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customer, and the benefit the service rate of return typically earned by small concerning submissions of comments
provider derives from the funds is in business QIs on exchange funds, the and requests for a public hearing, Kelly
lieu of a fee for services, the transaction interest rate QIs typically pay to Banks at (202) 622–0392 (not toll-free
is a compensation-related loan under taxpayers, and an appropriate rate for numbers).
section 7872. H.R. Conf. Rep. No. 861, testing exchange facilitator loans for SUPPLEMENTARY INFORMATION:
98th Cong., 2d Sess. 1019 (1984) (1984– sufficient interest under section 7872.
3 (Vol. 2) CB 272). Moreover, it was Background and Explanation of
determined that exchange funds are not Duplicative, Overlapping, and Provisions
received in consideration for the sale or Conflicting Rules
Temporary regulations in the Rules
exchange of property (within the The IRS and the Department of the and Regulations section of this issue of
meaning of section 1274(c)(1)) or Treasury are not aware of any the Federal Register amend the Income
received as a deferred payment on duplicative, overlapping, or conflicting Tax Regulations (26 CFR part 1) relating
account of a sale or exchange of Federal rules. to section 368, which provides for
property (within the meaning of section general nonrecognition treatment for
Kevin M. Brown,
483). reorganizations. In addition to
The industry survey indicates that 30 Deputy Commissioner for Services and
Enforcement. complying with the statutory and
percent of respondents closed at least certain other requirements, to qualify as
half of their deferred like-kind exchange [FR Doc. E7–4968 Filed 3–19–07; 8:45 am]
a reorganization, a transaction generally
transactions within 60 days or less. BILLING CODE 4830–01–P
must satisfy the continuity of interest
Only eight percent completed at least (COI) requirement. COI requires that, in
half of their transactions in more than substance, a substantial part of the value
150 days. In addition, 42 percent of DEPARTMENT OF THE TREASURY
of the proprietary interests in the target
survey respondents reported that at least corporation be preserved in the
Internal Revenue Service
half of their transactions typically reorganization. The text of those
involve exchange funds of $250,000 or regulations also serves as the text of
26 CFR Part 1
less, while about 8 percent of these proposed regulations. The
respondents reported that most of their [REG–146247–06] preamble to the temporary regulations
transactions involve exchange funds in explains the amendments.
excess of $1 million. In light of this RIN 1545–BG15
information, comments specifically are Special Analyses
Corporate Reorganizations; Guidance
requested regarding the average on the Measurement of Continuity of It has been determined that this notice
duration of exchange transactions, the Interest of proposed rulemaking is not a
average dollar amount of exchange significant regulatory action as defined
funds, and the appropriateness and AGENCY: Internal Revenue Service (IRS), in Executive Order 12866. Therefore, a
nature of a de minimis rule that would Treasury. regulatory assessment is not required. It
except certain exchange transactions ACTION: Notice of proposed rulemaking has also been determined that section
from the application of section 7872. by cross-reference to temporary 553(b) of the Administrative Procedure
If exchange funds are characterized as regulations. Act (5 U.S.C. chapter 5) does not apply
loaned by the taxpayer to the exchange to these regulations, and because the
facilitator, interest may be imputed if SUMMARY: In the Rules and Regulations regulation does not impose a collection
the exchange facilitator does not pay section of this issue of the Federal of information on small entities, the
sufficient interest to the taxpayer. To Register, the IRS is issuing temporary Regulatory Flexibility Act (5 U.S.C.
reduce the administrative burden of regulations that provide guidance chapter 6) does not apply. Pursuant to
determining imputed interest, the 2006 regarding the satisfaction of the section 7805(f) of the Internal Revenue
proposed regulations provide a special continuity of interest requirement for Code, this notice of proposed
AFR, equal to the investment rate on a corporate reorganizations. The text of rulemaking will be submitted to the
182-day Treasury bill, in lieu of the those regulations also serves as the text Chief Counsel for Advocacy of the Small
short-term AFR (which applies to loans of these proposed regulations. Business Administration for comment
of 3 years or less), to qualify as DATES: Written or electronic comments on its impact on small business.
sufficient interest for purposes of and requests for a public hearing must
determining whether interest must be Comments and Requests for Public
be received by June 18, 2007. Hearing
imputed. This special AFR was
intended to be a more accurate measure ADDRESSES: Send submissions to: Before the proposed regulations are
of a market rate of interest for these CC:PA:LPD:PR (REG–146247–06), room adopted as final regulations,
loans than the short-term AFR, and was 5203, Internal Revenue Service, PO Box consideration will be given to any
expected to result in characterization of 7604, Ben Franklin Station, Washington, written comments (a signed original and
fewer transactions as below-market DC 20044. Submissions may be hand- eight (8) copies) or electronic comments
loans than if the short-term AFR were delivered Monday through Friday that are submitted timely to the IRS.
used. Commentators have stated that the between the hours of 8 a.m. and 4 p.m. Comments are requested on all aspects
special AFR is significantly higher than to CC:PA: LPD:PR (REG–146247–06), of the proposed regulations. All
the market rate paid on funds held for Courier’s Desk, Internal Revenue comments will be available for public
the periods of time that exchange funds Service, 1111 Constitution Avenue, NW, inspection and copying. A public
typically are held by QIs. They state, for Washington, DC, or sent electronically, hearing will be scheduled if requested
erjones on PRODPC74 with PROPOSALS
example, that few if any QIs that pay via the Federal eRulemaking Portal at in writing by any person that timely
less than all the income to the taxpayer http://www.regulations.gov/ (IRS and submits written comments. If a public
pay an amount that is equal to or greater REG–146247–06). hearing is scheduled, notice of the date,
than the special AFR provided in the FOR FURTHER INFORMATION CONTACT: time, and place for the public hearing
2006 proposed regulations. Specific Concerning the proposed regulations, will be published in the Federal
comments are requested identifying the Lisa S. Dobson at (202) 622–7790; Register.
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