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62556 Federal Register / Vol. 71, No.

207 / Thursday, October 26, 2006 / Rules and Regulations

to 15.7 miles northwest of the TACAN, and Need for Correction (c) * * *
within a 7.4-mile radius of the Mountain Example 4. (i) * * *
Home Municipal Airport, thence extending As published, TD 9244 contains errors (ii) Analysis. Under paragraph (a)(2)(ii) of
east of the radius 3.1 miles each side of the that may prove to be misleading and are this section and under § 1.356–1(b), because
Sturgeon NDB 112° bearing to 7.4 miles east in need of clarification. the terms of the exchange do not specify that
of Sturgeon NDB; that airspace extending shares of Corporation Y stock or cash are
upward from 1,200 feet above the surface
List of Subjects in 26 CFR Part 1
received in exchange for particular shares of
bounded on the northeast by the southwest Income taxes, Reporting and Class A stock or Class B stock of Corporation
edge of V–253; to long. 115°00′11″W; south recordkeeping requirements. X, a pro rata portion of the shares of
to lat. 42°24′00″ N; east to lat. 42°24′08″N, Corporation Y stock and cash received will
long. 115°18′09″ W; thence on southeast, Correction of Publication be treated as received in exchange for each
south, and west by a 46.0-mile radius of share of Class A stock and Class B stock of
Mountain Home AFB; on the west by the ■ Accordingly, 26 CFR Part 1 is Corporation X surrendered based on the fair
southeast edge of V–113; northeast to the corrected by making the following market value of such stock. Therefore, J is
southwest edge of V–253. correcting amendments: treated as receiving one share of Corporation
* * * * * Y stock and $5 of cash in exchange for each
PART 1—INCOME TAXES share of Class A stock of Corporation X and
Issued in Los Angeles, California, on one share of Corporation Y stock and $5 of
October 10, 2006. ■ Paragraph 1. The authority citation cash in exchange for each share of Class B
Leonard A. Mobley, for part 1 continues to read in part as stock of Corporation X. J realizes a gain of
Acting Area Director, Western Terminal follows: $140 on the exchange of shares of Class A
Operations. Authority: 26 U.S.C. 7805 * * * stock of Corporation X, $100 of which is
recognized under § 1.356–1(a). J realizes a
[FR Doc. 06–8850 Filed 10–25–06; 8:45 am] gain of $80 on the exchange of Class B stock
§ 1.358–1 [Corrected]
BILLING CODE 4910–13–M of Corporation X, all of which is recognized
■ Par. 2. Section 1.358–1 is amended by under § 1.356–1(a). Under paragraph (a)(2)(i)
revising paragraph (b), Example to read of this section, J has 10 shares of Corporation
as follows: Y stock, each of which has a basis of $2 and
DEPARTMENT OF THE TREASURY is treated as having been acquired on Date 1,
§ 1.358–1 Basis to distributees. 10 shares of Corporation Y stock, each of
Internal Revenue Service * * * * * which has a basis of $4 and is treated as
(b) * * * having been acquired on Date 2, and 20
26 CFR Part 1 Example. A purchased a share of stock in shares of Corporation Y stock, each of which
Corporation X in 1935 for $150. Since that has a basis of $5 and is treated as having been
date A has received distributions out of other acquired on Date 3. Under paragraph
[TD 9244] than earnings and profits (as defined in (a)(2)(vii) of this section, on or before the date
section 316) totaling $60, so that A’s adjusted on which the basis of a share of Corporation
RIN 1545–BC05; 1545–BE88 basis for the stock is $90. In a transaction Y stock received becomes relevant, J may
qualifying under section 356, A exchanged designate which of the shares of Corporation
Determination of Basis of Stock or this share for one share in Corporation Y, Y stock received have a basis of $2, which
worth $100, cash in the amount of $10, and have a basis of $4, and which have a basis
Securities Received in Exchange for, of $5.
other property with a fair market value of
or With Respect to, Stock or Securities $30. The exchange had the effect of the Example 5. (i) * * *
in Certain Transactions; Treatment of distribution of a dividend. A’s ratable share (ii) Analysis. Under paragraph (a)(2)(ii) of
Excess Loss Accounts; Correction of the earnings and profits of Corporation X this section and under § 1.356–1(b), because
accumulated after February 28, 1913, was $5. the terms of the exchange specify that J
AGENCY: Internal Revenue Service (IRS), A realized a gain of $50 on the exchange, but receives 40 shares of stock of Corporation Y
Treasury. the amount recognized is limited to $40, the in exchange for J’s shares of Class A stock of
ACTION: Correcting amendment. sum of the cash received and the fair market Corporation X and $200 of cash in exchange
value of the other property. Of the gain for J’s shares of Class B stock of Corporation
recognized, $5 is taxable as a dividend, and X and such terms are economically
SUMMARY: This document contains a
$35 is taxable as a gain from the exchange of reasonable, such terms control. J realizes a
correction to final and temporary property. The basis to A of the one share of gain of $140 on the exchange of shares of
regulations (TD 9244), that were stock of Corporation Y is $90, that is, the Class A stock of Corporation X, none of
published in the Federal Register on adjusted basis of the one share of stock of which is recognized under § 1.356–1(a). J
Thursday, January 26, 2006 (71 FR Corporation X ($90), decreased by the sum of realizes a gain of $80 on the exchange of
4264). This regulation provides the cash received ($10) and the fair market shares of Class B stock of Corporation X, all
guidance regarding the determination of value of the other property received ($30) of which is recognized under § 1.356–1(a).
the basis of stock or securities received and increased by the sum of the amount Under paragraph (a)(2)(i) of this section, J has
in exchange for, or with respect to, stock treated as a dividend ($5) and the amount 20 shares of Corporation Y stock, each of
treated as a gain from the exchange of which has a basis of $1 and is treated as
or securities in certain transactions.
property ($35). The basis of the other having been acquired on Date 1, and 20
DATES: This correction is effective property received is $30. shares of Corporation Y stock, each of which
January 23, 2006. * * * * * has a basis of $2 and is treated as having been
acquired on Date 2. Under paragraph
FOR FURTHER INFORMATION CONTACT:
§ 1.358–2 [Corrected] (a)(2)(vii) of this section, on or before the date
Theresa M. Kolish, (202) 622–7530 (not on which the basis of a share of Corporation
a toll-free number). ■ Par. 3. Section 1.358–2(c) is amended
Y stock received becomes relevant, J may
by revising paragraphs (ii) in Examples designate which of the shares of Corporation
SUPPLEMENTARY INFORMATION: 4, 5, 6 and 11 to read as follows: Y stock received have a basis of $1 and
Background which have a basis of $2.
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§ 1.358–2 Allocation of basis among


Example 6. (i) * * *
The final and temporary regulations nonrecognition property.
(ii) Analysis. Under paragraph (a)(2)(ii) of
(TD 9244) that are the subject of these (a) * * * this section and under § 1.354–1(a), because
corrections are under sections 358 and (2) * * * the terms of the exchange specify that J
1502 of the Internal Revenue Code. (viii) * * * receives 10 shares of stock of Corporation Y

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Federal Register / Vol. 71, No. 207 / Thursday, October 26, 2006 / Rules and Regulations 62557

in exchange for J’s shares of Class A stock of § 1.1502–19T Excess loss accounts (Talmadge) Bridge across the Savannah
Corporation X and a Corporation Y security (temporary). River and on the southern end by a line
in exchange for its Corporation X security (a) through (c) [Reserved]. For further drawn at 146 degrees True from Day
and such terms are economically reasonable, guidance, see § 1.1502–19 (a) through Board 62 on the left descending bank of
such terms control. Pursuant to section 354,
(c). the Savannah River. This special local
J recognizes no gain on either exchange.
Under paragraph (a)(2)(i) of this section, J has * * * * * regulation is necessary to ensure the
10 shares of Corporation Y stock, each of (h)(2)(iv) * * * For guidance safety of commercial and recreational
which has a basis of $2 and is treated as regarding determinations of the basis of vessels and personnel within the
having been acquired on Date 1, and a the stock of a subsidiary acquired in an regulated area.
security that has a basis of $100 and is intercompany reorganization on or after DATES: This rule is effective from 7 a.m.
treated as having been acquired on Date 2. January 23, 2006, see paragraphs (d) and on November 4, 2006, until 9 p.m. on
* * * * * (g) Example 2 of this section. November 5, 2006.
Example 11. (i) * * * * * * * * ADDRESSES: Documents indicated in this
(ii) Analysis. Under paragraph (a)(2)(iii) of preamble as being available in the
this section, J is deemed to have received § 1.1502–32 [Corrected] docket are part of docket CGD07–06–
shares of Corporation Y stock with an ■ Par. 5. Section 1.1502–32 is amended 191, and are available for inspection or
aggregate fair market value of $1,000 in by revising the text of paragraph (h)(8) copying at Coast Guard Marine Safety
exchange for J’s Corporation X shares.
to reads as follows: Unit Savannah, 100 West Oglethorpe
Consistent with the economics of the
transaction and the rights associated with Avenue, Suite 1017, Savannah, Georgia
§ 1.1502–32 Investment adjustments.
each class of stock of Corporation Y owned 31401 between 7:30 a.m. and 4 p.m.,
by J, J is deemed to receive additional shares
* * * * * Monday through Friday, except Federal
of Corporation Y common stock. Because the (h) * * * Holidays.
value of the common stock indicates that the (h)(8) * * * Paragraph (b)(5)(ii) FOR FURTHER INFORMATION CONTACT: LT
liquidation preference associated with the Example 6 of this section applies only Robert Webb, Waterways Management
Corporation Y preferred stock could be with respect to determinations of the Officer, Coast Guard Marine Safety Unit
satisfied even if the reorganization did not basis of the stock of a subsidiary on or Savannah, 912–652–4353.
occur, it is not appropriate to deem the after January 23, 2006. For
issuance of additional Corporation Y SUPPLEMENTARY INFORMATION:
determinations of the basis of the stock
preferred stock. Given the number of of a subsidiary before January 23, 2006, Regulatory Information
outstanding shares of common stock of see § 1.1502–32(b)(5)(ii) Example 6 as
Corporation Y and their value immediately We did not publish a notice of
contained in the 26 CFR part 1 edition proposed rulemaking (NPRM) for this
before the effective time of the
reorganization, J is deemed to have received revised as of April 1, 2005. rule. Under 5 U.S.C. 553(b), the Coast
100 shares of common stock of Corporation * * * * * Guard finds that good cause exists for
Y in the reorganization. Under paragraph not publishing an NPRM. The sponsor’s
Guy R. Traynor,
(a)(2)(i) of this section, each of those shares application for this event was not
has a basis of $1 and is treated as having been Federal Register Liaison, Publications and
Regulations Branch, Legal Processing submitted to the Coast Guard with
acquired on Date 1. Then, the common stock
Division, Associate Chief Counsel (Procedure sufficient time for a public comment
of Corporation Y is deemed to be
recapitalized in a reorganization under and Administration). period before the event date. Publishing
section 368(a)(1)(E) in which J receives 100 [FR Doc. E6–17987 Filed 10–25–06; 8:45 am] an NPRM, which would incorporate a
shares of Corporation Y common stock in BILLING CODE 4830–01–P
comment period before a final rule
exchange for those shares of Corporation Y could be issued, would be contrary to
common stock that J held immediately prior public safety interests since it would
to the reorganization and those shares of delay the effective date of the rule until
Corporation Y common stock that J is DEPARTMENT OF HOMELAND after the date of the event. For the same
deemed to have received in the SECURITY reasons, under 5 U.S.C. 553(d)(3), the
reorganization. Under paragraph (a)(2)(i), Coast Guard finds that good cause exists
immediately after the reorganization, J holds Coast Guard
for making this rule effective less than
50 shares of Corporation Y common stock,
each of which has a basis of $2 and is treated 33 CFR Part 100 30 days after publication in the Federal
as having been acquired on Date 1, and 50 Register. The Coast Guard will issue a
shares of Corporation Y common stock, each [CGD07–06–191] broadcast notice to mariners to advise
of which has a basis of $4 and is treated as mariners of the regulated area and its
RIN 1625–AA08
having been acquired on Date 2. Under requirements.
paragraph (a)(2)(vii) of this section, on or Special Local Regulation; ChampBoat
before the date on which the basis of any Background and Purpose
Grand Prix of Savannah; Savannah,
share of J’s Corporation Y common stock Speedway Group, Inc. and
becomes relevant, J may designate which of GA
ChampBoat Series, LLC., submitted an
those shares have a basis of $2 and which AGENCY: Coast Guard, DHS. application for a marine event permit
have a basis of $4. for the ChampBoat Grand Prix of
ACTION: Temporary final rule.
* * * * * Savannah, to be held November 4–5,
SUMMARY: The Coast Guard is 2006, in Savannah, GA. After close
§ 1.1502–19T [Corrected]
establishing a temporary special local review of the application and through
■ Par. 4. Section 1.1502–19T is regulation (SLR) for the ChampBoat extensive conversation with port
amended by removing the cross Grand Prix of Savannah, a speed boat stakeholders, the Coast Guard approved
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reference for paragraphs (b)(2) through race occurring on the Savannah River. the application. The approval of the
(c) and adding a cross reference for The regulated area is defined as all application and issuance of the marine
paragraphs (a) through (c) in its place waters located between the width of the permit was contingent on the ability of
and revising the text to paragraph Savannah River bounded on the race coordinators to periodically open
(h)(2)(iv) to read as follows: northern end by the U. S. Highway 17 the river to commercial traffic. The race

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