[Federal Register Volume 67, Number 117 (Tuesday, June 18, 2002)]
[Rules and Regulations]
[Pages 41324-41329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15321]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301
[TD 9000]
RIN 1545-BA62
Modification of Tax Shelter Rules III
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
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SUMMARY: These regulations modify the rules relating to the filing by
certain taxpayers of a statement with their Federal income tax returns
under section 6011(a) and the registration of confidential corporate
tax shelters under section 6111(d). These rules also affect the list
maintenance requirement under
[[Page 41325]]
section 6112. These regulations affect taxpayers participating in
certain reportable transactions, persons responsible for registering
confidential corporate tax shelters, and persons responsible for
maintaining lists of investors in potentially abusive tax shelters. The
text of these regulations also serves as the text of the proposed
regulations set forth in the notice of proposed rulemaking on this
subject in the Proposed Rules section of this issue of the Federal
Register.
DATES: Effective Date: These regulations are effective June 14, 2002.
Applicability Date: For dates of applicability, see Sec. 1.6011-
4T(g) and Sec. 301.6111-2T(h).
FOR FURTHER INFORMATION CONTACT: Danielle M. Grimm or Tara P. Volungis,
202-622-3080 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information contained in these regulations have
been previously reviewed and approved by the Office of Management and
Budget in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)) under control number 1545-1685.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid OMB control number.
Books and records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
This document amends 26 CFR parts 1 and 301 to provide modified
rules relating to the disclosure of reportable transactions by certain
individuals, trusts, partnerships, S corporations, and other
corporations on their Federal income tax returns under section 6011 and
the registration of confidential corporate tax shelters under section
6111.
On February 28, 2000, the IRS issued temporary and proposed
regulations regarding section 6011 (TD 8877, REG-103735-00), section
6111 (TD 8876, REG-110311-98), and section 6112 (TD 8875, REG-103736-
00)(collectively, the February regulations). The February regulations
were published in the Federal Register (65 FR 11205, 65 FR 11215, 65 FR
11211) on March 2, 2000. On August 11, 2000, the IRS issued temporary
and proposed regulations regarding sections 6011, 6111, and 6112 (TD
8896, REG-103735-00, REG-110311-98, REG-103736-00) (collectively, the
August 2000 regulations). The August 2000 regulations were published in
the Federal Register (65 FR 49909) on August 16, 2000, modifying the
February regulations. On August 2, 2001, the IRS issued temporary and
proposed regulations regarding sections 6011, 6111, and 6112 (TD 8961,
REG-103735-00, REG-110311-98, REG-103736-00) (collectively, the August
2001 regulations). The August 2001 regulations were published in the
Federal Register (66 FR 41133) on August 7, 2001, further modifying the
February 2000 regulations.
The rules under sections 6011, 6111, and 6112 are designed to
provide the IRS and Treasury with information needed to evaluate
potentially abusive transactions. The IRS and Treasury have considered
and evaluated compliance with the disclosure, registration, and list
maintenance requirements under sections 6011, 6111, and 6112 and have
determined that certain additional changes to the temporary and
proposed regulations are necessary to improve compliance with the
regulations and to carry out the purposes of sections 6011, 6111, and
6112. The IRS and Treasury continue to evaluate all the comments and
recommendations received. Moreover, the IRS and Treasury intend to make
substantial additional changes to the rules under sections 6011, 6111,
and 6112 in order to establish a more effective disclosure regime and
to improve compliance as announced in Treasury's Plan to Combat Abusive
Tax Avoidance Transactions (PO-2018), released on March 20, 2002. See
http://www.treas.gov/press/releases/ po2018.htm.
Explanation of Provisions
1. Application of Sec. 1.6011-4T to Individuals, Trusts, Partnerships,
and S Corporations
Section 1.6011-4T generally provides that certain corporate
taxpayers must disclose their participation in listed and other
reportable transactions that meet the projected tax effect test by
attaching a written statement to their Federal income tax returns. It
has been determined that a number of these transactions are entered
into by noncorporate taxpayers. Accordingly, in order to obtain
information regarding potentially abusive transactions entered into by
noncorporate taxpayers, the requirement to disclose under Sec. 1.6011-
4T is extended to individuals, trusts, partnerships, and S corporations
that participate, directly or indirectly, in listed transactions. Thus,
if a partnership or an S corporation participates in a listed
transaction, that partnership or S corporation must disclose its
participation under Sec. 1.6011-4T and the partners and shareholders of
the partnership or S corporation, respectively, also must disclose
their participation under Sec. 1.6011-4T. The IRS and Treasury plan to
extend in future guidance the requirement to disclose under
Sec. 1.6011-4T to other reportable transactions entered into by
individuals, trusts, partnerships, and S corporations.
2. Indirect Participants
Section 1.6011-4T makes reference to taxpayers who participate
directly or indirectly in reportable transactions. In order to obtain
information about potentially abusive transactions entered into by
taxpayers, the IRS and Treasury have provided clarification regarding
indirect participation in a reportable transaction. A taxpayer will
have indirectly participated in a reportable transaction if the
taxpayer knows or has reason to know that the tax benefits claimed from
the taxpayer's transaction are derived from a reportable transaction.
However, this clarification does not imply that a taxpayer's
participation in a transaction did not otherwise qualify as indirect
participation in a reportable transaction for purposes of Sec. 1.6011-
4T, as in effect prior to June 14, 2002.
For example, Notice 95-53 (1995-2 C.B. 334), describes a lease
stripping transaction in which one party (the transferor) assigns the
right to receive future payments under a lease of tangible property and
receives consideration which the transferor treats as current income.
The transferor later transfers the property subject to the lease in a
transaction intended to qualify as a substituted basis transaction, for
example, a transaction described in section 351. In return, the
transferor receives stock (with low value and high basis) from the
transferee corporation. The transferee corporation claims the
deductions associated with the high basis property subject to the
lease. The transferor and transferee corporation have directly
participated in the listed transaction. If the transferor subsequently
transfers the high basis/low value stock to a taxpayer in another
transaction intended to qualify as a substituted basis transaction and
the taxpayer uses the stock to generate a loss, and if the taxpayer
knows or has reason to know that the tax loss claimed was derived from
the lease stripping
[[Page 41326]]
transaction, then the taxpayer is indirectly participating in a
reportable transaction. Accordingly, the taxpayer must disclose the
reportable transaction and the manner of the taxpayer's indirect
participation in the reportable transaction under the provisions of
Sec. 1.6011-4T.
3. Substantially Similar Transactions
Sections 1.6011-4T and 301.6111-2T make reference to substantially
similar transactions. Some taxpayers and promoters have applied the
substantially similar standard in an overly narrow manner to avoid
disclosure. For instance, some taxpayers and promoters have made subtle
and insignificant changes to a listed transaction in order to claim
that their transactions are not subject to disclosure. Others have
taken the position that their transaction is not substantially similar
to a listed transaction because they have an opinion concluding that
their transaction is proper. The IRS and Treasury believe that these
interpretations are improper. Accordingly, the regulations are modified
in Sec. 1.6011-4T and Sec. 301.6111-2T to clarify that the term
substantially similar includes any transaction that is expected to
obtain the same or similar types of tax benefits and that is either
factually similar or based on the same or similar tax strategy.
Further, the term substantially similar must be broadly construed in
favor of disclosure. This modification does not imply that a
transaction was not otherwise the same as or substantially similar to a
listed transaction prior to this modification.
For example, Notice 2000-44 (2000-2 C.B. 255), sets forth a listed
transaction involving offsetting options transferred to a partnership
where the taxpayer claims basis in the partnership for the cost of the
purchased options but does not reduce basis under section 752 as a
result of the partnership's assumption of the taxpayer's obligation
with respect to the options. Transactions using short sales, futures,
derivatives or any other type of offsetting obligations to inflate
basis in a partnership interest would be the same as or substantially
similar to the transaction described in Notice 2000-44. Moreover, use
of the inflated basis in the partnership interest to diminish gain that
would otherwise be recognized on the transfer of a partnership asset
would also be the same as or substantially similar to the transaction
described in Notice 2000-44.
As another example, Notice 2001-16 (2001-1 C.B. 730), sets forth a
listed transaction involving a seller (X) who desires to sell stock of
a corporation (T), an intermediary corporation (M), and a buyer (Y) who
desires to purchase the assets (and not the stock) of T. M agrees to
facilitate the sale to prevent the recognition of the gain that T would
otherwise report. Notice 2001-16 describes M as a member of a
consolidated group that has a loss within the group or as a party not
subject to tax. Transactions utilizing different intermediaries to
prevent the recognition of gain would be the same as or substantially
similar to the transaction described in Notice 2001-16. An example is a
transaction in which M is a corporation that does not file a
consolidated return but which buys T stock, liquidates T, sells assets
of T to Y, and offsets the gain recognized on the sale of those assets
with currently generated losses.
4. Projected Tax Effect Test for Listed Transactions
Section 1.6011-4T provides that a reportable transaction is a
transaction that meets the projected tax effect test and is either a
listed transaction or a transaction that has at least two of five
specified characteristics. Under Sec. 1.6011-4T, the projected tax
effect test for listed transactions is met if the taxpayer reasonably
estimates that the transaction will reduce the taxpayer's Federal
income tax liability by more than $1 million in any single taxable year
or by a total of more than $2 million for any combination of taxable
years in which the transaction is expected to have the effect of
reducing the taxpayer's Federal income tax liability. The IRS and
Treasury have determined that the projected tax effect test for listed
transactions results in inadequate disclosure. Accordingly, the
projected tax effect test will no longer apply to listed transactions.
Thus, any individual, trust, partnership, S corporation, or other
corporation that participates in a listed transaction must report it
under the provisions of Sec. 1.6011-4T.
5. Time of Providing Disclosure
In general, the disclosure statement for a reportable transaction
must be attached to the taxpayer's Federal income tax return for each
taxable year for which the taxpayer's Federal income tax liability is
affected by the taxpayer's participation in the transaction. In the
case of a taxpayer that is a partnership or an S corporation, the
disclosure statement for a listed transaction must be attached to the
taxpayer's Federal income tax return for each taxable year ending with
or within the taxable year of any partner or shareholder whose income
tax liability is affected or is reasonably expected to be affected by
the partnership's or the S corporation's participation in the
transaction. In addition, at the same time that the disclosure
statement is first attached to the taxpayer's Federal income tax
return, the taxpayer must file a copy of that disclosure statement with
the Office of Tax Shelter Analysis.
If a transaction becomes a reportable transaction (e.g., the
transaction subsequently becomes one identified in published guidance
as a listed transaction described in Sec. 1.6011-4T(b)(2), or there is
a change in facts affecting the expected Federal income tax effect of
the transaction) on or after the date the taxpayer has filed the return
for the first taxable year for which the transaction affected the
taxpayer's or a partner's or a shareholder's Federal income tax
liability, the disclosure statement must be filed as an attachment to
the taxpayer's Federal income tax return next filed after the date the
transaction becomes a reportable transaction (whether or not the
transaction affects the taxpayer's or any partner's or shareholder's
Federal income tax liability for that year) and at that time a copy of
that disclosure statement must be filed with the Office of Tax Shelter
Analysis. Notwithstanding the effective date of these regulations, for
purposes of Sec. 1.6011-4T, as in effect prior to June 14, 2002, a
corporate taxpayer was required to disclose a transaction that later
became reportable on the corporation's next filed Federal income tax
return even if the transaction did not affect the corporation's Federal
income tax liability for that year.
Regardless of whether the taxpayer plans to disclose the
transaction under other published guidance, for example, Rev. Proc. 94-
69 (1994-2 C.B. 804), the taxpayer also must disclose the transaction
in the time and manner provided for under the provisions of this
regulation. Notwithstanding the effective date of these regulations, a
corporate taxpayer was required to disclose a transaction in the time
and manner provided for in Sec. 1.6011-4T in effect prior to June 14,
2002, regardless of whether the taxpayer planned to disclose the
transaction under other published guidance.
Effective Dates
The regulations are applicable June 14, 2002.
Special Analyses
It has been determined that this Treasury decision is not a
significant
[[Page 41327]]
regulatory action as defined in Executive Order 12866. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
does not apply to these regulations. It is hereby certified that the
collection of information in these regulations will not have a
significant economic impact on a substantial number of small entities.
This certification is based upon the fact that the time required to
prepare or retain the disclosure is minimal and will not have a
significant impact on those small entities that are required to provide
disclosure. Therefore, a Regulatory Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required.
Pursuant to section 7805(f) of the Internal Revenue Code, these
regulations will be submitted to the Chief Counsel for Advocacy of the
Small Business Administration for comment on their impact on small
business.
Drafting Information
The principal authors of these regulations are Danielle M. Grimm
and Tara P. Volungis, Office of the Associate Chief Counsel
(Passthroughs and Special Industries). However, other personnel from
the IRS and Treasury Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and record keeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 301 are amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6011-4T is amended as follows:
1. The heading of Sec. 1.6011-4T is amended by removing the
language ``corporate''.
2. The heading of paragraph (a) is revised.
3. Paragraph (a) is amended by adding ``(1) In general.'' after the
heading.
4. Newly designated paragraph (a)(1) is amended by adding the
language ``corporate'' before ``taxpayer'' in the first sentence, and
by removing the second sentence and adding three new sentences in its
place.
5. Paragraphs (a)(2) and (a)(3) are added.
6. Paragraph (b)(1) is amended by revising the first sentence.
7. Paragraphs (b)(1)(i) and (b)(1)(ii) are added.
8. Paragraph (b)(4)(i) is amended by removing the first sentence.
9. Paragraph (b)(5) Example 3 is amended by revising the seventh
sentence.
10. Paragraphs (c)(1)(iii) and (c)(1)(v) are revised.
11. Paragraph (c)(2) Example is amended by adding the language
``Example.'' after ``of this section:'' in the first sentence and by
adding ``as in effect at that time.'' to the end of the third sentence.
12. Paragraph (d)(1) is revised.
13. Paragraph (e) is amended by removing the language
``corporation's'' in the first sentence and adding ``taxpayer's'' in
its place.
14. Paragraph (g) is revised.
The revisions and additions read as follows:
Sec. 1.6011-4T Requirement of statement disclosing participation in
certain transactions by taxpayers (Temporary).
(a) Disclosure requirement--(1) In general. * * * Every individual,
trust, partnership, and S corporation that has participated, directly
or indirectly, in a reportable transaction within the meaning of
paragraph (b)(2) of this section must attach to its return for the
taxable year described in paragraph (d) of this section a disclosure
statement in the form prescribed by paragraph (c) of this section. For
this purpose, a taxpayer will have indirectly participated in a
reportable transaction if the taxpayer's Federal income tax liability
is affected (or in the case of a partnership or an S corporation, if a
partner's or shareholder's Federal income tax liability is reasonably
expected to be affected) by the transaction even if the taxpayer is not
a direct party to the transaction (e.g., the taxpayer participates as a
partner in a partnership, as a shareholder in an S corporation, or
through a controlled entity). Moreover, a taxpayer will have indirectly
participated in a reportable transaction if the taxpayer knows or has
reason to know that the tax benefits claimed from the taxpayer's
transaction are derived from a reportable transaction. * * *
(2) Example of indirect participation. Notice 95-53 (1995-2 C.B.
334) (see Sec. 601.601(d)(2) of this chapter), describes a lease
stripping transaction in which one party (the transferor) assigns the
right to receive future payments under a lease of tangible property and
receives consideration which the transferor treats as current income.
The transferor later transfers the property subject to the lease in a
transaction intended to qualify as a substituted basis transaction, for
example, a transaction described in section 351. In return, the
transferor receives stock (with low value and high basis) from the
transferee corporation. The transferee corporation claims the
deductions associated with the high basis property subject to the
lease. The transferor and transferee corporation have directly
participated in the listed transaction. If the transferor subsequently
transfers the high basis/low value stock to a taxpayer in another
transaction intended to qualify as a substituted basis transaction and
the taxpayer uses the stock to generate a loss, and if the taxpayer
knows or has reason to know that the tax loss claimed was derived from
the lease stripping transaction, then the taxpayer is indirectly
participating in a reportable transaction. Accordingly, the taxpayer
must disclose the reportable transaction and the manner of the
taxpayer's indirect participation in the reportable transaction under
the rules of this section.
(3) Definition of taxpayer. For purposes of paragraphs (b)(3) and
(4) of this section, the term taxpayer means a corporation required to
file a return under section 11, 594, 801, or 831. For all other
purposes of this section, the term taxpayer also includes an
individual, trust, partnership, or S corporation.
(b) Definition of reportable transaction--(1) In general. A
reportable transaction is either a transaction that is described in
paragraph (b)(2) of this section, or is a transaction that is described
in paragraph (b)(3) of this section and that meets the projected tax
effect test in paragraph (b)(4) of this section. * * *
(i) Definition of substantially similar. For purposes of this
section, the term substantially similar includes any transaction that
is expected to obtain the same or similar types of tax benefits and
that is either factually similar or based on the same or similar tax
strategy. Receipt of an opinion concluding that the tax benefits from
the taxpayer's transaction are allowable is not relevant to the
determination of whether the taxpayer's transaction is the same as or
substantially similar to a listed transaction. Further, the term
[[Page 41328]]
substantially similar must be broadly construed in favor of disclosure.
(ii) Examples. The following examples illustrate situations where a
transaction is the same as or substantially similar to a listed
transaction:
Example 1. Notice 2000-44 (2000-2 C.B. 255) (see
Sec. 601.601(d)(2) of this chapter), sets forth a listed transaction
involving offsetting options transferred to a partnership where the
taxpayer claims basis in the partnership for the cost of the
purchased options but does not reduce basis under section 752 as a
result of the partnership's assumption of the taxpayer's obligation
with respect to the options. Transactions using short sales,
futures, derivatives or any other type of offsetting obligations to
inflate basis in a partnership interest would be the same as or
substantially similar to the transaction described in Notice 2000-
44. Moreover, use of the inflated basis in the partnership interest
to diminish gain that would otherwise be recognized on the transfer
of a partnership asset would also be the same as or substantially
similar to the transaction described in Notice 2000-44.
Example 2. Notice 2001-16 (2001-1 C.B. 730) (see
Sec. 601.601(d)(2) of this chapter), sets forth a listed transaction
involving a seller (X) who desires to sell stock of a corporation
(T), an intermediary corporation (M), and a buyer (Y) who desires to
purchase the assets (and not the stock) of T. M agrees to facilitate
the sale to prevent the recognition of the gain that T would
otherwise report. Notice 2001-16 describes M as a member of a
consolidated group that has a loss within the group or as a party
not subject to tax. Transactions utilizing different intermediaries
to prevent the recognition of gain would be the same as or
substantially similar to the transaction described in Notice 2001-
16. An example is a transaction in which M is a corporation that
does not file a consolidated return but which buys T stock,
liquidates T, sells assets of T to Y, and offsets the gain
recognized on the sale of those assets with currently generated
losses.
* * * * *
(5) * * *
Example 3. * * * However, E does reasonably determine that the
terms of the leases are consistent with customary commercial form in
the leasing industry, and that there is a generally accepted
understanding that the combination of Federal income tax
consequences it is claiming with respect to the leases are allowable
under the Internal Revenue Code for substantially similar
transactions. * * *
(c) * * *
(1) * * *
(iii) A brief description of the principal elements of the
transaction that give rise to the expected tax benefits, including the
manner of the taxpayer's direct or indirect participation in the
transaction.
* * * * *
(v) An identification of each taxable year (including prior taxable
years) for which the transaction is expected to have the effect of
reducing the Federal income tax liability of the taxpayer, or of any
partner or shareholder of the taxpayer, and an estimate of the amount
by which the transaction is expected to reduce the Federal income tax
liability of the taxpayer, or of any partner or shareholder of the
taxpayer, for each such taxable year.
* * * * *
(d) Time of providing disclosure--(1) In general. The disclosure
statement for a reportable transaction must be attached to the
taxpayer's Federal income tax return for each taxable year for which
the taxpayer's Federal income tax liability is affected by the
taxpayer's participation in the transaction. In the case of a taxpayer
that is a partnership or an S corporation, the disclosure statement for
a listed transaction must be attached to the taxpayer's Federal income
tax return for each taxable year ending with or within the taxable year
of any partner or shareholder whose income tax liability is affected or
is reasonably expected to be affected by the partnership's or the S
corporation's participation in the transaction. In addition, at the
same time that any disclosure statement is first attached to the
taxpayer's Federal income tax return, the taxpayer must file a copy of
that disclosure statement with the Office of Tax Shelter Analysis
(OTSA) at: Internal Revenue Service LM:PFTG:OTSA, Large & Mid-Size
Business Division, 1111 Constitution Ave., NW., Washington, DC 20224.
Regardless of whether the taxpayer plans to disclose the transaction
under other published guidance, for example, Rev. Proc. 94-69 (1994-2
C.B. 804) (see Sec. 601.601(d)(2) of this chapter), the taxpayer also
must disclose the transaction in the time and manner provided for under
the provisions of this section. If a transaction becomes a reportable
transaction (e.g., the transaction subsequently becomes one identified
in published guidance as a listed transaction described in (b)(2) of
this section, or there is a change in facts affecting the expected
Federal income tax effect of the transaction) on or after the date the
taxpayer has filed the return for the first taxable year for which the
transaction affected the taxpayer's or a partner's or a shareholder's
Federal income tax liability, the disclosure statement must be filed as
an attachment to the taxpayer's Federal income tax return next filed
after the date the transaction becomes a reportable transaction
(whether or not the transaction affects the taxpayer's or any partner's
or shareholder's Federal income tax liability for that year). If a
disclosure statement is required as an attachment to a Federal income
tax return that is filed after June 14, 2002, but on or before 180 days
after June 14, 2002, the taxpayer must either attach the disclosure
statement to the return, or file the disclosure statement as an
amendment to the return no later than 180 days after June 14, 2002.
* * * * *
(g) Effective date. This section applies to Federal income tax
returns filed after February 28, 2000. However, paragraphs (a)(1),
(a)(2), (a)(3), (b)(1), (b)(4)(i), (b)(5) Example 3, (c)(1)(iii),
(c)(1)(v), (c)(2) Example, (d)(1), and (e) of this section apply to any
transaction entered into on or after January 1, 2001, unless such
transaction is reported on a tax return of the taxpayer that is filed
on or before June 14, 2002. Taxpayers may rely on the rules in
paragraphs (a)(1), (a)(2), (a)(3), (b)(1), (b)(4)(i),(b)(5) Example 3,
(c)(1)(iii), (c)(1)(v), (c)(2) Example, (d)(1), and (e) of this section
for Federal income tax returns filed after February 28, 2000.
Otherwise, the rules that apply with respect to transactions entered
into before January 1, 2001, and with respect to any transaction
entered into on or after January 1, 2001, and reported on a tax return
of the taxpayer that is filed on or before June 14, 2002, are contained
in Sec. 1.6011-4T in effect prior to June 14, 2002 (see 26 CFR part 1
revised as of April 1, 2002).
Par. 3. In Sec. 1.6031(a)-1, paragraph(a)(1) is amended by adding a
sentence to the end of the paragraph to read as follows:
Sec. 1.6031(a)-1 Return of partnership income.
(a) * * *
(1) * * * For the rules requiring the disclosure of certain
transactions, see Sec. 1.6011-4T.
* * * * *
Par. 4. In Sec. 1.6037-1, paragraph (c) is amended by adding a
sentence to the end of the paragraph to read as follows:
Sec. 1.6037-1 Return of electing small business corporation.
* * * * *
(c) * * * For the rules requiring the disclosure of certain
transactions, see Sec. 1.6011-4T.
* * * * *
PART 301--PROCEDURE AND ADMINISTRATION
Par. 5. The authority citation for part 301 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
[[Page 41329]]
Par. 6. Section 301.6111-2T is amended as follows:
1. Paragraph (a)(3) is amended by adding four sentences to the end
of the paragraph.
2. The paragraph heading for (h) is revised and the entire text
after the second sentence is removed and four new sentences are added
in their place.
The revision and additions read as follows:
Sec. 301.6111-2T Confidential corporate tax shelters (Temporary).
(a) * * *
(3) * * * For purposes of this section, the term substantially
similar includes any transaction that is expected to obtain the same or
similar types of tax benefits and that is either factually similar or
based on the same or similar tax strategy. Receipt of an opinion
concluding that the tax benefits from the taxpayer's transaction are
allowable is not relevant to the determination of whether the
taxpayer's transaction is the same as or substantially similar to a
listed transaction. Further, the term substantially similar must be
broadly construed in favor of disclosure. For examples, see
Sec. 1.6011-4T(b)(1)(ii) of this chapter.
* * * * *
(h) Effective dates. * * * However, paragraph (a)(3) of this
section applies to confidential corporate tax shelters in which any
interests are offered for sale after June 14, 2002. The rule in
paragraph (a)(3) of this section may be relied upon for confidential
corporate tax shelters in which any interests are offered for sale
after February 28, 2000. Otherwise, the rules that apply to
confidential corporate tax shelters in which any interests are offered
for sale after February 28, 2000, and on or before June 14, 2002 are
contained in this Sec. 301.6111-2T in effect prior to June 14, 2002.
(See 26 CFR part 301 revised as of April 1, 2002).
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
Approved: June 11, 2002.
Pamela F. Olson,
Acting Assistant Secretary of the Treasury.
[FR Doc. 02-15321 Filed 6-14-02; 11:32 am]
BILLING CODE 4830-01-P