefore,
these proposed regulations contain guid-
ance as to the point in the computation
that those adjustments are made.

The proposed regulations also contain
a rule to prevent iterative computations in
determining the amount of deductions that
are determined by reference to or are lim-
ited by the group's CTI, for example, the
consolidated charitable contributions de-
duction under § 1.1502-24 and a mem-
ber's percentage depletion deduction with
respect to oil or gas property for indepen-
dent producers and royalty owners under
§ 1.1502-44. The amount of those deduc-
tions is taken into account in determining
the group's CTI and may affect the com-
putation of a disposed of subsidiary's ab-
sorbed amount. The absorbed amount will
reduce the stock basis and affect the
amount of gain or loss on the disposition
of the subsidiary's stock, which will
change the amount of CTI, and thus the
amount of the group's deduction. To pre-
vent these iterative computations, the pro-
posed regulations provide that the amount
of those deductions is determined without
regard to gain or loss on the disposition of
a subsidiary's stock.

As a result of the later addition of
§ 1.1502-11(c), current § 1.1502-11(b)
does not apply if a member realizes dis-
charge of indebtedness income that is ex-
cluded from gross income under section
108(a). The rules applicable in that case,
contained in paragraph (c) of § 1.1502-
11, are generally not addressed by these
proposed regulations, but to the extent that
paragraph (c) uses the absorbed amount
described in § 1.1502-11(b)(2) as a start-
ing point, the computation will be af-
fected. Comments are requested regarding
appropriate additional changes to
§ 1.1502-11(c).

Finally, the proposed regulations in-
clude modifications to §§ 1.1502-11(a),
1.1502-12, 1.1502-22(a), and 1.1502-24
of the current regulations and removal of
§§ 1.1502-21A, 1.1502-22A and 1.1502-
23A. These modifications are not changes
to current substantive law; they are in-
tended solely to update the regulations to
reflect certain statutory changes and re-

move cross-references to outdated regula-
tory provisions.

## Proposed Effective Date

These regulations are proposed to be
effective for consolidated return years be-
ginning on or after the date these regula-
tions are published as final regulations in
the Federal Register.

## Special Analyses

It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866, as supplemented by
Executive Order 13563. Therefore, a reg-
ulatory assessment is not required. These
proposed regulations would not impose a
collection of information on small entities.
Further, under the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby
certified that these proposed regulations
would not have a significant economic
impact on a substantial number of small
entities. This certification is based on the
fact that these proposed regulations would
primarily affect members of consolidated
groups that tend to be large corporations.
Accordingly, a regulatory flexibility anal-
ysis is not required. Pursuant to section
7805(f) of the Code, this notice of pro-
posed rulemaking has been submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.

## Comments and Requests for a Public Hearing

Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed
original with eight (8) copies) or elec-
tronic comments that are submitted timely
to the IRS. The Treasury Department and
the IRS request comments on all aspects
of the proposed regulations.

All comments will be available for
public inspection and copying at www.
regulations.gov or upon request. A public
hearing may be scheduled if requested by
any person that timely submits comments.
If a public hearing is scheduled, notice of
the date, time, and place for the public
hearing will be published in the Federal
Register.

## Drafting Information

The principal author of these regula-
tions is Robert M. Rhyne, Office of Asso-
ciate Chief Counsel (Corporate). How-
ever, other personnel from the IRS and the
Treasury Department participated in their
development.

* * * * *

## Proposed Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 301
are proposed to be amended as follows:

# PART 1-INCOME TAXES

Paragraph 1. The authority citation for
part 1 is amended by adding an entry for
§ 1.1502-24 to read in part as follows:

Authority: 26 U.S.C. 7805 * * *
* * * * *

Section 1.1502-24 also issued under
26 U.S.C. 1502.

* * * * *

Par. 2. Section 1.1502-11 is amended
by:

1\. Revising paragraphs (a) introductory
text, (a)(2), (a)(3), and (a)(4).

2\. Removing and reserving paragraph
(a)(6).

3\. Revising paragraphs (b), (c)(2)(i),
and (c)(2)(ii).

4\. Removing in paragraph (c)(2)(vi)
the phrase "unlimited deductions and
losses that are absorbed" and adding "S's
absorbed amount of losses" in its place.

5\. Revising paragraph (c)(4).

6\. Revising the heading of paragraph
(c)(7) and adding a sentence at the end of
the paragraph.

7\. Adding paragraph (e).

The revisions and additions read as fol-
lows:

## § 1.1502-11 Consolidated taxable income.

(a) In general. The consolidated tax-
able income (CTI) for a consolidated re-
turn year shall be determined by taking
into account-

* * * * *

(2) Any consolidated net operating loss
(CNOL) deduction (see § 1.1502-21 for
the computation of the CNOL deduction);

(3) Any consolidated capital gain net
income (see § 1.1502-22 for the compu-
tation of the consolidated capital gain net
income);

(4) Any consolidated section 1231 net
loss (see § 1.1502-23 for the computa-
tion of the consolidated section 1231 net
loss);

* * * * *

(6) [Reserved]

* * * * *

(b) Elimination of circular basis ad-
justments if there is no excluded COD
income-(1) In general. If a member (P)
disposes of a share of stock of one or more
subsidiaries (S), this paragraph (b) applies
to determine the amount of S's losses
that will be used in the consolidated
return year of disposition and in a car-
ryback year. The purpose of these rules
is to prevent P's income, gain, deduc-
tion, or loss from the disposition of a
share of S's stock from affecting the
amount of S's deductions and losses that
are absorbed. A change to the amount of
S's absorbed losses would affect P's
basis in S's stock under § 1.1502-32,
which in turn affects P's gain or loss on
the disposition of S's stock. For pur-
poses of this section, P is treated as
disposing of a share of a subsidiary's
stock if any event described in
§ 1.1502-19(c) occurs or, if for any
reason, a member recognizes gain or
loss (including an excess loss account
included in income) with respect to the
share. However, to the extent income,
gain, deduction, or loss from a disposi-
tion of a share of S's stock is deferred
under any rule of law (for example,
§ 1.1502-13 and section 267(f)), the
taxable year in which the deferred
amount is taken into account is treated
as the taxable year of disposition. This
paragraph (b) does not apply if any
member realizes discharge of indebted-
ness income that is excluded from gross
income under section 108(a) during the
consolidated return year of the disposi-
tion. If a member realizes such income,
see paragraph (c) of this section. For
purposes of this section, S's ordinary
loss means its separate net operating
loss (as defined in § 1.1502-
21(b)(2)(iv)(B)). Solely for purposes of
this section, any reference to a mem-
ber's capital gain includes amounts

treated as capital gain. Furthermore, for
those purposes, a member's capital loss
means a consolidated net capital loss de-
termined by reference to only that mem-
ber's capital gain and capital loss items.

(2) Deductions and losses of disposed
subsidiaries-(i) Determination of ab-
sorbed amounts. If P disposes of a share
of S's stock in a transaction to which this
paragraph (b) applies, the extent to which
S's ordinary loss and capital loss (includ-
ing losses carried over from a prior year)
that are absorbed in the consolidated re-
turn year of the disposition or in a prior
year as a carryback (the absorbed amount)
is determined under this paragraph (b)(2).
S's absorbed amount is the amount that
would be absorbed in a computation of the
group's consolidated taxable income
(CTI) for the consolidated return year of
the disposition (and any taxable year to
which losses may be carried back) without
taking into account any member's income,
gain, deduction, or loss from the disposi-
tion of any share of any subsidiary's stock
in that year. S's absorbed amount is de-
termined after first applying other appli-
cable limitations and ordering rules (for
example, limitations imposed by section
382(a) and § 1.1502-21 and the ordering
rules of section 382(1)(2)) to S's deduc-
tions and losses. Any election that the
group makes on its actual return for the
consolidated return year (for example, an
election to relinquish a carryback under
§ 1.1502-21(b)(3)) must be used in this
computation. Once S's absorbed amount
is determined, that amount is not redeter-
mined. Except as provided in paragraph
(b)(2)(iii)(B)(1) of this section, the
amount determined under this paragraph
(b)(2)(i) fixes only the amount of S's
losses that will be absorbed. Thus, under
paragraph (b)(2)(iii)(A) of this section, the
character of the losses that are absorbed in
the actual computation of the group's CTI
for the year (or as a carryback to a prior
year) may not be the same as the character
of the losses that are absorbed in deter-
mining the absorbed amount. However, if
the alternative computation of paragraph
(b)(2)(iii)(B)(1) of this section is required,
the character of the absorbed amount as
determined under this paragraph (b)(2)(i)
is retained.

(ii) Stock basis reduction and gain or
loss on disposition. After the determina-

tion of S's absorbed amount, P reduces its
basis in S's stock under the investment
adjustment rules of § 1.1502-32(b)(2) by
the absorbed amount. If any share is a loss
share, P then adjusts its basis in S's stock
by applying paragraphs (b) and (c) of
§ 1.1502-36, and, if an election is actually
made under § 1.1502-36(d)(6), by apply-
ing § 1.1502-36(d) to the extent necessary
to give effect to the election. P then com-
putes its gain or loss on the disposed of
shares after taking into account those ad-
justments.

(iii) Actual computation of CTI-(A)
In general. The group's CTI and any car-
ryback of a portion of a CNOL are deter-
mined under applicable provisions of the
Internal Revenue Code (Code) and regu-
lations, taking into account gain or loss on
any subsidiary's stock, and taking into
account losses of disposed of subsidiaries
equal to each such subsidiary's absorbed
amount.

(B) Alternative computation. If the
computation of the group's CTI under
paragraph (b)(2)(iii)(A) of this section
would result in an absorption of less than
all of any disposed of subsidiary's ab-
sorbed amount, then the group's CTI is
computed by applying the following
steps, rather than the computation under
that paragraph:

(1) First, losses of each disposed of
subsidiary equal in both amount and char-
acter and from the same taxable years as
losses used in the computation of its ab-
sorbed amount under paragraph (b)(2)(i)
of this section offset income and gain of
other members without taking into ac-
count any gain or loss on any share of
subsidiary stock and without regard to net
losses of other members.

(2) Second, a disposing member offsets
its gain on subsidiary stock with its losses
on subsidiary stock of the same character.
For this purpose, a loss on subsidiary
stock is determined after applying
§ 1.1502-36(b) and (c), and so much of
§ 1.1502-36(d) as is necessary to give
effect to an election actually made under
§ 1.1502-36(d)(6). If the disposing mem-
ber has net income or gain on subsidiary
stock, and if the member also has a loss of
the same character (determined without
regard to the net income, gain, deduction
or loss on subsidiary stock), the loss off-
sets that net income or gain and any re-

maining income or gain is added to the
amount determined after the application
of paragraph (b)(2)(ii)(B)(1) of this sec-
tion. For example, if P has a net capital
loss on portfolio stock, that net loss is not
taken into account in applying paragraph
(b)(2)(iii)(B)(1). However, under this
paragraph (b)(2)(iii)(B)(2), that net capital
loss is absorbed to the extent of that mem-
ber's net capital gain on subsidiary stock.

(3) Third, if, after the application of
paragraph (b)(2)(iii)(B)(2) of this section,
the group has remaining income or gain
and a disposing member has a net loss on
subsidiary stock (determined after apply-
ing § 1.1502-36(b) and (c), and so much
of § 1.1502-36(d) as is necessary to give
effect to an election actually made under
§ 1.1502-36(d)(6)), that remaining in-
come or gain is then offset by a loss on the
disposition of subsidiary stock, subject to
the applicable rules of the Code and reg-
ulations. The amount of the offset, how-
ever, is limited to the lesser of the total
remaining ordinary income or capital gain
of the group (determined after the appli-
cation of paragraph (b)(2)(iii)(B)(2) of
this section), or the amount of the dispos-
ing member's ordinary income or capital
gain of the same character (determined
without regard to the stock loss). If the
preceding sentence applies to more than
one disposing member, and the sum of the
amounts determined under that sentence
exceeds the group's remaining ordinary or
capital gain, the amounts offset capital
gain or ordinary income on a pro rata
basis under the principles of paragraph (e)
of this section.

(4) Fourth, if, after application of para-
graph (b)(2)(iii)(B)(3) of this section, the
group has remaining ordinary income or
capital gain, those amounts are offset by
the unused losses of all members on a pro
rata basis under paragraph (e) of this sec-
tion.

(C) Priority of rules. The computation
of CTI under this paragraph (b)(2)(iii) ap-
plies notwithstanding other rules for the
absorption of a portion of a member's
current year loss, such as paragraphs (a)
and (e) of this section, §§ 1.1502-12 and
1.1502-22(a), and the absorption of a
member's portion of a CNOL or consoli-
dated net capital loss carryover from a
prior year under §§ 1.1502-21(b) and
1.1502-22(b), respectively. For example,

in some circumstances, an ordinary loss of
a disposed of subsidiary may offset capital
gain of another member notwithstanding
that under general rules a capital loss of
another member would be allowed to the
extent of capital gains before an ordinary
loss is taken into account. Similarly, an
ordinary loss with respect to a subsid-
iary's stock, which would generally offset
ordinary income of the owning member
and be included in determining that mem-
ber's separate taxable income, may be-
come a loss carryover if use of that loss
would cause less than all of a disposed of
subsidiary's absorbed amount to be used.

(D) Deductions determined by refer-
ence to CTI. In the case of any deduction
of any member that is determined by ref-
erence to or limited by the amount of CTI
(for example, a charitable contribution de-
duction under § 1.1502-24(c) and a per-
centage depletion deduction under
§ 1.1502-44(b)), the amount of the de-
duction is determined without regard to
any gain or loss on subsidiary stock.

(iv) Losses not absorbed. To the extent
S's losses in the consolidated return year
of the disposition of its stock do not offset
income or gain by reason of the rules of
this paragraph (b), S ceases to be a mem-
ber, and S's losses are not reattributed
under § 1.1502-36(d)(6), the losses are
carried over to its separate return years (if
any) under the applicable principles of the
Code and regulations thereunder. Those
losses are not taken into account in deter-
mining the percentage of CNOL or con-
solidated net capital loss attributable to
members under § 1.1502-21(b)(2)(iv) or
§ 1.1502-22(b)(3), respectively. If S re-
mains a member, its unused losses are
included in the CNOL or consolidated net
capital loss carryovers and are subject to
the allocation rules of those sections.

(v) Disposition of stock of a higher-tier
subsidiary. If a subsidiary (T) is a lower-
tier subsidiary (as described in § 1.1502-
36(f)(4)) of a higher-tier subsidiary (S),
and S's stock is disposed of during a con-
solidated return year, T's losses are sub-
ject to this paragraph (b) as if T's stock
had been disposed of. Thus, T's absorbed
amount is determined by disregarding any
gain or loss (for example, an excess loss
account taken into account under
§ 1.1502-19(b)) on a deemed disposition
of T's stock as provided under this para-

graph (b), as well as any gain or loss on
the disposition of a share of any other
subsidiary's stock.

(vi) Examples. For purposes of the ex-
amples in this paragraph (b)(2)(vi), unless
otherwise stated, P is the common parent
of a calendar-year consolidated group and
owns all of the only class of stock of
subsidiaries S, S1, S2, M, M1, and M2 for
the entire year; S, S1, S2, M, M1, M2, and
T own no stock of lower-tier subsidiaries;
all persons use the accrual method of ac-
counting; the facts set forth the only cor-
porate activity; all transactions are be-
tween unrelated persons; tax liabilities are
disregarded; and § 1.1502-36 will not
cause P to adjust its basis in S's stock
immediately before a disposition. The
rules of this paragraph (b)(2) are illus-
trated by the following examples:

Example 1. Absorption of disposed of subsid-
iary's losses. (i) Facts. P has a $500 basis in S's
stock. P sells S's stock for $520 at the close of Year
1\. For Year 1, P has ordinary income of $30 (deter-
mined without taking into account P's gain or loss
from the disposition of S's stock) and S an $80
ordinary loss.

(ii) Determination of absorbed amount. To de-
termine S's absorbed amount and the effect of the
absorption of its losses under § 1.1502-32(b)(2) on
P's basis in S's stock, the group's taxable income is
computed without taking into account P's gain or
loss from the disposition of S's stock. The P group is
treated as having a CNOL of $50 (P's $30 of income
minus S's $80 separate net operating loss). Accord-
ingly, S's absorbed amount determined under para-
graph (b)(2)(i) of this section is $30.

(iii) Loss absorption and basis reduction. Under
paragraph (b)(2)(ii) of this section, P's basis in S's
stock is reduced by S's $30 absorbed amount from
$500 to $470 immediately before the disposition.
Consequently, P recognizes a $50 gain from the sale
of S's stock, and the P group has CTI of $50 for Year
1 (P's $30 of ordinary income plus its $50 of gain
from the sale of S's stock, minus $30 of S's ordinary
loss equal to its absorbed amount). In addition, S's
$50 of unabsorbed loss is carried to S's first separate
return year.

Example 2. Carrybacks and carryovers. (i)
Facts. For Year 1, the P group has CTI of $30 (all of
which is attributable to P) and a consolidated net
capital loss of $100 ($50 attributable to P and $50 to
S), which cannot be carried back. At the beginning
of Year 2, P has a $300 basis in S's stock. P sells S's
stock for $280 at the close of Year 2. For Year 2, P
has ordinary income of $30, and a $20 capital gain
(determined without taking into account the consol-
idated net capital loss carryover from Year 1 or P's
gain or loss from the disposition of S's stock), and S
has a $100 ordinary loss.

Year 2 is computed without taking into account P's
gain or loss from the disposition of S's stock. Under
section 1212(a)(1)(B), P's $20 capital gain for Year
2 would be offset by $20 of the group's consolidated
capital loss carryover from Year 1 ($10 attributable
to P and $10 attributable to S). P's $30 of ordinary
income in Year 2 would be offset by $30 of S's $100
ordinary loss in that year. P's $30 of ordinary income
in Year 1 would be offset by a $30 CNOL carryback
from Year 2, all of which is attributable to S. Ac-
cordingly, S's absorbed amount under paragraph
(b)(2)(i) of this section is $70 ($10 of S's portion of
the consolidated capital loss carryover from Year 1
plus $60 of S's loss from Year 2).

(iii) Loss absorption and basis reduction. Under
paragraph (b)(2)(ii) of this section, P's basis in S's
stock is reduced by S's $70 absorbed amount from
$300 to $230, immediately before the disposition,
resulting in $50 of capital gain to P from the sale of
S's stock for $280 in Year 2. Thus, for Year 2 P will
have $70 of capital gain ($50 from the stock sale
plus $20 from its other capital gain for that year),
which will be offset by $70 of the consolidated
capital loss carryover from Year 1, $35 of which is
attributable to P and $35 of which is attributable to S.
Another $30 of S's ordinary loss offsets P's $30 of
ordinary income in Year 2. An amount of S's ordi-
nary loss equal to its remaining $5 absorbed amount
may be carried back to Year 1 to offset $5 of the
group's CTI in that year. P will have a $15 ($50 -
$35) capital loss carryover from Year 1, and S will
carry over a $15 ($50 - $35) capital loss from Year
1 and a $65 ($100 - $35) NOL to its first separate
return year.

Example 3. Chain of subsidiaries. (i) Facts. P has
a $500 basis in the stock of S and S has a $500 basis
in the stock of T, its wholly owned subsidiary. P sells
all of its S stock for $520 at the close of Year 1. For
Year 1, P has ordinary income of $30, S has no
income or loss, and T has an $80 ordinary loss.

(ii) Determination of absorbed amount, basis
reduction, and loss absorption. Under § 1.1502-
19(c)(1)(ii), T's stock is treated as disposed of when
it becomes a nonmember, and its losses are subject to
paragraph (b) of this section. Thus, T's absorbed
amount is determined by taking into account P's $30
of ordinary income but without taking into account
any gain or loss on P's disposition of S's stock.
Accordingly, T's absorbed amount determined under
paragraph (b)(2)(i) of this section is $30. Under
paragraph (b)(2)(ii) of this section, S's basis in T's
stock is reduced by $30, from $500 to $470. Fur-
thermore, under § 1.1502-32(a)(3)(iii), P's basis in
S's stock is reduced by $30, from $500 to $470,
immediately before the sale. Consequently, P recog-
nizes a $50 gain from the sale of S's stock ($520 -
$470), and T will have a $50 ($80 - $30) NOL
carryover to its first separate return year.

(iii) Excess loss account in lower-tier stock. The
facts are the same as in paragraph (i) of this Example
3, except that S has a $10 excess loss account (ELA)
in T's stock (rather than a $500 basis). Under para-
graph (b)(1) of this section, T's stock is treated as
disposed of and its absorbed amount is determined
under paragraph (b)(2)(i) of this section. Thus, T's
absorbed amount is determined by taking into ac-
count P's $30 of ordinary income but without taking
into account P's gain or loss on the disposition of S's

stock and S's inclusion of its ELA with respect to
T's stock under § 1.1502-19(b)(1). Accordingly, T's
absorbed amount determined under paragraph
(b)(2)(i) of this section is $30. Under paragraph
(b)(2)(ii) of this section, S's ELA in its T stock is
increased by $30, from $10 to $40, immediately
before the disposition of T's stock. Under § 1.1502-
19(b), the ELA is included in S's income. Moreover,
under § 1.1502-32(b)(2), P's basis in S's stock is
increased immediately before the sale by a net $10
(S's $40 inclusion of T's ELA under § 1.1502-19(b)
minus T's $30 absorbed loss that tiers up under
§ 1.1502-32(a)(3)(iii)) from $500 to $510. Thus, P
recognizes $10 of gain on the sale of S's stock ($520
\- $510), and S takes into account $40 of gain from
the inclusion of its ELA in T's stock. T will have a
$50 ($80 - $30) NOL carryover to its first separate
return year.

Example 4. Sale of S's stock and S remains in the
group. (i) Facts. For Year 1, the P group has CTI of
$100 (all of which is attributable to P). At the be-
ginning of Year 2, P has a $40 basis in each of the 10
shares of S's stock. P sells 2 shares of S's stock for
$85 each at the close of Year 2. For Year 2, P has an
$80 ordinary loss (determined without taking into
account P's gain or loss from the sale of S's stock),
and S has an $80 ordinary loss.

(ii) Determination of absorbed amount. To de-
termine S's absorbed amount and the effect of the
absorption of its losses under § 1.1502-32(b)(2) on
P's basis in S's stock, the group's CTI for Year 2 is
computed without taking into account P's gain or
loss from the sale of S's stock. Thus, the group
would have a $160 CNOL for Year 2, $100 of which
is carried back to Year 1 ($50 attributable to S and
$50 attributable to P) and offsets $100 of CTI in that
year. Accordingly, S's absorbed amount determined
under paragraph (b)(2)(i) of this section is $50.

(iii) Loss absorption and basis reduction. Under
paragraph (b)(2)(ii) of this section, P's basis in all of
S's stock is reduced by $50. Each of P's 10 shares of
S stock is reduced by $5 from $40 to $35. Conse-
quently, on the sale of each of the 2 shares of S's
stock, P recognizes a $50 gain ($85 - $35). The
losses available to offset the $100 gain on the sale of
S's 2 shares consist of P's $80 ordinary loss and $50
of S's ordinary loss equal its absorbed amount. Un-
der paragraph (e) of this section, P's and S's losses
are absorbed on a pro rata basis. Therefore, the group
absorbs approximately $62 ($100 x 80/80 + 50) of
P's ordinary loss from Year 2, and approximately
$38 ($100 x 50/80 + 50) of S's ordinary loss in that
year. P's remaining $18 ($80 - $62) of ordinary loss
in Year 2 and S's remaining $12 ($50 - $38) of
ordinary loss equal to its remaining absorbed amount
may be carried back to Year 1 to offset $30 of the
$100 of CTI in that year. For Year 2, the P group has
$30 remaining of its CNOL (all of which is attrib-
utable to S) which is carried to the P group's Year 3
consolidated return year.

(iv) Lower-tier subsidiary. The facts are the same
as in paragraph (i) of this Example 4, except that S
has no income or loss for Year 2, but S's wholly
owned subsidiary, T, has an $80 ordinary loss. Under
paragraph (b)(2)(v) of this section, T's loss is subject
to paragraph (b) of this section as if T's stock had
been disposed of. To determine T's absorbed
amount, and the effect of the absorption of its losses

under § 1.1502-32 on S's basis in its T stock and P's
basis in its S stock, the group's taxable income is
computed without taking into account P's gain or
loss from the sale of S's stock. Of the group's $160
CNOL for Year 2, $100 is carried back to Year 1
($50 attributable to P and $50 attributable to T) and
offsets $100 of CTI in that year. Accordingly, T's
absorbed amount determined under paragraph
(b)(2)(i) of this section is $50. Under paragraph
(b)(2)(ii) of this section, S's basis in T's stock is
reduced by $50. Under § 1.1502-32(a)(3)(iii), the
$50 reduction to S's basis in T's stock tiers up and
reduces P's basis in its 10 shares of S stock by $50.
Consequently, P's basis in each of the 10 shares of S
stock will be decreased by $5 from $40 to $35. On
the sale of each of the 2 shares of S's stock, P
recognizes a $50 gain ($85 - $35). Under the actual
computation, the group has P's $80 ordinary loss and
$50 of T's $80 ordinary loss (limited by its absorbed
amount) available to offset P's $100 gain on the sale
of S's stock. Under paragraph (e) of this section, P's
gain is offset on a pro rata basis by approximately
$62 ($100 x 80/($80 + $50)) of P's ordinary loss in
Year 2, and approximately $38 ($100 x ($50/($80 +
$50)) of T's ordinary loss in that year. P's remaining
$18 of ordinary loss in Year 2 and $12 of T's
ordinary loss equal to its remaining absorbed amount
may be carried back to Year 1 to offset $30 of the
$100 of CTI in that year. For Year 2, the P group has
$30 remaining of its CNOL (all of which is attrib-
utable to T) which is carried to the P group's Year 3
consolidated return year.

Example 5. Alternative Computation. (i) Facts.
At the beginning of Year 1, P has a $200 basis in S's
stock. P sells all of its S stock for $100 at the close
of Year 1. For Year 1, P has $10 capital gain on
portfolio stock. In addition to S, P has two other
subsidiaries, M1 and M2. M1 has capital gain of
$50; M2 has a capital loss of $30, and S has a capital
loss of $60.

(ii) Determination of absorbed amount. To de-
termine S's absorbed amounts and the effect of the
absorption of its loss under § 1.1502-32(b)(2) on P's
basis in S's stock, the group's taxable income is
computed without taking into account P's gain or
loss from the disposition of S's stock. Under that
computation, S's capital loss would offset $40 ($60
x $60/$90) of the group's $60 of capital gain. Ac-
cordingly, S's absorbed amount is $40.

(iii) Basis reduction. Under paragraph (b)(2)(ii)
of this section, S's $40 absorbed amount reduces P's
basis in S's stock by $40 from $200 to $160. On the
sale of S's stock, P recognizes a capital loss of $60
($100 - $160).

(iv) Computation of CTI under generally appli-
cable rules. In the actual computation under para-
graph (b)(2)(iii)(A) of this section, P is treated as
having a $50 capital loss ($60 capital loss on the sale
of S's stock plus $10 capital gain). Therefore, the
only capital gain in the actual computation is MI's
$50. There is a total of $120 of capital loss in the
computation: S's $40 of capital loss (equal to its
absorbed amount), as well as P's $50 and M2's $30
capital losses. M1's $50 of capital gain would be
offset on a pro rata basis by approximately $16.50 of
S's loss ($50 x $40/$120), approximately $21.00
($50 x $50/$120) of P's $50 capital loss, and $12.50
($50 x $30/$120) of M2's capital loss. Because less

than all of S's absorbed amount of $40 would be
used, the group's CTI is determined under the alter-
native computation of paragraph (b)(2)(iii)(B) of this
section.

(v) Alternative computation of CTI. Under para-
graph (b)(2)(iii)(B)(1) of this section, S's $40 capital
loss (the amount and character of S's absorbed
amount) first offsets $40 of the $60 of capital gain
(determined without taking into account any gain or
loss on P's sale of S stock and without regard to
M2's capital loss of $30) generated by other mem-
bers. Accordingly, $20 of capital gain (P's $10 cap-
ital gain determined without regard to its loss on S's
stock plus MI's $50 capital gain minus S's $40
absorbed amount) remains. Because P has no net
stock gain, paragraph (b)(2)(iii)(B)(2) of this section
is inapplicable. Under paragraph (b)(2)(iii)(B)(3) of
this section, $10 (the amount of P's capital loss on
S's stock limited by the amount of its income in-
cluded in the computation under paragraph (b)(2)(i)
of this section) of P's capital loss offsets the group's
$20 remaining capital gain. Under paragraph
(b)(2)(iii)(B)(4) of this section, capital losses of
members other than S offset the group's remaining
$10 of capital gain on a pro rata basis. Therefore, the
group will use $3.75 of M2's $30 capital loss ($10 x
$30/$80) and $6.25 of P's $50 remaining capital loss
($10 x $50/$80). The group will have a $70 consol-
idated net capital loss carryover to Year 2 ($43.75
attributable to P and $26.25 attributable to M2).
Paragraphs (b), (c), and (d)(6) of § 1.1502-36 will
not cause P to adjust its basis in S's stock immedi-
ately before P's sale of the S stock. However, S's
$20 unabsorbed capital loss that may be carried to its
first separate return year may be reduced under the
attribute reduction rule of § 1.1502-36(d)(2).

Example 6. Loss disposition. (i) Facts. For Year
1, the P group has a consolidated net capital loss of
$100, all of which is attributable to S, and P and M
have no income or loss. At the beginning of Year 2,
P has a $300 basis in S's stock. P sells all of S's
stock for $100 at the close of Year 2. For Year 2, P
and S have no income or loss (determined without
taking into account P's gain or loss from the dispo-
sition of S's stock) and the group has consolidated
capital gain net income of $100 attributable solely to
M.

(ii) Determination of absorbed amount. To de-
termine S's absorbed amount and the effect of the
absorption of its losses under § 1.1502-32(b)(2) on
P's basis in S's stock, the group's taxable income for
Year 2 is computed without taking into account P's
gain or loss from the disposition of S's stock. The
$100 consolidated net capital loss carryover from
Year 1 attributable to S offsets the group's $100 of
consolidated capital gain net income in Year 2. Ac-
cordingly, S's absorbed amount determined under
paragraph (b)(2)(i) of this section is $100.

(iii) Loss absorption and basis reduction. Under
paragraph (b)(2)(ii) of this section, P's basis in S's
stock is reduced from $300 to $200 immediately
before the disposition. Consequently, P recognizes a
$100 capital loss on the sale of S's stock. In an actual
computation of CTI, P's $100 capital loss on S's
stock in Year 2 would offset M's $100 capital gain in
Year 2 before the consolidated capital loss carryover
from Year 1 and, as a result, S's $100 absorbed
amount would not be used. Because less than all of

S's absorbed amount of $100 would be used, the
group's CTI is determined under the alternative
computation of paragraph (b)(2)(iii)(B) of this sec-
tion.

(iv) Alternative Computation of CTI. Under para-
graph (b)(2)(iii)(B)(1) of section, S's $100 consoli-
dated net capital loss carryover from Year 1 first
offsets M's $100 of capital gain in Year 2. Because
P has no net stock gain to be added to the compu-
tation, the amount under paragraph (b)(2)(iii)(B)(2)
of this section is zero. Because there is no remaining
income to offset, paragraphs (b)(2)(iii)(B)(3) and
(b)(2)(iii)(B)(4) of this section are inapplicable.
Therefore, P's $100 loss on S's stock becomes a
consolidated net capital loss carryover to the group's
Year 3 consolidated return year.

Example 7. Netting of Disposing Member's
Gains and Losses. (i) Facts. At the beginning of
Year 1, P has a $120 basis in S's stock. P sells all of
S's stock for $80 at the close of Year 1. In addition,
P has $60 capital loss on the sale of portfolio stock.
S has a capital loss of $180. M1 has a capital gain of
$100 and M2 has a capital loss of $120.

(ii) Determination of absorbed amount. To de-
termine S's absorbed amount and the effect of the
absorption of its loss under § 1.1502-32(b)(2) on P's
basis in S's stock, the group's taxable income is
computed without taking into account P's gain or
loss from the disposition of S's stock. Under that
computation, S's capital loss would offset $50 ($100
x $180/($180 +$120 + $60)) of Ml's $100 capital
gain. Accordingly, S's absorbed amount is $50.

(iii) Basis reduction and computation of CTI
under generally applicable rules. Under paragraph
(b)(2)(ii) of this section, P's basis in S's stock is
reduced by $50 from $120 to $70 immediately be-
fore the sale. Consequently, P recognizes a $10 cap-
ital gain on the sale of S's stock. In an actual com-
putation of CTI, P's $10 capital gain on the sale of
S's stock would be offset by $10 of P's $60 capital
loss. MI's $100 capital gain would be offset by
$22.73 ($100 x $50/($50 + $120 + $50)) of P's $50
of net capital loss, $ 54.54 ($100 x $120/$220) of
M2's $120 capital loss and $22.73 ($100 x $50/
$220) of S's $50 capital loss. Because less than all of
S's absorbed amount of $50 would be used, the
group's CTI is determined under the alternative
computation of paragraph (b)(2)(iii)(B) of this
section.

(iv) Alternative computation of CTI. Under para-
graph (b)(2)(iii)(B)(1) of this section, $50 of S's
capital loss (the amount and character of S's ab-
sorbed amount) first offsets $50 of the $100 capital
gain (determined without taking into account any
gain or loss on P's sale of S stock and without regard
to P's and M2's capital losses). Therefore, after the
absorption of S's loss equal to its absorbed amount,
there is $50 of remaining capital gain. P will have a
$10 capital gain on the sale of S's stock, a $60
capital loss on portfolio stock, and M2 will have a
$120 capital loss. Under paragraph (b)(2)(iii)(B)(2)
of this section, $10 of P's $60 loss on portfolio stock
offsets its $10 gain on S's stock before M2's $120
capital loss is taken into account. No member has a
net loss on subsidiary stock, and therefore paragraph
(b)(2)(iii)(B)(3) of this section does not apply. Under
paragraph (b)(2)(iii)(B)(4) of this section, the re-
maining capital gain of $50 after the application of

paragraph (b)(2)(iii)(B)(3) is offset pro rata by
$14.70 ($50 x $50/($50 + $120)) of P's capital loss
and $35.30 ($50 x $120/$170) of M2's capital loss.
P's unused capital loss of $35.30 and M2's unused
capital loss of $84.70 become a $120 consolidated
net capital loss carryover to the group's Year 2
consolidated return year.

Example 8. Character of Absorbed Amount. (i)
Facts. At the beginning of Year 1, P has a $550 basis
in S's stock. P sells all of S's stock for $50 at the
close of Year 1. In addition, P has a capital gain of
$200 (without regard to gain or loss on the sale of
S's stock). S has an ordinary loss of $50 and M has
an ordinary loss of $25.

(ii) Determination of absorbed amount. To de-
termine S's absorbed amount and the effect of the
absorption of its losses under § 1.1502-32(b)(2) on
P's basis in S's stock, the group's taxable income is
computed without taking into account P's gain or
loss from the disposition of S's stock. Under that
computation, S's $50 ordinary loss and M's $25
ordinary loss offset $75 of P's $200 capital gain.
Accordingly, S's absorbed amount determined under
paragraph (b)(2)(i) of this section is $50.

(iii) Basis reduction and computation of CTI
under generally applicable rules. Under paragraph
(b)(2)(ii) of this section, P's basis in S's stock is
reduced by $50 from $550 to $500 immediately
before the sale. Consequently, P recognizes a $450
capital loss on the sale of S's stock. In an actual
computation of CTI, $200 of P's $450 capital loss on
its sale of S's stock would offset its $200 capital gain
and none of S's absorbed amount would be used.
Because less than all of S's absorbed amount of $50
would be used, the group's CTI is determined under
the alternative computation of paragraph
(b)(2)(iii)(B) of this section.

(iv) Alternative computation of CTI. Under para-
graph (b)(2)(iii)(B)(1) of this section, S's $50 ordi-
nary loss first offsets $50 of P's $200 capital gain.
Therefore, after the absorption of S's loss equal to its
absorbed amount, the group will have $150 ($200 -
$50) of remaining capital gain. Because P has no net
stock gain to be added to the computation, paragraph
(b)(2)(iii)(B)(2) of this section is inapplicable. Under
paragraph (b)(2)(iii)(B)(3) of this section, $150 of
P's $450 loss on S's stock (the lesser of P's $200
capital gain or the group's $150 remaining capital
gain) offsets the group's remaining $150 of capital
gain. Because there is no more income in the group
for M's loss to offset, the amount under paragraph
(b)(2)(iii)(B)(4) of this section is zero. Therefore, P's
remaining unused capital loss on S's stock of $300
and M's $25 ordinary loss become carryovers to the
group's Year 2 consolidated return year.

Example 9. Worthless Stock Loss. (i) Facts. At
the beginning of Year 1, P has a $120 basis in S's
stock. For Year 1, P has $100 of ordinary income
(determined without taking into account P's gain or
loss on the disposition of S's stock) and S generates
an $80 ordinary loss. At the close of Year 1, S issues
stock to its creditors in a bankruptcy proceeding, and
P's stock in S is canceled. The aggregate of S's
historic gross receipts meets the requirements of
section 165(g)(3)(B), which allows P to claim an
ordinary loss with respect to S's stock.

(ii) Determination of absorbed amount. To de-
termine S's absorbed amount and the effect of the

absorption under § 1.1502-32(b)(2) on P's basis in
S's stock, the group's CTI is computed without
taking into account P's gain or loss from the dispo-
sition of S's stock. Under that computation, S's $80
ordinary loss would offset $80 of P's $100 of ordi-
nary income. Accordingly, S's absorbed amount un-
der paragraph (b)(2)(i) of this section is $80.

(iii) Basis reduction and computation of CTI
under generally applicable rules. Under paragraph
(b)(2)(ii) of this section, S's $80 absorbed amount
reduces P's basis in S's stock from $120 to $40.
Therefore, P's worthless stock deduction with re-
spect to S's stock is $40. In an actual computation of
CTI, P's separate taxable income under § 1.1502-12
would be determined by offsetting P's $100 of ordi-
nary income with its $40 worthless stock deduction
with respect to S's stock, leaving $60 of ordinary
income that would be offset by S's ordinary loss.
However, that computation would result in the ab-
sorption of only $60 of S's losses. Because less than
all of S's absorbed amount of $80 would be used, the
group's CTI is determined under the alternative
computation of paragraph (b)(2)(iii)(B) of this sec-
tion.

(iv) Alternative computation of CTI. Under para-
graph (b)(2)(iii)(B)(1) of this section, S's $80 ordi-
nary loss first offsets $80 of P's $100 of ordinary
income. Therefore, after the absorption of S's loss
equal to its absorbed amount, the group will have
$20 of remaining ordinary income. Because P has no
net stock gain to be added to the computation, the
amount under paragraph (b)(2)(iii)(B)(2) of this sec-
tion is zero. Under paragraph (b)(2)(iii)(B)(3) of this
section, the group uses $20 of P's $40 ordinary loss
on S's stock to offset the remaining $20 income of
the group. Because there remains no more income in
the group, the amount under paragraph
(b)(2)(iii)(B)(4) of this section is zero. P's remaining
$20 ordinary loss becomes a CNOL carryover to the
group's Year 2 consolidated return year.

Example 10. Charitable Contributions. (i) Facts.
At the beginning of Year 1, P has a $1,000 basis in
S's stock. P sells all of its S stock for $900 at the
close of Year 1. For Year 1, P has $1,000 of ordinary
income (determined without taking into account P's
gain or loss on the disposition of S's stock). For Year
1, S makes a $100 charitable contribution and incurs
$200 of ordinary and necessary business expenses
that are deductible under section 162(a). In addition,
P has a subsidiary M, which also makes a $100
charitable contribution.

(ii) Determination of S's portion of consolidated
charitable contributions deduction. Under § 1.1502-
24(a), a group's consolidated charitable contribu-
tions deduction is limited to ten percent of its ad-
justed consolidated taxable income as defined in
§ 1.1502-24(c). Under paragraph (b)(2)(iii)(D) of
this section, S's portion of the group's consolidated
charitable contributions deduction is determined by
computing the group's taxable income without re-
gard to P's gain or loss on S's stock. Thus, for
purposes of determining the consolidated charitable
contributions deduction for Year 1, the group's CTI
would be $800 (P's $1,000 of income minus S's
$200 of section 162 expenses). Accordingly, the
consolidated charitable contributions deduction for
Year 1 is limited to $80 ($800 x 10%), $40 attrib-

utable to S and $40 attributable to M. Accordingly,
S's ordinary loss for Year 1 is $240 ($200 + $40).

(iii) Determination of absorbed amount. To de-
termine S's absorbed amount and the effect of the
absorption of its losses under § 1.1502-32(b)(2) on
P's basis in S's stock, the group's CTI is computed
without taking into account P's gain or loss from the
disposition of S's stock. S's $240 ordinary loss off-
sets $240 of P's $1,000 of ordinary income. Accord-
ingly, S's absorbed amount is $240.

(iv) Loss absorption and basis reduction. Under
paragraph (b)(2)(ii) of this section, S's $240 ab-
sorbed amount reduces P's basis in S's stock from
$1,000 to $760. On the sale of S's stock, P recog-
nizes capital gain of $140 ($900 - $760). P's ordi-
nary income is offset by $240 of S's ordinary loss
and $40 of M's portion of the group's consolidated
charitable contributions deduction, resulting in CTI
of $860 ($1,000 + $140 - $280). Of the group's
excess charitable contributions of $120, $60 will be
apportioned to S and carried to its first separate
return year. The remaining $60 of excess consoli-
dated charitable contributions is the group's consol-
idated charitable contribution carryover under
§ 1.1502-24(b).

Example 11. Application of Unified Loss Rule. (i)
Facts. In Year 1, P purchases the sole share of S's
stock for $500. At the time of the purchase, S owns
Land with a basis of $420. During Year 1, P incurs
a $100 ordinary loss and S earns $100 in rental
income, which increases P's basis in S's stock to
$600. For Year 2, P has ordinary income of $30
(determined without taking into account P's gain or
loss from the disposition of S's stock) and S incurs
an ordinary loss of $80. At the close of Year 2, S has
$20 of cash in addition to Land. In addition to S, P
has another subsidiary M, which has an ordinary loss
of $40 for Year 2. At the close of Year 2, when the
value of Land has declined, P sells the sole share of
S's stock for $480. No election is made under
§ 1.1502-36(d)(6) to reduce P's basis in S's stock or
reattribute S's attributes to P.

(ii) Determination of absorbed amount. To de-
termine S's absorbed amount and the effect of the
absorption of its losses under § 1.1502-32(b)(2) on
P's basis in S's stock, the group's CTI is computed
without taking into account P's gain or loss from the
disposition of S's stock. Under paragraph (e)(1) of
this section, P's $30 of ordinary income would be
offset by $10 ($30 x $40/$120) of M's ordinary loss
for Year 2 and $20 ($30 x $80/$120) of S's ordinary
loss for Year 2. Accordingly, S's absorbed amount
determined under paragraph (b)(2)(i) of this section
is $20.

(iii) Loss absorption and basis reduction. Under
paragraph (b)(2)(ii) of this section, S's $20 absorbed
amount reduces P's basis in S's stock from $600 (P's
$500 purchase price plus the $100 positive adjust-
ment in Year 1) to $580. After taking into account
the effects of all applicable rules of law, including
paragraph (b)(2)(ii) of this section, P would recog-
nize a $100 ($480 - $580) loss on the sale of S's
stock. Thus, P's sale of the S share is a transfer of a
loss share and therefore subject to § 1.1502-36.
Under § 1.1502-36(b)(1)(ii), P's basis in its sole
share of S's stock is not subject to redetermination.
Under § 1.1502-36(c), P's basis in the S share
($580) is reduced, but not below value, by the lesser

of the share's net positive adjustment and disconfor-
mity amount. The share's net positive adjustment is
the greater of zero and the sum of all investment
adjustments (as defined in § 1.1502-36(b)(1)(iii))
applied to the basis of the share. The net positive
adjustment applied to the basis of the share is $80,
S's $100 income for Year 1 and its $20 absorbed
amount for Year 2. The share's disconformity
amount is the excess, if any, of its basis ($580) over
its allocable portion of S's net inside attribute
amount. S's net inside attribute amount of $500 is
the sum of S's $20 cash, S's basis in Land of $420,
and S's $60 loss carryover ($80 - $20). Thus, the
share's disconformity amount is $80 ($580 - $500).
The lesser of the net positive adjustment ($80) and
the share's disconformity amount ($80) is $80. Ac-
cordingly, under § 1.1502-36(c), P's basis in S's
share is reduced by $80 from $580 to $500, and after
taking into account the adjustments under para-
graphs (b) and (c) of § 1.1502-36, the transferred S
share is still a loss share ($480 sale price minus $500
basis).

(iv) Computation of CTI. In an actual computa-
tion of CTI, P's $30 of ordinary income would be
offset on a pro rata basis by $20 ($30 x $40/$60) of
M's ordinary loss and $10 ($30 x $20/$60) of S's
ordinary loss. Because less than all of S's absorbed
amount of $20 would be used, the group's CTI is
determined under the alternative computation of
paragraph (b)(2)(iii)(B) of this section. Under para-
graph (b)(2)(iii)(B)(1) of this section, the computa-
tion of CTI is made by first computing the group's
taxable income without taking into account P's loss
on the disposition of S's stock and using only S's
loss equal to its $20 absorbed amount. Accordingly,
the group's $30 of ordinary income is reduced by
$20 of S's ordinary loss, leaving $10 of remaining
ordinary income. Because P has no net stock gain to
be added to the computation, paragraph
(b)(2)(iii)(B)(2) of this section is inapplicable. Under
paragraph (b)(2)(iii)(B)(3) of this section, the
group's remaining $10 of ordinary income is offset
by a loss on the disposition of subsidiary stock,
subject to applicable principles of the Code and
regulations. The group's remaining $10 of income
may not be offset by P's capital loss on the sale of
S's stock, because P has no income of the same
character on its loss on S's stock. Under paragraph
(b)(2)(iii)(B)(4) of this section, the group's remain-
ing $10 of ordinary income is offset by $10 of M's
ordinary loss. M's $30 unabsorbed loss is carried
over as a CNOL and P's remaining $20 capital loss
from the sale of S's stock is carried over as a con-
solidated net capital loss to the group's Year 3 con-
solidated return year. S's $60 unused loss would be
carried over to its separate return year subject to
§ 1.1502-36(d). Under § 1.1502-36(d)(2), S's attri-
butes are reduced by S's attribute reduction amount.
Under § 1.1502-36(d)(3), S's attribute reduction
amount is the lesser of the net stock loss and S's
aggregate inside loss. The net stock loss is $20, the
excess of the $500 basis of the transferred share over
the $480 value of the transferred share. S's aggregate
inside loss is $20, the excess of its $500 net inside
attribute amount over the $480 value of the S share.
Therefore, the attribute reduction amount is $20, the
lesser of the $20 net stock loss and the $20 aggregate
inside loss. Accordingly, S's $20 attribute reduction

amount is applied to reduce from $60 to $40 the
amount of S's NOL carryover to its separate return
year.

(v) Election to reduce stock basis. The facts are
the same as in paragraph (i) of this Example 11
except that P elects under § 1.1502-36(d)(6)(i)(B) to
reattribute S's losses to the full extent of the attribute
reduction amount ($20). Accordingly, P is treated as
succeeding to $20 of S's losses as if acquired in a
transaction described in section 381(a) (see
§ 1.1502-36(d)(6)(i)(B) and (iv)(A)) and, as a result,
P's basis in the S share is reduced from $500 to
$480. After giving effect to the election, P will have
no loss on S's stock, the group will have a $50
CNOL carryover to Year 3 ($30 attributable to M
and $20 attributable to P), and S will have a $40
NOL carryover to its separate return year.

(3) Effective/applicability date. This
paragraph (b) applies to dispositions of
subsidiary stock occurring in consolidated
return years beginning on or after the date
these regulations are published as final
regulations in the Federal Register.

(2) * * *

(i) Limitation on deductions and losses
to offset income or gain. First, the deter-
mination of the extent to which S's deduc-
tions and losses for the consolidated re-
turn year of the disposition (and its
deductions and losses carried over from
prior years) may offset income and gain is
made pursuant to paragraph (b)(2) of this
section.

(ii) Tentative adjustment of stock basis.
Second, § 1.1502-32 is tentatively applied
to adjust the basis of the S stock to reflect
the amount of S's income and gain in-
cluded, and S's absorbed amount of
losses, in the computation of consolidated
taxable income or loss for the year of
disposition (and any prior years) that is
made pursuant to paragraph (b)(2) of this
section, but not to reflect the realization of
excluded COD income and the reduction
of attributes in respect thereof.

* * * * *

(4) Definition of lower-tier corpora-
tion. For purposes of this paragraph (c),
lower-tier corporation means a lower-tier
subsidiary described in § 1.1502-36(f)(4).
* * * * *

(7) Effective/applicability date. * * *
However, paragraphs (c)(2) and (4) of this
section apply to consolidated return years
beginning on or after the date these regu-
lations are published as final regulations
in the Federal Register.

* * * * *

(e) Absorption rule-(1) Pro rata ab-
sorption of ordinary losses. If the group
has a CNOL for a consolidated return
year, the amount of each member's sepa-
rate net operating loss, as defined in
§ 1.1502-21(b)(2)(iv)(B)(1), for the year
that offsets the income or gain of other
members is determined on a pro rata basis
under the principles of § 1.1502-
21(b)(2)(iv). For example, if, for the con-
solidated return year, P and S1 have a
separate net operating loss of $60 and $30,
respectively, and S2 (the only other mem-
ber of the P group) has $21 of income, $14
of P's net operating loss and $7 of S1's
net operating loss offset S2's $21 of in-
come and are absorbed in the year.

(2) Pro-rata absorption of capital
losses. If the group has a consolidated net
capital loss for a consolidated return year
and any member has capital gain net in-
come for the year (taking into account
only its capital gains and losses), the
amount of each member's capital loss (as
defined in paragraph (b)(1) of this section)
that offsets the sum of the capital gain net
income of other members (computed sep-
arately for each member) is determined on
a pro rata basis under the principles of
§ 1.1502-21(b)(2)(iv). For purposes of
this paragraph (e)(2), the character of each
member's gains and losses is first deter-
mined on a consolidated basis. See
§§ 1.1502-22 and 1.1502-23.

(3) Effective/applicability date. This
paragraph (e) applies to consolidated re-
turn years beginning on or after the date
these regulations are published as final
regulations in the Federal Register.

Par. 3. Section 1.1502-12 is amended
by:

1\. Revising paragraphs (b) and (e).

2\. Removing and reserving paragraph
(m).
The revisions read as follows:

§ 1.1502-12 Separate taxable income.

* * * * *

(b) Any deduction that is disallowed
under § 1.1502-15 shall be taken into
account as provided in that section;

* * * * *

(e) If a member disposes of a share of
a subsidiary's stock, the member's deduc-
tion or loss (if any) on the stock that will
be used in the consolidated return year of

the disposition and as a carryback to prior
years is computed in accordance with
§ 1.1502-11(b) or (c), as appropriate.
* * * * *

(m) [Reserved]

* * * * *

Par. 4. Section 1.1502-21 is amended
by:

1\. Revising paragraph (b)(2)(iv)(B).

2\. Adding paragraphs (b)(3)(vi) and
(h)(1)(iv).

The revision and additions read as fol-
lows:

§ 1.1502-21 Net operating losses.

* * * * *

(b) * * *

(2) * * *

(iv) * * *

(B) Percentage of CNOL attributable
to a member-(1) In general. Except as
provided in paragraph (b)(2)(iv)(B)(2) of
this section, the percentage of the CNOL
attributable to a member shall equal the
separate net operating loss of the member
for the consolidated return year divided by
the sum of the separate net operating
losses of all members having such losses
for that year. For this purpose, the sepa-
rate net operating loss of a member is
determined by computing the CNOL by
reference to only the member's items of
income, gain, deduction, and loss (exclud-
ing capital gains and amounts treated as
capital gains), including the member's
losses and deductions actually absorbed
by the group in the consolidated return
year (whether or not absorbed by the
member).

(2) Recomputed percentage. If, for any
reason, a member's portion of a CNOL is
absorbed or reduced on a non pro rata
basis (for example, under §§ 1.1502-
11(b) or (c), 1.1502-28, 1.1502-36(d), or
as the result of a carryback to a separate
return year), the percentage of the CNOL
attributable to each member is recom-
puted. In addition, if a member with a
separate net operating loss ceases to be a
member, the percentage of the CNOL at-
tributable to each remaining member is
recomputed under paragraph
(b)(2)(iv)(B)(1) of this section. The re-
computed percentage of the CNOL attrib-
utable to each member shall equal the
remaining CNOL attributable to the mem-

ber at the time of the recomputation di-
vided by the sum of the remaining CNOL
attributable to all of the remaining mem-
bers at the time of the recomputation.

* * * * *

(3) * * *

(vi) Amount of subsidiary's absorbed
deductions and losses if subsidiary's stock
is disposed of. For special rules regarding
the amount of a subsidiary's deductions
and losses that is absorbed if a member
disposes of a share of the subsidiary's
stock, see § 1.1502-11(b) and (c).

* * * * *

(h) * * *

(1) * * *

(iv) Paragraphs (b)(2)(iv)(B) and
(b)(3)(vi) of this section apply to consol-
idated return years beginning on or after
the date these regulations are published as
final regulations in the Federal Register.
* * * * *

§ 1.1502-21A [Removed]

Par. 5. Section 1.1502-21A is re-
moved.

Par. 6. Section 1.1502-22 is amended
by:

1\. Revising paragraphs (a)(2) and (3).

2\. Adding paragraph (a)(4).

The revisions and addition read as fol-
lows:

### § 1.1502-22 Consolidated capital gain and loss.

* * * * *

(a) * * *

(2) The consolidated net section 1231
gain for the year (determined under
§ 1.1502-23);

(3) The net capital loss carryovers or
carrybacks to the year; and

(4) Applying the ordering rules of
§ 1.1502-11(b) if stock of a subsidiary is
disposed of.

* * * * *

§ 1.1502-22A [Removed]

Par. 7. Section 1.1502-22A is re-
moved.

§ 1.1502-23A [Removed]

Par. 8. Section 1.1502-23A is re-
moved.

§ 1.1502-24 [Amended]

Par. 9. Section 1.1502-24 is amended
by:

1\. Removing the words "Five percent"
in paragraph (a)(2) and adding "The per-
centage limitation on the total charitable
contribution deduction provided in section
170(b)(2)(A)" in its place.

2\. Removing "section 242," and
"§ 1.1502-25," in paragraph (c).

# PART 301-PROCEDURE AND ADMINISTRATION

Par. 10. The authority citation for part
301 is amended by revising the entry for
§ 301.6402-7 to read in part as follows:
Authority: 26 U.S.C. 7805.

* * * * *

Section 301.6402-7 also issued under
26 U.S.C. 6402(k).

* * * * *

Par. 11. Section 301.6402-7 is
amended by revising the last sentence of
paragraph (g)(2)(ii) and paragraph (l) to
read as follows:

§ 301.6402-7 Claims for refund and
applications for tentative carryback
adjustments involving consolidated
groups that include insolvent financial
institutions.

** * * *

(g) * * *

(2) * * *

(ii) * * * For this purpose, the separate
net operating loss of a member is deter-
mined by computing the consolidated net
operating loss by reference to only the
member's items of income, gain, deduc-
tion, and loss (excluding capital gains and
amounts treated as capital gains), includ-
ing the member's losses and deductions
actually absorbed by the group in the con-
solidated return year (whether or not ab-
sorbed by the member).

* * * * *

(l) Effective/applicability dates. This
section applies to refunds and tentative
carryback adjustments paid after Decem-
ber 30, 1991. However, the last sentence
of paragraph (g)(2)(ii) of this section ap-
plies to separate net operating losses of
members incurred in consolidated return
years beginning on or after the date these

regulations are published as final regula-
tions in the Federal Register.

John M. Dalrymple,
Deputy Commissioner for
Services and Enforcement.

(Filed by the Office of the Federal Register on June 10,
2015, 8:45 a.m., and published in the issue of the Federal
Register for June 11, 2015, 80 F.R. 33211)

## Notice of Proposed Rulemaking

### Aggregation of Basis for Partnership Distributions Involving Equity Interests of a Partner

#### REG-138759-14

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Notice of proposed
rulemaking.

SUMMARY: This document contains
proposed regulations that would allow
consolidated group members that are part-
ners in the same partnership to aggregate
their bases in stock distributed by the part-
nership for the purpose of limiting the
application of rules that might otherwise
cause basis reduction or gain recognition.
The proposed regulations would also re-
quire certain corporations that engage in
gain elimination transactions to reduce the
basis of corporate assets or to recognize
gain. The proposed regulations affect part-
nerships and their partners.

DATES: Comments and requests for a
public hearing must be received by Sep-
tember 10, 2015.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-138759-14), room
5203, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG-138759-14),
Courier's Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically,

via the Federal eRulemaking Portal
at http://www.regulations.gov
(IRS
REG-138759-14).

#### FOR FURTHER INFORMATION

CONTACT: Concerning the proposed
regulations, Kevin I. Babitz, (202) 317-
6852; concerning submission of com-
ments or to request a public hearing, Olu-
wafunmilayo Taylor at (202) 317-6901
(not a toll-free number).

SUPPLEMENTARY INFORMATION:
Background

1\. Section 337(d) and the Repeal of the
General Utilities Doctrine

In General Utilities & Operating Co. v.
Helvering, 296 U.S. 200 (1935), the Su-
preme Court held that corporations gener-
ally could distribute appreciated property
to their shareholders without the recogni-
tion of any corporate level gain (the Gen-
eral Utilities doctrine). Beginning in 1969
and ending with the Tax Reform Act of
1986, Public Law 99-514, 100 Stat. 2085,
(the Act), Congress enacted a series of
statutory changes that limited and ulti-
mately repealed the General Utilities doc-
trine. Under current law, sections 311(b)
and 336(a) of the Internal Revenue Code
(Code) require a corporation that distrib-
utes appreciated property to its sharehold-
ers to recognize gain determined as if the
property were sold to the shareholders for
its fair market value. Additionally, section
631 of the Act added section 337(d) to the
Code to permit the Secretary to prescribe
regulations that are necessary or appropri-
ate to carry out the purposes of the Gen-
eral Utilities repeal, "including regula-
tions to ensure that [the repeal of the
General Utilities doctrine] may not be cir-
cumvented through the use of any provi-
sion of law or regulations."

##### 2. Section 732(f)

Section 538 of the Ticket to Work and
Work Incentives Improvement Act of
1999, Public Law 106-170, 113 Stat.
1860, (the Ticket to Work Act), enacted
section 732(f) on December 17, 1999.
Section 732(f) provides that if: (1) a cor-
porate partner receives a distribution from
a partnership of stock in another corpora-
tion (distributed corporation), (2) the cor-

porate partner has control of the distrib-
uted corporation (ownership of stock
meeting the requirements of section
1504(a)(2)) immediately after the distri-
bution or at any time thereafter (the "con-
trol requirement"), and (3) the partner-
ship's basis in the stock immediately
before the distribution exceeded the cor-
porate partner's basis in the stock imme-
diately after the distribution, then the basis
of the distributed corporation's property
must be reduced by this excess. The
amount of this reduction is limited to the
amount by which the sum of the aggregate
adjusted basis of property and the amount
of money of the distributed corporation
exceeds the corporate partner's adjusted
basis in the stock of the distributed corpo-
ration. The corporate partner must recog-
nize gain to the extent that the basis of the
distributed corporation's property cannot
be reduced.

Congress enacted section 732(f) due to
concerns that a corporate partner could
otherwise negate the effects of a basis
step-down to distributed property required
under section 732(b) by applying the step-
down against the basis of distributed stock
of a corporation (distributed corporation).
The Senate Finance Committee stated that:

The Committee is concerned that
the downward adjustment to the ba-
sis of property distributed by a part-
nership may be nullified if the dis-
tributed property is corporate stock.
The distributed corporation can be
liquidated by the corporate partner,
so that the stock basis adjustment
has no effect. Similarly, if the cor-
porations file a consolidated return,
their taxable income may be com-
puted without reference to the
downward adjustment to the basis
of the stock. These results can occur
either if the partnership has contrib-
uted property to the distributed cor-
poration, or if the property was held
by the corporation before the distri-
bution. Therefore, the provision re-
quires a basis reduction to the prop-
erty of the distributed corporation.

S. Rep. No. 106-201, 106th Cong., 1st
Sess. 50 (1999).

For example, assume a corporate part-
ner has a partnership interest with zero
basis and receives a partnership distribu-
tion of high-basis stock in a corporation.

The corporate partner's basis in the dis-
tributed corporation's stock is reduced to
zero under section 732(a) or section
732(b). If the partnership has elected un-
der section 754, then the basis of other
partnership property is increased by an
equal amount under section 734(b). The
effects of the section 732 basis decrease
and the section 734(b) basis increase gen-
erally offset each other. However, if the
corporate partner owned stock in the dis-
tributed corporation that satisfied the con-
trol requirement, the corporate partner
could liquidate the distributed corporation
under section 332, and section 334(b)
would generally provide for a carryover
basis in the distributed corporation's prop-
erty received by the corporate partner in
the liquidation. Taken together, these
rules could permit the partnership to in-
crease the basis of its retained property
without an equivalent basis reduction fol-
lowing the liquidation of the distributed
corporation. Section 732(f) generally pre-
cludes this result by requiring that either
the distributed corporation must reduce
the basis of its property or the corporate
partner must recognize gain (to the extent
the distributed corporation is unable to
reduce the basis of its property). Thus,
section 732(f) generally ensures that any
basis increase under section 734(b) is ul-
timately offset.

Section 732(f) applies if the corporate
partner either has control of the distrib-
uted corporation following the distribu-
tion or if the corporate partner subse-
quently acquires control of the distributed
corporation at any time thereafter. Section
732(f) does not apply if the corporate part-
ner does not have control of the distrib-
uted corporation immediately following
the distribution and the corporate partner
establishes to the satisfaction of the Sec-
retary that the distribution was not part of
a plan or arrangement to acquire control
of the distributed corporation.

In its discussion of the control require-
ment of section 732(f)(1)(B), the Confer-
ence Report to the Ticket to Work Act
explains that "this provision also calls for
regulations, including regulations to avoid
double counting and to prevent the abuse
of the purposes of this provision." H. R.
Conf. Rep. No. 106-478, 106th Cong., 1st
Sess. 174 (1999). This grant of regulatory
authority is codified at section 732(f)(8),

which provides that "the Secretary shall
prescribe such regulations as may be nec-
essary to carry out the purposes of this
subsection, including regulations to avoid
double counting and to prevent the abuse
of such purposes."

Simultaneous with this notice of pro-
posed rulemaking, the Treasury Depart-
ment and the IRS are issuing final and
temporary regulations under section
337(d) (§ 1.337(d)-3T) that prevent a cor-
porate partner from using a partnership to
avoid corporate-level gain required to be
recognized under section 311(b) or sec-
tion 336(a) following the repeal of the
General Utilities doctrine. Those final and
temporary regulations address partnership
acquisitions, ownership, and distributions
of stock and other equity interests in a
corporate partner. Sections 732(f) and
337(d) share a common purpose of pre-
serving corporate-level gains. Given this
shared purpose, these proposed regula-
tions are issued under the combined au-
thority of sections 337(d) and 732(f).

## Explanation of Provisions

As described in this preamble, Con-
gress provided the Treasury Department
and the IRS with a broad grant of statutory
authority to carry out the purposes of sec-
tions 337(d) and 732(f). The Treasury De-
partment and the IRS believe that as cur-
rently applied, section 732(f) may be too
broad in some circumstances and too nar-
row in others. Specifically, section 732(f)
may require basis reduction or gain rec-
ognition even though that basis reduction
or gain recognition does not further the
purposes of section 732(f). In other cir-
cumstances, corporate partners may inap-
propriately avoid the purposes of section
732(f) by engaging in transactions that
allow corporate partners to receive prop-
erty held by a distributed corporation
without reducing the basis of that property
to account for basis reductions under sec-
tion 732(b) made when the partnership
distributed stock of the distributed corpo-
ration to the corporate partner. These pro-
posed regulations add rules to conform the
application of section 732(f) with Con-
gress's identified purposes for enacting
sections 337(d) and 732(f) in these situa-
tions.

1\. Aggregation of Section 732(b) Basis
Adjustments

Section 732(f) generally applies on a
partner-by-partner basis. However, the
Treasury Department and the IRS believe
that in certain circumstances, it is appro-
priate to aggregate the bases of consoli-
dated group members in a partnership for
purposes of applying section 732(f). For
example, basis aggregation may be appro-
priate when two or more corporate part-
ners in the same consolidated group
(member-partners) receive a deemed dis-
tribution of stock in a distributed corpora-
tion either because (a) the partnership
elects to be treated as an association tax-
able as a corporation under § 301.7701-3
or (b) one corporate partner acquires all of
the interests in the partnership causing the
partnership to liquidate. In these in-
stances, section 732(b) may cause one
member-partner to increase the basis of
distributed stock while another member-
partner reduces the basis of distributed
stock by an equivalent amount. Under cur-
rent law, section 732(f) may require the
member-partner whose basis is reduced to
recognize gain or to reduce the basis of
the distributed corporation's property,
with no offsetting loss or increase to the
basis of the distributed corporation's
property with respect to the member-
partner whose basis is increased. The
Treasury Department and the IRS do not
believe that prohibiting member-partners
from consolidating their bases in a part-
nership for purposes of applying section
732(f) in these situations furthers Con-
gress's intent to sustain the effect of the
basis reduction to distributed property.

These proposed regulations provide for
the aggregation of basis within the same
consolidated group (as defined in
§ 1.1502-1(h)), for purposes of section
732(f), when two conditions are met.
First, two or more of the corporate part-
ners receive a distribution of stock in a
distributed corporation. Second, the dis-
tributed corporation is or becomes a mem-
ber of the distributee partners' consoli-
dated group following the distribution.

Under this rule, section 732(f) only ap-
plies to the extent that the partnership's
adjusted basis in the distributed stock im-
mediately before the distribution exceeds
the aggregate basis of the distributed stock

in the hands of all members of the distrib-
utee corporate partner's consolidated
group immediately after the distribution.
The requirement that the distributed cor-
poration be a member of the consolidated
group is intended to avoid unintended
consequences that could result if that cor-
poration was a controlled foreign corpo-
ration. However, the Treasury Department
and the IRS request comments on whether
this proposed rule should apply more
broadly.

### 2. Gain Elimination Transactions

As described in the Background sec-
tion of this Preamble, Congress enacted
section 732(f) to address concerns that a
corporate partner could otherwise negate
the effects of a basis step-down to distrib-
uted property required under section
732(b) by applying the step-down against
stock of a distributed corporation. Con-
gress indicated that it intended for the
control requirement to apply expansively
by requiring corporate partners to apply
section 732(f) whenever the corporate
partner acquires control (as defined in sec-
tion 732(f)(5)) of the distributed corpora-
tion as part of a plan or arrangement. The
formalistic definition of control, however,
fails to anticipate other scenarios in which
a corporate partner's acquisition of the
property of a distributed corporation has
the same effect. To address these scenar-
ios, Congress granted the Secretary au-
thority to promulgate regulations neces-
sary to carry out the purposes of section
732(f).

The Treasury Department and the IRS
are concerned that some corporate part-
ners might eliminate gain in the stock of a
distributed corporation while avoiding the
effects of a basis step-down in transac-
tions in which the corporate partner's
ownership of the distributed corporation
does not satisfy the control requirement.
For example, a distributed corporation not
controlled by a corporate partner might
subsequently merge into the corporate
partner in a reorganization under section
368(a) in which gain is not recognized as
part of a plan or arrangement. In this sit-
uation, the gain inherent in the stock of the
distributed corporation is eliminated, but
the basis of the distributed corporation's
property is not reduced. If section 732(f)

does not apply to this transaction, then the
basis step-down is negated, contravening
the purposes of section 732(f) and Gen-
eral Utilities repeal.

Accordingly, these proposed regula-
tions provide that, in the event of a gain
elimination transaction, section 732(f)
shall apply as though the corporate partner
acquired control (as defined in section
732(f)(5)) of the distributed corporation
immediately before the gain elimination
transaction.

The proposed regulations define sev-
eral terms for purposes of applying this
rule. The term "Corporate Partner" means
a person that is classified as a corporation
for federal income tax purposes and that
holds or acquires an interest in a partner-
ship. The term "Stock" includes other eq-
uity interests, including options, warrants
and similar interests. The term "Distrib-
uted Stock" means Stock distributed by a
partnership to a Corporate Partner, or
Stock the basis of which is determined by
reference to the basis of such Stock. Dis-
tributed Stock also includes Stock owned
directly or indirectly by a Distributed Cor-
poration if the basis of such Stock has
been reduced pursuant to section
732(f)(7). The term "Distributed Corpora-
tion" means the issuer of Distributed
Stock (or, in the case of an option, the
issuer of the Stock into which the option is
exercisable). The term "Gain Elimination
Transaction" means a transaction in which
Distributed Stock is disposed of and less
than all of the gain is recognized, unless
(1) the transferor of the Distributed Stock
receives in exchange Stock or a partner-
ship interest that is exchanged basis prop-
erty (as defined in section 7701(a)(44))
with respect to the Distributed Stock, or
(2) a transferee corporation holds the Dis-
tributed Stock as transferred basis prop-
erty (as defined in section 7701(a)(43))
with respect to a transferor corporation's
gain. Examples of Gain Elimination
Transactions include (without limitation)
a reorganization under section 368(a) in
which the Corporate Partner and the Dis-
tributed Corporation combine, and a dis-
tribution of the Distributed Stock by the
Corporate Partner to which section
355(c)(1) or 361(c)(1) applies.

### 3. Tiered Partnerships

The IRS and the Treasury Department
are concerned that taxpayers could use
tiered partnerships to circumvent these
regulations and section 732(f) generally.
Congress specified in the Conference Re-
port to the Ticket to Work Act that tax-
payers should not be permitted to avoid
the purposes of section 732(f) through the
use of tiered partnerships. H. R. Conf.
Rep. No. 106-478, 106th Cong., 1st Sess.
174 (1999). Therefore, these regulations
require taxpayers to apply these regula-
tions to tiered partnerships in a manner
consistent with the purpose of section
732(f).

#### Effective/Applicability Date

The rules governing aggregation of ba-
sis apply to distributions occurring on or
after the date these regulations are pub-
lished as final regulations in the Federal
Register. The rules governing gain elim-
ination transactions apply to transactions
occurring on or after the date these regu-
lations are published as final regulations
in the Federal Register. The rules gov-
erning tiered partnerships apply to distri-
butions and transactions occurring on or
after the date these regulations are pub-
lished as final regulations in the Federal
Register. No inference is expressed or
implied with respect to distributions or
transactions occurring before the date
these regulations are published as final
regulations in the Federal Register.

## Special Analyses

ship of corporations, partnerships and cor-
porate stock. Accordingly, a regulatory
flexibility analysis is not required. Pursu-
ant to section 7805(f) of the Code, these
regulations have been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.

## Comments and Requests for a Public Hearing

Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the "Addresses"
heading. The Treasury Department and
the IRS request comments on all aspects
of the proposed rules. All comments will
be available at www.regulations.gov or
upon request. A public hearing will be
scheduled if requested in writing by any
person that timely submits written or elec-
tronic comments. If a public hearing is
scheduled, notice of the date, time, and
place for the public hearing will be pub-
lished in the Federal Register.

## Drafting Information

The principal authors of these regula-
tions are Kevin I. Babitz and Joseph R.
Worst, Office of the Associate Chief
Counsel (Passthroughs and Special Indus-
tries). However, other personnel from the
Treasury Department and the IRS partic-
ipated in their development.

* * * * *

Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:

### PART I-INCOME TAXES

Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 *

Section 1.732-3 also issued under 26
U.S.C. 337(d), 732(f), and 1502. * * *

Par. 2. Section 1.732-3 is revised to
read as follows:

§ 1.732-3 Corresponding adjustment to
basis of assets of a distributed
corporation controlled by a corporate
partner.

(a) Determination of control. The de-
termination of whether a corporate partner

that is a member of a consolidated group
has control of a distributed corporation for
purposes of section 732(f) shall be made
by applying the special aggregate stock
ownership rules of § 1.1502-34.

(b) Aggregation of basis within consol-
idated group. With respect to distributed
stock of a corporation, if the following
two conditions are met, then section
732(f) shall apply only to the extent that
the partnership's adjusted basis in the dis-
tributed stock immediately before the dis-
tribution exceeds the aggregate basis of
the distributed stock of the corporation in
the hands of corporate partners that are
members of the same consolidated group
(as defined in § 1.1502-1(h)) immediately
after the distribution:

(1) Two or more of the corporate part-
ners receive a distribution of stock in an-
other corporation; and

(2) The corporation, the stock of which
was distributed by the partnership, is or
becomes a member of the distributee part-
ners' consolidated group following the
distribution.

(c) Application of section 732(f) to
Gain Elimination Transactions- (1) Gen-
eral rule. In the event of a Gain Elimina-
tion Transaction, section 732(f) shall ap-
ply as though the Corporate Partner
acquired control (as defined in section
732(f)(5)) of the Distributed Corporation
immediately before the Gain Elimination
Transaction.

(2) Definitions. The following defini-
tions apply for purposes of this paragraph
(c):

(i) Corporate Partner. The term Cor-
porate Partner means a person that is clas-
sified a corporation for federal income tax
purposes and that holds or acquires an
interest in a partnership.

(ii) Stock. The term Stock includes
other equity interests, including options,
warrants and similar interests.

(iii) Distributed Stock. The term Dis-
tributed Stock means Stock distributed by
a partnership to a Corporate Partner, or
Stock the basis of which is determined by
reference to the basis of such Stock. Dis-
tributed Stock also includes Stock owned
directly or indirectly by a Distributed Cor-
poration if the basis of such Stock has
been reduced pursuant to section 732(f).

(iv) Distributed Corporation. The term
Distributed Corporation means the issuer

of Distributed Stock (or, in the case of an
option, the issuer of the Stock into which
the option is exercisable).

(v) Gain Elimination Transaction. The
term Gain Elimination Transaction means
a transaction in which Distributed Stock is
disposed of and less than all of the gain is
recognized unless-

(A) The transferor of the Distributed
Stock receives in exchange Stock or a
partnership interest that is exchanged ba-
sis property (as defined in section
7701(a)(44)) with respect to the Distrib-
uted Stock, or

(B) A transferee corporation holds the
Distributed Stock as transferred basis
property (as defined in section
7701(a)(43)) with respect to the transferor
corporation's gain. A Gain Elimination
Transaction includes (without limitation)
a reorganization under section 368(a) in
which the Corporate Partner and the Dis-
tributed Corporation combine, and a dis-
tribution of the Distributed Stock by the
Corporate Partner to which section
355(c)(1) or 361(c)(1) applies.

(d) Tiered partnerships. The rules of
this section shall apply to tiered partner-
ships in a manner that is consistent with
the purposes of section 732(f).

(e) Effective/applicability date. The
rules governing aggregation of basis in
paragraph (b) of these regulations apply to
distributions occurring on or after the date
these regulations are published as final
regulations in the Federal Register. The
rules governing gain elimination transac-
tions in paragraph (c) of this section apply
to transactions occurring on or after the
date these regulations are published as
final regulations in the Federal Register.
The rules governing tiered partnerships in
paragraph (d) of this section apply to dis-
tributions and transactions occurring on or
after the date these regulations are pub-
lished as final regulations in the Federal
Register.

John Dalrymple,
Deputy Commissioner for
Services and Enforcement.

(Filed by the Office of the Federal Register on June 11,
2015, 8:45 a.m., and published in the issue of the Federal
Register for June 12, 2015, 80 F.R. 33452)

# Notice of proposed Rulemaking Partnership Transactions Involving Equity Interests of a Partner

## REG-149518-03

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Withdrawal of notice of pro-
posed rulemaking and notice of proposed
rulemaking by cross-reference to tempo-
rary regulations.

SUMMARY: In the Rules and Regula-
tions section of this issue of the Bulletin,
the IRS and the Treasury Department are
issuing temporary regulations that prevent
a corporate partner from using a partner-
ship to avoid corporate level gain required
to be recognized. These regulations affect
partnerships and their partners. The text of
the temporary regulations in this issue of
the Bulletin also serves as the text of
these proposed regulations.

DATES: Comments and requests for a
public hearing must be received by Sep-
tember 10, 2015.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-149518-03), room
5203, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station, Wash-
ington, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG-149518-03),
Courier's Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW, Washington, DC, or sent electron-
ically, via the Federal eRulemaking Por-
tal at http://www.regulations.gov (IRS
REG-149518-03).

## FOR FURTHER INFORMATION

### SUPPLEMENTARY INFORMATION: Background and Explanation of Provisions

Temporary regulations in the Rules
and Regulations section of this issue of
the Bulletin amend the Income Tax Reg-
ulations (26 CFR part 1) relating to sec-
tion 337(d). The temporary regulations set
forth rules for applying section 337(d) to
partnerships and S corporations. The text
of the temporary regulations also serves as
the text of these proposed regulations. The
preamble to the temporary regulations ex-
plains the temporary regulations and these
proposed regulations.

### Special Analyses

It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866, as supplemented by
Executive Order 13563. Therefore, a reg-
ulatory assessment is not required. These
proposed regulations do not impose a col-
lection of information on small entities.
Further, pursuant to the Regulatory Flex-
ibility Act (5 U.S.C. chapter 6), it is
hereby certified that these proposed regu-
lations would not have a significant eco-
nomic impact on a substantial number of
small entities. This certification is based
on the fact that these proposed regulations
would primarily affect sophisticated own-
ership structures with interlocking owner-
ship of corporations, partnerships and cor-
porate stock. Additionally, these proposed
regulations contain a number of de mini-
mis provisions that render the regulations
inapplicable to most small businesses. Ac-
cordingly, a regulatory flexibility analysis
is not required. Pursuant to section
7805(f) of the Internal Revenue Code,
these regulations have been submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.

### Comments and Requests for a Public Hearing

Before these proposed regulations are
adopted as final regulations, consideration
will be given to comments that are sub-
mitted timely to the IRS as prescribed in
this preamble under the "Addresses"
heading. The Treasury Department and

the IRS request comments on all aspects
of the proposed rules. All comments will
be available at www.regulations.gov or
upon request. A public hearing will be
scheduled if requested in writing by any
person that timely submits written or elec-
tronic comments. If a public hearing is
scheduled, notice of the date, time, and
place for the public hearing will be pub-
lished in the Federal Register.

### Drafting Information

The principal authors of these regula-
tions are Joseph R. Worst and Kevin I.
Babitz, Office of the Associate Chief
Counsel (Passthroughs and Special Indus-
tries). However, other personnel from the
IRS and the Treasury Department partic-
ipated in their development.

### Withdrawal of Notice of Proposed Rulemaking

Accordingly, under the authority of 26
U.S.C. 7805, the notice of proposed rule-
making (PS-91-90; REG-208989-90)
that was published in the Federal Regis-
ter on December 15, 1992 (57 FR 59324),
is withdrawn.

* * * * *

### Proposed Amendment to the Regulations

Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:

PART I-INCOME TAXES

Paragraph 1. The authority citation for
part 1 is amended by adding an entry in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 }
Section 1.337(d)-3 also issued under
26 U.S.C. 337(d). * * *

Par. 2. Section 1.337(d)-3 is added to
read as follows:

§ 1.337(d)-3 Gain recognition upon
certain partnership transactions
involving a partner's stock.

[The text of proposed § 1.337(d)-3 is
the same as the text of § 1.337(d)-3T(a)
through (i) published elsewhere in this
issue of the Bulletin].

Par. 3. Section 1.732-1 is amended by

1.732-1T(c)(1) published elsewhere in

John Dalrymple,

revising paragraphs (c)(1) and (c)(5)(ii) to

this issue of the Bulletin].

Deputy Commissioner for

read as follows:

** * * * (5) * * *

Services and Enforcement.

§ 1.732-1 Basis of distributed property

(ii) [The text of proposed § 1.732- 1(c)(5)(ii) is the same as the text of

(Filed by the Office of the Federal Register on June 11, 2015, 8:45 a.m., and published in the issue of the Federal Register for June 12, 2015, 80 F.R. 33451)

other than money.

* * * * *

§ 1.732-1T(c)(5)(ii) published elsewhere

(c)(1) [The text of proposed § 1.732-

in this issue of the Bulletin].

1(c)(1) is the same as the text of §

* * * * *

## 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
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the 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 with
modified, below).

Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

Modified is 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
with amplified and clarified, above).

Obsoleted describes 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.

Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-

stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes 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
published ruling is first modified and then,
as modified, is superseded.

Supplemented is 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
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is 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 following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

GP-General Partner.

GR-Grantor.

COOP-Cooperative.

IC-Insurance Company.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

CY-County.

LE-Lessee.

D-Decedent.

LP-Limited Partner.

LR-Lessor.

M-Minor.

Nonacq .- Nonacquiescence.

O Organization.

P-Parent Corporation.

PHC-Personal Holding Company.

PO-Possession of the U.S.

PR-Partner.

PRS-Partnership.

PTE-Prohibited Transaction Exemption.
Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S-Subsidiary.

S.P.R .- Statement of Procedural Rules.

Stat .- Statutes at Large.

T-Target Corporation.

T.C .- Tax Court.

T.D .- Treasury Decision.

TFE-Transferee.

TFR-Transferor.

T.I.R .- Technical Information Release.

TP-Taxpayer.
TR-Trust.

TT-Trustee.

U.S.C .- United States Code.

DE-Donee.

Del. Order-Delegation Order.

DISC-Domestic International Sales Corporation.
DR-Donor.

E-Estate.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

ERISA-Employee Retirement Income Security Act.
EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

FPH-Foreign Personal Holding Company.

BK-Bank.

B.T.A .- Board of Tax Appeals.

C-Individual.

C.B .- Cumulative Bulletin.

CFR-Code of Federal Regulations.

CI-City.

DC-Dummy Corporation.

X-Corporation.

Y-Corporation.

Z-Corporation.

Numerical Finding List1

Notices :- Continued

Revenue Procedures :- Continued

Bulletin 2015-1 through 2015-26

2015-38, 2015-21 I.R.B. 984

2015-27, 2015-16 I.R.B. 914

2015-39, 2015-22 I.R.B. 1008

2015-28, 2015-16 I.R.B. 920

Announcements:

2015-40, 2015-24 I.R.B. 1058

2015-29, 2015-15 I.R.B. 882

2015-41, 2015-24 I.R.B. 1059

2015-30, 2015-20 I.R.B. 970

2015-1, 2015-11 I.R.B. 758

2015-42, 2015-26 I.R.B. 1137

2015-31, 2015-23 I.R.B. 1017

2015-2, 2015-3 I.R.B. 324

2015-44, 2015-26 I.R.B. 1140

2015-32, 2015-24 I.R.B. 1064

2015-3, 2015-3 I.R.B. 328

2015-45, 2015-26 I.R.B. 1140

2015-33, 2015-24 I.R.B. 1068

2015-4, 2015-5 I.R.B. 565

2015-35, 2015-26 I.R.B. 1142

2015-5, 2015-7 I.R.B. 602

Proposed Regulations:

2015-37, 2015-26 I.R.B. 1196

2015-6, 2015-8 I.R.B. 685

2015-7, 2015-13 I.R.B. 823

REG-153656-3, 2015-5 I.R.B. 566

Revenue Rulings:

2015-8, 2015-9 I.R.B. 698

REG-140991-09, 2015-23 I.R.B. 1037

2015-10, 2015-11 I.R.B. 758

REG-101652-10, 2015-26 I.R.B. 1197

2015-1, 2015-4 I.R.B. 331

2015-11, 2015-15 I.R.B. 883

REG-103281-11, 2015-19 I.R.B. 948

2015-2, 2015-3 I.R.B. 321

2015-12, 2015-12 I.R.B. 770

REG-107595-11, 2015-21 I.R.B. 986

2015-3, 2015-6 I.R.B. 580

2015-13, 2015-15 I.R.B. 908

REG-109187-11, 2015-2 I.R.B. 277

2015-4, 2015-10 I.R.B. 743

2015-14, 2015-20 I.R.B. 971

REG-132253-11, 2015-12 I.R.B. 771

2015-5, 2015-13 I.R.B. 788

2015-15, 2015-22 I.R.B. 1014

REG-143040-11, 2015-13 I.R.B. 827

2015-6, 2015-13 I.R.B. 801

2015-16, 2015-24 I.R.B. 1070

REG-133489-13, 2015-16 I.R.B. 926

2015-7, 2015-14 I.R.B. 849

REG-136018-13, 2015-11 I.R.B. 759

2015-8, 2015-18 I.R.B. 945

Notices:

REG-100400-14, 2015-12 I.R.B. 779

2015-9, 2015-21 I.R.B. 972

REG-132634-14, 2015-21 I.R.B. 997

2015-10, 2015-21 I.R.B. 973

2015-1, 2015-2 I.R.B. 249

REG-132751-14, 2015-2 I.R.B. 279

2015-11, 2015-21 I.R.B. 975

2015-2, 2015-4 I.R.B. 334

REG-138759-14, 2015-26 I.R.B. 1209

2015-12, 2015-26 I.R.B. 1080

2015-3, 2015-6 I.R.B. 583

REG-143416-14, 2015-11 I.R.B. 757

2015-13, 2015-22 I.R.B. 1011

2015-4, 2015-5 I.R.B. 407

REG-145878-14, 2015-2 I.R.B. 290

2015-14, 2015-22 I.R.B. 1012

2015-5, 2015-5 I.R.B. 408

REG-149518-14, 2015-26 I.R.B. 1213

2015-6, 2015-5 I.R.B. 412

REG-102648-15, 2015-10 I.R.B. 745

Treasury Decisions:

2015-7, 2015-6 I.R.B. 585

REG-102656-15, 2015-21 I.R.B. 1005

9707, 2015-2 I.R.B. 247

2015-8, 2015-6 I.R.B. 589

REG-108214-15, 2015-23 I.R.B. 1035

9708, 2015-5 I.R.B. 337

2015-9, 2015-6 I.R.B. 590

9709, 2015-7 I.R.B. 593

2015-10, 2015-20 I.R.B. 965

Revenue Procedures:

9710, 2015-8 I.R.B. 603

2015-11, 2015-8 I.R.B. 618

9711, 2015-11 I.R.B. 748

2015-12, 2015-8 I.R.B. 700

2015-1, 2015-1 I.R.B. 1

9712, 2015-11 I.R.B. 750

2015-13, 2015-10 I.R.B. 722

2015-2, 2015-1 I.R.B. 105

9713, 2015-13 I.R.B. 802

2015-14, 2015-10 I.R.B. 722

2015-3, 2015-1 I.R.B. 129

9714, 2015-14 I.R.B. 831

2015-15, 2015-9 I.R.B. 687

2015-4, 2015-1 I.R.B. 144

9715, 2015-15 I.R.B. 851

2015-16, 2015-10 I.R.B. 732

2015-5, 2015-1 I.R.B. 186

9716, 2015-15 I.R.B. 863

2015-17, 2015-14 I.R.B. 845

2015-6, 2015-1 I.R.B. 194

9717, 2015-16 I.R.B. 910

2015-18, 2015-12 I.R.B. 765

2015-7, 2015-1 I.R.B. 231

9718, 2015-15 I.R.B. 866

2015-19, 2015-9 I.R.B. 690

2015-8, 2015-1 I.R.B. 235

9719, 2015-21 I.R.B. 977

2015-20, 2015-11 I.R.B. 754

2015-9, 2015-2 I.R.B. 249

9720, 2015-25 I.R.B. 1070

2015-21, 2015-12 I.R.B. 765

2015-10, 2015-2 I.R.B. 261

9721, 2015-25 I.R.B. 1077

2015-22, 2015-12 I.R.B. 768

2015-12, 2015-2 I.R.B. 265

9722, 2015-26 I.R.B. 1094

2015-23, 2015-12 I.R.B. 769

2015-13, 2015-5 I.R.B. 419

9724, 2015-26 I.R.B. 1105

2015-24, 2015-13 I.R.B. 811

2015-14, 2015-5 I.R.B. 450

9725, 2015-26 I.R.B. 1122

2015-25, 2015-13 I.R.B. 814

2015-15, 2015-5 I.R.B. 564

2015-26, 2015-13 I.R.B. 814

2015-16, 2015-7 I.R.B. 596

2015-27, 2015-13 I.R.B. 816

2015-17, 2015-7 I.R.B. 599

2015-28, 2015-14 I.R.B. 848

2015-18, 2015-8 I.R.B. 642

2015-29, 2015-15 I.R.B. 873

2015-19, 2015-8 I.R.B. 678

2015-30, 2015-17 I.R.B. 928

2015-20, 2015-9 I.R.B. 694

2015-31, 2015-17 I.R.B. 929

2015-21, 2015-13 I.R.B. 817

2015-32, 2015-20 I.R.B. 967

2015-22, 2015-11 I.R.B. 754

2015-33, 2015-18 I.R.B. 934

2015-23, 2015-13 I.R.B. 820

2015-34, 2015-18 I.R.B. 942

2015-24, 2015-13 I.R.B. 822

2015-35, 2015-18 I.R.B. 943

2015-25, 2015-14 I.R.B. 848

2015-37, 2015-19 I.R.B. 947

2015-26, 2015-15 I.R.B. 875

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2014-27 through 2014-52 is in Internal Revenue Bulletin
2014-52, dated December 28, 2014.

## Finding List of Current Actions on

## Revenue Procedures :- Continued

Revenue Procedures :- Continued

Previously Published Items1

2003-63

2014-10

Bulletin 2015-1 through 2015-26

Superseded by Rev. Proc. 2015-12, 2015-2 I.R.B. 265

Superseded by Rev. Proc. 2015-10, 2015-2 I.R.B. 261

Announcements:

2011-14

2014-31 Obsoleted

2010-3

Modified by

by Rev. Proc. 2015-31, 2015-23 I.R.B. 1017

Amplified by

Rev. Proc. 2015-12, 2015-2 I.R.B. 265

Ann. 2015-3, 2015-3 I.R.B. 328

2011-14

2014-44

Superseded by

Notices:

Modified by

Rev. Proc. 2015-35, 2015-26 I.R.B. 1142

Rev. Proc. 2015-13, 2015-5 I.R.B. 419

1997-19

2014-59

Modified by

2011-14

Modified by

Notice 2015-38, 2015-21 I.R.B. 984

Amplified by Rev. Proc. 2015-13, 2015-5 I.R.B. 419

Rev. Proc. 2015-24, 2015-13 I.R.B. 822

2015-8

1997-26

2011-14

Modified by

Superseded by

Clarified by

Rev. Proc. 2015-22, 2015-11 I.R.B. 754 2015-9

Notice 2015-38, 2015-21 I.R.B. 984

Rev. Proc. 2015-13, 2015-5 I.R.B. 419

2001-62

2012-11

Modified by

Superseded by

Rev. Proc. 2015-17, 2015-7 I.R.B. 599

Notice 2015-38, 2015-21 I.R.B. 984

Rev. Proc. 2015-17, 2015-7 I.R.B. 599

2015-14

2002-62

2013-22

Modified by Rev. Proc. 2015-20, 2015-9 I.R.B. 694

Superseded by

Modified by

Notice 2015-38, 2015-21 I.R.B. 984

Rev. Proc. 2015-22, 2015-11 I.R.B. 754

2015-37 Amplified by

2004-83

2014-01

Rev. Proc. 2015-37, 2015-26 I.R.B. 1196

Superseded by

Notice 2015-38, 2015-21 I.R.B. 984

Rev. Proc. 2015-01, 2015-01 I.R.B. 1

Revenue Rulings:

2013-01

2014-02

1975-491

Modified by

Superseded by

Revoked by

Notice 2015-20, 2015-11 I.R.B. 754

Rev. Proc. 2015-02, 2015-01 I.R.B. 105

Rev. Rul. 2015-11, 2015-21 I.R.B. 975

2013-01

2014-03

1978-130

Superseded by

Revoked by Rev. Rul. 2015-9, 2015-21 I.R.B. 972

Notice 2015-20, 2015-11 I.R.B. 754

Rev. Proc. 2015-03, 2015-01 I.R.B. 129

1990-5

2014-24

2014-04

Superseded by

Obsoleted by

Superseded by

Rev. Rul. 2015-13, 2015-22 I.R.B. 1011

Notice 2015-29, 2015-15 I.R.B. 882

Rev. Proc. 2015-04, 2015-01 I.R.B. 144

1990-65

Revenue Procedures:

2014-05

Revoked by

Superseded by

Rev. Rul. 2015-11, 2015-21 I.R.B. 975

1997-27

Rev. Proc. 2015-05, 2015-01 I.R.B. 186

Clarified by

1992-19

Rev. Proc. 2015-13, 2015-5 I.R.B. 419

2014-06

Supplemented by

Superseded by

Rev. Rul. 2015-02, 2015-3 I.R.B. 321

1997-27

Rev. Proc. 2015-06, 2015-01 I.R.B. 194

Modified by

2002-12

Rev. Proc. 2015-13, 2015-5 I.R.B. 419

2014-07

Superseded by

Rev. Rul. 2015-13, 2015-22 I.R.B. 1011

2002-43

Rev. Proc. 2015-07, 2015-01 I.R.B. 231

Modified by

2011-17

Rev. Proc. 2015-26, 2015-15 I.R.B. 875

2014-08 Superseded by

Amplified by Rev. Rul. 2015-13, 2015-22 I.R.B. 1011

2002-43

Rev. Proc. 2015-08, 2015-01 I.R.B. 235

Obsoleted by

Rev. Proc. 2015-26, 2015-15 I.R.B. 875

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2014-27 through 2014-52 is in Internal Revenue Bulletin 2014-52, dated December 28,
2014.

# Internal Revenue Service Washington, DC 20224

Official Business
Penalty for Private Use, $300

# INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.

## We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.
NW, IR-6230 Washington, DC 20224.

Internal Revenue Bulletin 2015-26 (PDF rendition): IRS Revenue Procedures

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