[Federal Register: June 7, 2007 (Volume 72, Number 109)]
[Proposed Rules]
[Page 31483-31487]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07jn07-24]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-157711-02]
RIN 1545-BB61
Unified Rule for Loss on Subsidiary Stock; Correction
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Correction to notice of proposed rulemaking.
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SUMMARY: This document contains corrections to a notice of proposed
rulemaking that were published in the Federal Register on Tuesday,
January 23, 2007 (72 FR 2964). These regulations apply to corporations
filing consolidated returns. The regulations implement aspects of the
repeal of the General Utilities doctrine by redetermining members'
bases in subsidiary stock and requiring certain reductions in
subsidiary stock basis on a transfer of the stock. The regulations
promote the clear reflection of income by redetermining members' bases
in subsidiary's stock and reducing the subsidiary's attributes to
prevent the duplication of loss, and they also, provide guidance
limiting the application of section 362(e)(2) with respect to
transactions between members of a consolidated group.
FOR FURTHER INFORMATION CONTACT: Theresa Abell (202) 622-7700 or Phoebe
Bennett (202) 622-7770 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
The notice of proposed rulemaking (REG-157711-02) that is the
subject of these corrections are under sections 358, 362(e)(2) and 1502
of the Internal Revenue Code.
Need for Correction
As published, the notice of proposed rulemaking (REG-157711-02)
contains errors that may prove to be misleading and are in need of
clarification.
Correction of Publication
Accordingly, the publication of the notice of proposed rulemaking
(REG-157711-02), that is the subject of FR Doc. 07-187, is corrected as
follows:
1. On page 2964, column 2, in the preamble, under the paragraph
heading ``Paperwork Reduction Act'', eighth paragraph of the column,
line 3, the language ``13(e)(4)(v) and 1.1502-36(d)(7). The'' is
corrected to read ``13(e)(4)(v) and 1.1502-36(d)(6). The''.
[[Page 31484]]
2. On page 2964, column 3, in the preamble, under the paragraph
heading ``Background'', second paragraph of the column, line 10, the
language ``v. United States, 255 F.3d 1357 (2001),'' is corrected to
read ``v. United States, 255 F.3d 1357 (Fed. Cir. 2001),''.
3. On page 2965, column 1, in the preamble, under the paragraph
heading ``2. The Administrative Response to GU Repeal: Sec. 1.1502-
20.'', first paragraph, line 2 from bottom of the paragraph, the
language ``determine adjustments to member's'' is corrected to read
``determine adjustments to members '' `.
4. On page 2972, column 1, in the preamble, under the paragraph
heading ``2. Hybrid Tracing-Presumptive Model: Asset Tracing.'', first
paragraph, line 3, the language ``presumption approach that would'' is
corrected to read ``presumptive approach that would''.
5. On page 2972, column 2, in the preamble, the paragraph heading
``3. Presumption-Based Models'' is corrected to read ``3. Presumptive-
Based Models.''.
6. On page 2975, column 1, in the preamble, under the paragraph
heading ``d. Netting of items from different tax periods.'', first
paragraph, line 6, the language, ``investments were not. The IRS and''
is corrected to read ``investment adjustments were not. The IRS and''.
7. On page 2975, column 1, in the preamble, under the paragraph
heading ``d. Netting of items from different tax periods.'', second
paragraph, line 8, the language, ``account by the group. Thus, IRS
and'' is corrected to read ``account by the group. Thus, the IRS and''.
8. On page 2975, column 2, in the preamble under the paragraph
heading ``e. Summary and conclusions.'', second paragraph, line 12 from
the bottom of the paragraph, the language ``administrative and other
concerns'' is corrected to read ``administrative burden and other
concerns''.
9. On page 2977, column 1, in the preamble, under the paragraph
heading ``E. Noneconomic and Duplicated Loss From Investment Adjustment
System.'', first paragraph, line 2, the language ``preamble, IRS and
Treasury Department'' is corrected to read ``preamble, the IRS and
Treasury Department''.
10. On page 2978, column 3, under paragraph heading ``1.
Overview.'', third paragraph of the column, line 4 from the bottom of
the paragraph, the language ``implement a loss limitation approach'' is
correct to read ``implements a loss limitation approach''.
11. On page 2980, column 1, under paragraph heading ``4. The
Attribute Reduction Rule.'', second paragraph, lines 16 and 17, the
language ``the value of all of the S shares. Net the inside attributes
generally has the same'' is corrected to read ``the value of all the S
shares. The term net inside attributes generally has the same''.
12. On page 2980, column 1, under paragraph heading ``4. The
Attribute Reduction Rule.'', third paragraph, last line of the column,
the language ``stock loss for a later recognition (for'' is corrected
to read ``stock loss for later recognition (for''.
13. On page 2980, column 2, under paragraph heading ``4. The
Attribute Reduction Rule.'', second paragraph of the column, lines 1
and 2 from bottom of the paragraph, the language ``attributes are
reduced reflects this principle.'' is corrected to read ``attributes
are reduced reflects these principles.''.
14. On page 2980, column 3, under subparagraph heading ``a. Special
rules applicable when S holds stock of lower-tier subsidiary.'', second
paragraph, line 16, the language ``inside attributes. For example, if P
owns'' is corrected to read ``inside attributes. For example, assume P
owns''.
15. On page 2981, column 3, under subparagraph heading ``b.
Election to reduce stock basis and/or reattribute loss.'', first
paragraph of the column, line 22 from bottom of the paragraph, the
language ``transaction. Proposed regulations under'' is corrected to
read ``transaction.''
16. On page 2981, column 3, under subparagraph heading ``b.
Election to reduce stock basis and/or reattribute loss.'', second
paragraph, line 21 from bottom of the paragraph, the language ``Sec.
1.1502-32 treat the reattributed'' is corrected and added with new
paragraph to read ``Proposed regulations under Sec. 1.1502-32 treat
the reattributed''.
17. On page 2982, column 1, under subparagraph heading ``6. Special
Rules for Section 362(e)(2) Transaction.'', second paragraph, lines 1
and 2 from bottom of the column, the language ``under section
362(e)(2)(C) been made Similarly, to adjust for distortions'' is
corrected to read ``under section 362(e)(2)(C) been made. Similarly, to
adjust for distortions''.
18. On page 2982, column 2, under subparagraph heading ``6. Special
Rules for Section 362(e)(2) Transaction.'', second paragraph of the
column, line 9 from the bottom of the paragraph, the language, ``stock
basis and net inside attributes that'' is corrected to read ``stock
basis, net inside attributes, and value that''.
19. On page 2983, column 2, under subparagraph heading ``2.
Suspension of Section 362(e)(2) for Intercompany Transactions.'', last
paragraph of the column, line 2 from bottom of the column, the language
``investment adjustment system has not'' is corrected to read
``investment adjustment system has not eliminated''.
20. On page 2984, column 2, under subparagraph heading ``4.
Application of Section 362(e)(2) to Intercompany Transactions.'', first
paragraph of the column, line 7 from the bottom of the paragraph, the
language ``attributes is applied to proportionately'' is corrected to
read ``attributes is applied proportionately''.
21. On page 2984, column 3, under subparagraph heading ``5. Special
Allocations Under Sec. 1.1502-32.'', line 7 of the paragraph, the
language ``entirely to member's shares. In other'' is corrected to read
``entirely to members'' shares. In other''.
22. On page 2986, column 2, under subparagraph heading, ``8.
Retention of, and Nonsubstantive Revisions to, Sec. 1.1502-80(c).'',
third paragraph of the column, line 8 of the paragraph, the language
``under the LDR and, since LDR no longer'' is corrected to read ``under
the LDR and, since the LDR no longer''.
23. On page 2986, column 3, under subparagraph heading, ``8.
Retention of, and Nonsubstantive Revisions to, Sec. 1.1502-80(c).'',
first paragraph of the column, line 2 of the column, the language
``deduction. See, In re Prudential Lines,'' is corrected to read
``deduction. See In re Prudential Lines,''.
Sec. 1.1502-13 [Corrected]
24. On page 2988, column 1, Sec. 1.1502-13(e)(4)(ii)(C)(2), line
12 from bottom of the column, the language ``otherwise is eliminated
(other than'' is corrected to read ``otherwise eliminated (other
than''.
25. On page 2989, column 3, Sec. 1.1502-13(e)(4)(vi), Example
3.(iv), line 18 of the paragraph, the language ``in Sec. 1.1502-
32(b)(3)(iii)(B), and will effect P's'' is corrected to read ``in Sec.
1.1502-32(b)(3)(iii)(B), and will affect P's''.
Sec. 1.1502-32 [Corrected]
26. On page 2991, column 3, Sec. 1.1502-32(b)(3)(iii)(C), line 3
from bottom of the paragraph, the language ``Federal Register, see
1.1502-'' is corrected to read ``Federal Register, see Sec. 1.1502-''.
27. On page 2991, column 3, Sec. 1.1502-32(b)(3)(iii)(D), line 3
from bottom of the paragraph, the language ``see 1.1502-
32(b)(3)(iii)(D) as
[[Page 31485]]
contained'' is corrected to read ``see Sec. 1.1502-32(b)(3)(iii)(D) as
contained''.
28. On page 2991, column 3, Sec. 1.1502-32(c)(1)(i), line 2 from
bottom of the column, the language ``allocated to the shares of S's
stock to'' is corrected to read ``allocated to the shares of S stock
to''.
29. On page 2993, column 1, Sec. 1.1502-32(c)(1)(ii)(A)(2)
Example.(iv)(D), line 7 from bottom of the column, the language
``nondeductible basis recovery item if it is'' is corrected to read
``nondeductible basis recovery item if it were''.
30. On page 2994, column 1, Sec. 1.1502-32(c)(2)(i), line 11, the
language ``that member's excess loss accounts and'' is corrected to
read ``that member's excess loss account and''.
31. On page 2994, column 2, Sec. 1.1502-32(c)(4)(i), line 3 of the
paragraph, the language ``share of S's preferred and common stock'' is
corrected to read ``share of S preferred and common stock''.
32. On page 2994, column 2, Sec. 1.1502-32(c)(4)(i), line 8 of the
paragraph, the language ``made by reallocating S's adjustments'' is
corrected to read ``made by reallocating S stock adjustments''.
33. On page 2994, column 2, Sec. 1.1502-32(c)(4)(i), last line of
the paragraph, the language ``of S's shares. * * *'' is corrected to
read ``of the S shares. * * *''.
Sec. 1.1502-35 [Corrected]
34. On page 2994, column 3, Sec. 1.1502-35(a), line 5 from bottom
of the paragraph, the language ``of April 1, 2006. For transfers and''
is corrected to read ``of April 1, 2007. For transfers and''.
35. On page 2995, column 1, Sec. 1.1502-35(b)(3)(iii), line 4, the
language ``year of the group) is a noncapital,'' is corrected to read
``year of the selling group) is a noncapital,''.
Sec. 1.1502-36 [Corrected]
36. On page 2995, column 2, the language of the section heading
``Sec. 1.1502-36 Loss on subsidiary stock.'' is corrected to read
``Sec. 1.1502-36 Unified rule for loss on subsidiary stock.''.
37. On page 2996, column 2, Sec. 1.1502-36(b)(1)(i), line 4 of the
paragraph, the language ``(b) reduce the extent to which there is'' is
corrected to read ``(b) reduce (but do not increase) the extent to
which there is''.
38. On page 2997, column 1, Sec. 1.1502-36(b)(2)(iii)(A), line 2
of the paragraph, the language `` Reallocations are made in a manner
that'' is corrected to read ``All reallocations (both to and from
members' shares of S stock) are made in a manner that''.
39. On page 2997, column 2, Sec. 1.1502-36(b)(2)(iii)(B)(2)(ii)
Example.(iii), line 6 from the bottom of the column, the language
``would have tiered up to the M share P sold,'' is corrected to read
``would have tiered up to the M share that P sold,''.
40. On page 2998, column 2, Sec. 1.1502-36(b)(3) Example 2.(i),
line 10 of the paragraph, the language ``Asset 1 for $100. On December
31, year 2, S'' is corrected to read ``Asset 1 for $100. On December
31, year 2, P''.
41. On page 2999, column 2, Sec. 1.1502-36(b)(3) Example 3.(i),
line 5 of the paragraph, the language ``preferred shares to reflect
their entitlement to'' is corrected to read ``preferred shares to
reflect its entitlement to''.
42. On page 2999, column 3, Sec. 1.1502-36(b)(3) Example
3.(ii)(C), line 8 of the paragraph, the language ``Accordingly $25 of
that amount is reallocated'' is corrected to read ``Accordingly, $25 of
that amount is reallocated''.
43. On page 3000, column 2, Sec. 1.1502-36(c)(6)(i), line 5 from
the bottom of the paragraph, the language ``S1's investment adjustments
increased'' is corrected to read ``S1's investment adjustments
increase''.
44. On page 3000, column 3, Sec. 1.1502-36(c)(6)(v) Example.(ii),
line 3 from the bottom of the paragraph, the language ``the loss share
stock of S1, the lowest-tier'' is corrected to read ``the loss share of
S1 stock, the lowest-tier''.
45. On page 3000, column 3, Sec. 1.1502-36(c)(6)(v) Example.(iii),
line 3 from the bottom of the paragraph, the language ``recognized on
the transfer of S3 tiers up to'' is corrected to read ``recognized on
the transfer of S3 stock tiers up to''.
46. On page 3001, column 3, Sec. 1.1502-36(c)(8) Example 1.(i)(C),
line 13 of the paragraph, the language ``recognized on the sale of
Asset 1. Thus the'' is corrected to read ``recognized on the sale of
Asset 1. Thus, the''.
47. On page 3001, column 3, Sec. 1.1502-36(c)(8) Example 1.(ii),
line 5 from the bottom of the paragraph, the language ``Asset 1 to $0)
Because the net positive'' is corrected to read ``Asset 1 to $0).
Because the net positive''.
48. On page 3002, column 3, Sec. 1.1502-36(c)(8) Example
1.(iv)(B), line 4 of the paragraph, the language ``there
redetermination would change no'' is corrected to read
``redetermination would change no''.
49. On page 3003, column 2, Sec. 1.1502-36(c)(8) Example 4.(ii),
lines 4 through 10 of the column, the language ``Because the net
positive adjustment includes items of income (and not just gain), the
analysis of the application of this paragraph (c) is the same here as
in paragraph (i)(C) of this Example 4. Furthermore, the analysis of the
application of this paragraph (C) would also be the same if the $60
loss carryover were subject to a section 382 limitation from a prior
ownership change, and if, instead, it would subject to the limitation
in Sec. 1.1502-'' is corrected to read ``The analysis of the
application of this paragraph (c) is the same here as in paragraph
(i)(C) of this Example 4. Furthermore, the analysis of the application
of this paragraph (c) would also be the same if the $60 loss carryover
were subject to a section 382 limitation from a prior ownership change,
if, instead, it were subject to the limitation in Sec. 1.1502-''.
50. On page 3003, column 2, Sec. 1.1502-36(c)(8) Example 5.(i),
lines 7 through 10 of the paragraph, the language ``December 31, year
1, P sells one of its shares, Share 1, for $20. After applying and
giving effect to all generally applicable rules of law (other than this
section), P's basis in its Share'' is corrected to read ``December 31,
year 1, P sells one of its S shares, Share 1, for $20. After applying
and giving effect to all generally applicable rules of law (other than
this section), P's basis in Share''.
51. On page 3003, column 2, Sec. 1.1502-36(c)(8) Example 5.(iii),
line 6 from the bottom of the paragraph, the language ``($100 from the
sale of the asset), and Share'' is corrected to read ``($100 from the
sale of Asset), and Share''.
52. On page 3004, column 3, Sec. 1.1502-36(c)(8) Example 7.(i),
line 8 from the bottom of the paragraph, the language ``basis in S1
under Sec. 1.1502-32 by $40 (to'' is corrected to read ``basis in the
S1 share under Sec. 1.1502-32 by $40 (to''.
53. On page 3006, column 2, Sec. 1.1502-36(d)(5)(ii)(B)(3), line 3
from the bottom of the paragraph, the language ``extent necessary to
reduce the bases of'' is corrected to read ``extent necessary to reduce
the basis of''.
54. On page 3006, column 2, Sec. 1.1502-36(d)(5)(ii)(B)(4), line 2
from the bottom of the paragraph, the language ``the basis of such
shares without'' is corrected to read ``the bases of such shares
without''.
55. On page 3007, column 1, Sec. 1.1502-36(d)(6)(ii)(B), line 5
from the bottom of the paragraph, the language ``immediately tier up
(under the'' is corrected to read ``immediately tiers up (under the''.
[[Page 31486]]
56. On page 3007, column 3, Sec. 1.1502-36(d)(6)(iv), line 4 of
the paragraph, the language ``all members' basis in loss shares of S''
is corrected to read ``all members' bases in loss shares of S''.
57. On page 3007, column 3, Sec. 1.1502-36(d)(7) Example 1.(i)(B),
line 3 of the paragraph, the language ``under paragraph (b) of this
section either'' is corrected to read ``under paragraph (b) of this
section because''.
58. On page 3008, column 1, Sec. 1.1502-36(d)(7) Example 1.(i)(B),
line 2 of the column, the language ``disparity in the basis of the
shares). See'' is corrected to read ``disparity in the bases of the
shares). See''.
59. On page 3009, column 2, Sec. 1.1502-36(d)(7) Example 4.(i)(A),
line 4 of the column, the language ``the $500 income earned). The sale
is'' is corrected to read ``the $500 of income earned). The sale is''.
60. On page 3010, column 2, Sec. 1.1502-36(d)(7) Example
5.(i)(C)(3), line 10 from the bottom of the paragraph, the language
``the transaction ($50) over the sum of'' is corrected to read ``the
transaction ($50) over the sum of the''.
61. On page 3010, column 3, Sec. 1.1502-36(d)(7) Example
5.(ii)(C)(4), lines 15 to 21 of the paragraph, the language
``reductions to share A and to share B under this paragraph (d) are
reversed to restore the basis of each share to $12.50. Thus, $25 of the
$27.50 attribute reduction applied to reduce the basis of share A and
$25 of the $47.50 attribute reduction applied to reduce the basis of
share B are reversed, restoring the'' is corrected to read ``reductions
to Share A and to Share B under this paragraph (d) are reversed to
restore the basis of each share to $12.50. Thus, $25 of the $27.50
attribute reduction applied to reduce the basis of Share A and $25 of
the $47.50 attribute reduction applied to reduce the basis of Share B
are reversed, restoring the''.
62. On page 3011, column 2, Sec. 1.1502-36(d)(7) Example
6.(ii)(B), line 2 from the bottom of the column, the language ``basis
in subsidiary stock under the principles'' is corrected to read ``bases
in subsidiary stock under the principles''.
63. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(B), line 2 from the top of the column, the language ``the
transaction the sale is not subject to'' is corrected to read ``the
transaction, the sale is not subject to''.
64. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(C), line 3 of the paragraph, the language ``this section). The
next highest tier transfer is'' is corrected to read ``this section).
The next higher tier transfer is''.
65. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(C), line 8 from the bottom of the paragraph, the language ``of
the transferred Share E minus the $20'' is corrected to read ``of the
transferred share E minus the $20''.
66. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(D)(1), line 6 from the bottom of the paragraph, the language
``basis in its asset)) minus S's liability ($20).'' is corrected to
read ``basis in its asset))) minus S's liability ($20).''.
67. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(D)(2), lines 5 to 6 from the bottom of the paragraph, the
language ``applied to reduce the basis of share E because share E was
transferred in a transaction in'' is corrected to read ``applied to
reduce the basis of share E, because share E was transferred in a
transfer in''.
68. On page 3011, column 3, Sec. 1.1502-36(d)(7) Example
6.(ii)(D)(3), line 3 from the bottom of the column, the language
``apportioned to or applied to reduced the'' is corrected to read
``apportioned to or applied to reduce the''.
69. On page 3012, column 3, Sec. 1.1502-36(d)(7) Example
7.(iii)(C)(3), line 16 of the paragraph, the language ``reducing the
basis of both assets to $0.'' is corrected to read ``reducing the basis
of each asset to $0.''.
70. On page 3012, column 3, Sec. 1.1502-36(d)(7) Example
7.(iii)(C)(3), line 2 from the bottom of the paragraph, the language
``attribute reduction amount is disregarded has'' is corrected to read
``attribute reduction amount is disregarded and has''.
71. On page 3013, column 1, Sec. 1.1502-36(d)(7) Example 8.(i)(E),
line 5 of the paragraph, the language ``basis in the S shares by the
full attribute'' is corrected to read ``bases in the S shares by the
full attribute''.
72. On page 3013, column 2, Sec. 1.1502-36(d)(7) Example 8.(i)(E),
line 7 of the paragraph, the language ``transfer. The reduction of M's
basis in the S'' is corrected to read ``transfer. The reduction of M's
bases in the S''.
73. On page 3014, column 1, Sec. 1.1502-36(d)(7) Example
8.(ii)(E), lines 2 through 5 of the paragraph, the language ``are the
same as paragraph (ii)(A) of this Example 8, except that P elects under
paragraph (d)(6) of this section to reduce M's basis in the S shares by
the full attribute'' is corrected to read ``are the same as in
paragraph (ii)(A) of this Example 8, except that P elects under
paragraph (d)(6) of this section to reduce M's bases in the S shares by
the full attribute''.
74. On page 3014, column 1, Sec. 1.1502-36(d)(7) Example
8.(ii)(F), is removed.
75. On page 3014, column 1, Sec. 1.1502-36(d)(7) Example
8.(ii)(G), is the newly designated paragraph (F).
76. On page 3014, column 2, Sec. 1.1502-36(d)(7) Example 9.(i),
line 5 from the bottom of the column, the language ``to P1 (the common
parent of a consolidated'' is corrected to read ``to P1 (the common
parent of a different consolidated''.
77. On page 3014, column 3, Sec. 1.1502-36(d)(7) Example 9.(ii),
line 7 from the bottom of the column, the language ``computed and is
applied to adjust the basis'' is corrected to read ``computed and is
applied to adjust the bases''.
78. On page 3015, column 1, Sec. 1.1502-36(d)(7) Example 9.(iii),
line 1 of the paragraph, the language ``(iii) Transfers in next highest
tier (loss'' is corrected to read ``(iii) Transfers in next higher tier
(loss''.
79. On page 3015, column 3, Sec. 1.1502-36(d)(7) Example
9.(iv)(B)(2), line 30 from the bottom of the paragraph, the language
``allocated amount is apportioned among other'' is corrected to read
``allocated amount is apportioned among the other''.
80. On page 3017, column 1, Sec. 1.1502-36(e)(1), last line of the
paragraph, the language ``the section.'' is corrected to read ``this
section.''.
81. On page 3017, column 2, Sec. 1.1502-36(e)(2)(iii), line 6 of
the paragraph, the language ``allocable portion of S's attributes has''
is corrected to read ``allocable portion of S's net inside attributes
has''.
82. On page 3017, column 2, Sec. 1.1502-36(e)(2)(iv)
Example.(i)(A), line 11 of the paragraph, the language ``basis of A1
would have been reduced by $80'' is corrected to read ``basis in Asset
1 would have been reduced by $80''.
83. On page 3017, column 2, Sec. 1.1502-36(e)(2)(iv)
Example.(i)(B), last line of the paragraph, the language ``to this
paragraph (c).'' is corrected to read ``to paragraph (c) of this
section.''.
84. On page 3018, column 1, Sec. 1.1502-36(f)(2), line 6 of the
column, the language ``dealers in securities) and 481'' is corrected to
read ``dealers in securities) and section 481''.
85. On page 3018, column 1, Sec. 1.1502-36(f)(4), lines 6 through
15 of the paragraph, the language ``basis of shares of S2 stock under
Sec. 1.1502-32 affect the investment adjustments made to the basis of
the stock of S1. A subsidiary (S1) (and its shares of stock) is lower
tier with respect to another subsidiary (S) (and its shares of stock)
[[Page 31487]]
if investment adjustments made to the basis of shares of S1 stock
affect the investment adjustments made to the basis of shares of S
stock. The'' is corrected to read ``bases of shares of S2 stock under
Sec. 1.1502-32 affect the investment adjustments made to the bases of
shares of S1 stock. A subsidiary (S1) (and its shares of stock) is
lower tier with respect to another subsidiary (S) (and its shares of
stock) if investment adjustments made to the bases of shares of S1
stock affect the investment adjustments made to the bases of shares of
S stock. The''.
86. On page 3019, column 1, Sec. 1.1502-36(g)(2) Example 3.(ii),
line 4 of the paragraph, the language ``there is no disparity in the
basis of the'' is corrected to read ``there is no disparity in the
bases of the''.
87. On page 3019, column 1, Sec. 1.1502-36(g)(2) Example 4.(i),
lines 5 through 6 from the bottom of the paragraph, the language
``equal basis that exceeds value. S owns Asset 1 with a basis that
exceeds value and cash.'' is corrected to read ``equal basis that
exceeds value. S owns Cash and Asset 1 with a basis that exceeds
value.''.
88. On page 3019, column 1, Sec. 1.1502-36(g)(2) Example 4.(ii),
line 4 of the paragraph, the language ``there is no disparity in the
basis of the'' is corrected to read ``there is no disparity in the
bases of the''.
LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division,
Associate Chief Counsel (Procedure and Administration).
[FR Doc. E7-11057 Filed 6-6-07; 8:45 am]
BILLING CODE 4830-01-P