Fi 46-89

Thit documsnt mn4jpr h l
Books or records mlrting 10hts. . .
mphtionr dating to F d a d h b n l - collactions of inlormation must b #I..- . . . assistmcu, rr dshned ia d o n SQ?(c)-:- . ra~ainedas long 4 s tbair cantenls may - :;<
, . .
of the Ln~srnalRsvsnua Coda, lhrt is r . -~ become~mrterimlin tbs adminrshuon
received by I h a n d d l y ~ h u b l a db a n L : b of any intemrl rewnuo Lw.GensmUy, ...- . ,
or h i R in;ritution. and lo aquiritionr - -' tax iturns and tax return information ..:.. :
o l h u c i a l l y voubled bank ot tbriA 1:; :: &Tconfidential. as mqulmd by 26--..,I*
,. . ,
.
-..
'-.
institutions in whi&.Fedaral :finmeid;.:.+U..s,c 6103. - " .' ',
.assistaacsis pmvidd: This document
also contains fmal q u h b o n s under ''::
.
: section 7507: Them TbgUlalions pmVide-'. This dncumsnt-containslid . , - -.I
,.,*-:.
, guidrnco concerning Lho proper ~ s x :.. .
: rcgdations unaar r d o n 587, a t
amandedbyse&cnl40l oiht . ,. .;.. . matment of v u i o u j ~ s ~ 1 ~ a c l i o: --::."-::
ns
Financid institutions Refom. Recover)..
. - Fnvolving Lba receipt of Federal
bancjJ
wistann.+!
' : ..;..
- '..-':' and Enforeemant Act of 1989 Public
*..
~ a 101-73)
w
(FIRRE~I.Tbe reguhrions:
DATES: be^ regurati'oik ~ &
. .:.k i v s ' .~ ; pmviae guidancc lor h& and ,
hmmbtr 21,1995. .. ..
.
domestic building and l o ~ assodations
n
For dates of applicsbiliiy. s e tht' t- . (Lnstitulions)and their dfiliates in . . . ..
"5 1.597-7 E!lectivr dets" section vndtr . connection nilb m t e ~ pof
. l Federal
tbe S U P ~ M E ~ A R(NFORMA~ON
Y
poruoa fiaancihl nssistance (FFA). as defined in , ,
. ,
of the pmamblo and h e tfiuctivt dmte . sechon 597Ic)
provisions (5 1.597-7) of h i s document.
S d o n 597Ial delegs~cst o h e
.
•
FOA FURTHER lHFORMAnOH COHTAm:
.
Secrekary 01 the Treasury authority t o
Steven M.Flanagao a\ 202422-7780.
prtscribe regulations wnctrning "any - .
Vicki 1. Mychc a1 202-622-7535.
. . -: trmsection in which Federal finuncial ,
William D.Altxarrder a1 202422-77-10,
assistance is provided." These
or Srtvtn R. Glicksicin st 2 0 2 4 2 2 4 4 3 9 regulations &e issued under tbe
[not toll-free numbers):
'
autbontv of section 597(a).
This documenr also amends !he
regulations undtr s d o n 7507 to reflect
I h c treament o l FFA under flRREh. - Tbe IiiS published p r o p o d
Tbt collections of information
.
,regulations
undersections-597
and7507
contained in h e s e final regulations have
on April 2 2 . 1 9 9 2 (57 FR 14794,FI+&
bce~drevjewed and approvtd by tbe
,
89, 1992-1 C.B. 10371.
Olfice of Managtmtnt and Budgel in
accordance wi& b e Papenvork
Public Cornmenu and the Final
Rtduclion A a ( 4 4 U.S.C.3507) under
Regulations
control number 1545-1300. Respomes .
The IRS rece~vedcommenz bn the
= M Y :

:a

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'

t h e s e coll~ctionsof information are
required ro vack deferred income and ,.
ils suasequenl recapture. elect ;a
.
.
&saIhliate earlier b a n would obtmise
be permitttd. elect to apply the
provisions of the regulabon
mvo~cuvely,ma repon uncollemd
.
income tax.
hn agency may not conducl or
sponsor, and a person rs nor mquired to
respond 10. a collec~iono i i n f o m a ~ o n
uniess t h e collcdon oi iniormauon
a ~ s ? l a ~ bas v a l ~ dcontrol number.
The esumatec m u a l burden per
rc~;~oncenUrecordkeeper
varlcs from 1
hour lo 1 1 hows, depending on
individual -~rcdmstzoces. HI:^ an
26 CFR P a m 1,30t and 602
esilrnaled average of 4 . 4 S o w
Comrnen~sconcerning t7e accuracy or
this burdtr. esllrnale and suggcsbo- lor
r e d u c i n ~tbir burdcn shouia w sen1 10
b e I n i e r ~ a Rrvtn~)e
l
Service. .4ttn: R S
Sreztmenl cf Atquisiti3n of CeMin
F i ~ n c i aIr..-tltutiona;
t
Certain f a x
Reporis Clearpncc Ofiicer T:F?.
\ f ' z \ ~ . n r r o n .DZ 20224. end 10 the
Consequel.--.es01 Federal Financial
Asislance la Financial Inslltuhoss
OiTrcc or Ma?s~emen1and 8udgc1. A!m:
Desk Officc: ior h e D e p m e n t 01 b y
AGENCY: lnternal Ec\.ecue Sc:.'lce t!zS),
Trczsur!.. Ofdcc or Lnlormaiion 2 n d
1 ='qReFui.?;07y . \ t r a ~ r s .\+'asi.lng~on.K
A=;)~H: Final teguia:ions.
20303.
ID

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prop,osed regulauons,and 4 p u k l ~ c
b e m g was held on ]uly 17, 3 9 9 2 . Aher
consideration of r b t comrnenis and the
sratements made a t t h e bearing, the
proposed~r~ulations
are adopted e s
, renred by h ~ Treaswy
s
dension The. .
pnntipal comments and revislorn are
discussed belon . Torotion of FFA
Sectlon 1.597-2 conlains r u j e s
conccnlng accounung lo: FFA as
i n c o r m -The .Final rvpulaljons retaln he
p r o p o ~ c drule 1ha1.gencrelly. FF.4 I S
lncome \ o he railed h s l ~ l u ~ ~wncn
o n 11
i s rece~xcdor accrued in accordance
rich b c lnsli~sl!on'smethod ei
accounting. 5ec:nsn 1.59;-21c1 conlains
rules pcrmll1lnS cenaln I n s ~ i t u t ~ ~ron s
oelcr h e inclusion of FCA

Section 1 . 5 9 7 - 2

Dejerrol /ornulo wtrhou: : . , n t ~ ~ . c ~ ~ n p
Equir!,. Undcr h e propos..' !cFcla:!r s.
unrcsolvcd Insijlullons rnliroc:
C o n ~ ~ n u i nEou~lv
g
wcre pc.m;:icd l o
dele: lncluslon o l FFh I ~ excess
I
of

amounrs d e ~ c r r n l a e dilndc: a io;mula
T h e proposed formuls rcaulrcd cL7:nl
i n c l u s ~ o nequal 10 157 sum ol babjl~r~cs
ICSS aggrcgare adjus~cdbasis a! Ule

66092 Federal Register

Val. 60, NO. 245 1 Thursday, December 21,

199s 1 Rules and Regulations

Equity deferral provisions apply oulp ta provide a New Enflty or Acquiring a
bqinning.of the absistanm
(repmwating 10already racopked), - .the limited numbr o l "open bank''
purrba~
prim ndjusbnent upon MY
msolutions not subject I 0 Lhb deemed
plus loss in the current y w
trantler lo Agency (a g., insalisfadtion
Taxable Transfernhes. Ih* diEcussed
(disregarding FFAI. nu-pmposed
01 tbt d i ~ g a r d e di a s m n t ] .
below, the Tweble Traasler dthiliwns
ln r e s p o w to cornmenis, &e hnal
fonnula generally allowed h e
h~ritutioll
rhe bandit ofany.prior losses haw aho h n modified to darify that - fegdsrioas n h spedfically provide for
most "open bank" assisted trnnuactions -payments ro Agency by hstitulion
-.orits ownbrs' equity.but offset MY
filialas. Momver. the final replations
..losses a l mditors' capital by the
rn treat& as Taxable TransIem.)
ipdusion of FFA. However. wib mpect. T h e Gnal regulations do not eliminate provide tbrl if Agency selk m
ths special hament oI Wlutions
Institution's instrument to a bird party.
to lasses during tbt year FFA is
Cantinuin$ Equity. The r@ations
tha ales p r i a is mated as a reppant
- mid,the proposed forrnufr, did not
. pmvida deferral rules to meliomte a
to Agency by tho issuer. Fuabermon. . m g u i s b between los&esof owners'
Liming rnismatcb between FFA income
the instrument is trsbted as having been
equity m d l o s w of ueditors' -pita1
and relrred losses. ~ e f jsdnot
newly i e r d by h a icrucr to hhdder
and. tbemfore. o&t 10ofowners'
.
et fhst rime. Tb8 IRS md Trrasury
equity by inclusion of WA. The fornula designed to allow built-in l o ~ tos
(twrbsr with related mcaptumnbs) in offset opamting income insttmd of FFA .betlava &at h s is M appropriate t h o
or to permit the permanent elimination - for the isruer to offset F F A or inmaw
the find regulations has besn changed
of any subsidy provided by Agency. The its basis, because the sales prim
to reflect that the owners' equity is the
requirernenl that Institutions wirh
rsmanbly f u e s Ihs value of i h e
k t capital last a d . in a transaction
instrument, and any subsequent cost
without Cantinuing Equity, is not offset Continuing Equity recaptqm their
deferred FFA withto six years is a
a s m a l e d with the instrumenl should
by kclrrsiw ofFFA.
&jtml f~rmulawith Continuing
reasomble safeguard against indefinite Ix nccounted for in nmordann w i l h the
Equity. The pm osed tegulatiohs
deferral of FFA income, The results
natum ofthe instrument.
allowed d e f e J under different
under the- rules m c o m ~ d ikn
1.5974(g,
,
e
~
~
d e c t ta those appliablo to a c q u i m ~in sertjon
conditions whtrd Continuing Equity is
Df~amio
tion
p m n L In thd wse. the hstitutioa
Taxable T m i e n .
m-I include currently, in addition to '
The
regulations do,however.
The proposed m l a t i o n s would
mmiify the Continuing Equity formula, allow r c o d d a t e d group to e l m
h e normal formula amount. income
(dter tbt ttgulatiom became h d )to
q u a 1 10all net opsraliog 10scarryavers which. in the propwed regulations,
available t o i t Also, an Institution with counted some losses tmce. Recognized axclude m lnstitutioa in m i v e r ~ h i
h m i t s p u p . T h e r~ectimpotenti y
losses represented in the E n t prong of
Chntilluhg E q ~ t ymu51nxapiure
requires the inclusion of r "tot1 charge"
deferrad FFh at least as
as pro
tbe formula Iliabilitiss minus asset
in the incoma of those mtmbers ownhg
bases) may comprise pm af rbe bird
rata over a m m r n u m of six yean,
b e common stmk of the lnstirution [ h e
madlessof whether it m-ms
all 01 proag (net operating losses available to
membtr shareholders).The amount of
the Insritution or its consolida~ed
its built-in losses during that time.
Commenta~ors~uggesttdt h a t the .
gro~)~
Tbt
) . h a ] re letions correct his h e toll &ergs is b e excess of tbt
.
disafhliarod Institution's liabjlitimver
double counting of r s s e r .
pmpaed reguhtionr ufaidy Lmitcd
Lbc adjutad basis of i l s assea The toU..'
Tra~s[cm
ufmoncy and pmpcrfy lo
deiural for hsiitutionc wi& Contiauing
Agency. The proposed regulatinns
c b q e is intendedro reflect the amount
Equity and recommended the s m e
FFA if money that would be included in mmme if
& f e r n 1 Cormda apply in all cases. They cnntahrd rules for t&g
Agency wert to pmvide Ihe e n t h .
&tidted&eGntipuhgEquityconcept orpmpcrty isalso b a n s f e m d t o
-use
it focused ontheidentity of the Agency. These rules. togetbrr with rules amount of FFA necessary ro restotc h e
lor the Lreahnenr of FFA received
Institution's solvency e: the time of h e
blstirutim'sshareholder6 aher Ibn
puxuant to a Loss Guarantee. have been cvellt permitting disaffitiation.
- asiaance rans sac ti on.
clari6ed. reorganized,a n d m a t e d in -.~Commtntatorssuggared that the 6nal Uba~ae-dcfiiCion of Contintiing5 1.597-2(dl.
rcgubtions shauld include the toU
Equity in the proposed replatiom. an
T h e proposed regulations provided an charge in tbe income 01 the disaflitiatcd
m t u t l o n gentraily would have

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Continuing Equity if five percenl or
D o r e of its stock at tht end of a taxable
\-ex was awned by sbereholdets who
b w n t d stock beforethe Institution was

o f t z t ~or deduction Ior payments by an
Instirution 10 Agency to h e extent of
previously mcelved FFA. The mle as

Institu:j~n[(ratherthan its member
shareholders]. pronde h e group w i a ~
"1011 charge deduction," and clarify h e
proposed provided limned rehe1 tor
ablUty of t h e rnernber shmholdets to
payments made 10 Agency by a New
?laced Ln rccervership by a supervisory
take a wortbkess flock deductjon.
Entity or Acqumng, because rhcv
asency [Agency) or 6 r s t received FFA.
701)chorgr. c~mmenlatonsuggested
receive little or no FFA. However. an
that h e final regulations include h e toll
Tne 6ve percenr referenm was
assisied acquisision can resull i n lnrome chage IIY the income of the laded
afileadlng k a u r e , under 5 1.597-5, n
to a New Entity or Acquiring in the form institution rather thaa its member
50 percent chacge in ownership
of built-in S a m Under secuon S97(cj
shareholders. Accordmg ro ht
?aerally resuIls in a deemed Taxable
and 1.597-3@]. an inswnenl issued
cornmen~a~ors.
including t h e roll c h u g e
Transfer (now defined in 9 1.597in h e income ofthe member
j[a)11)) in which rhe I a i l s l Institution is ro Agency by a N e w Enbty or A c q u r i q g
i s , in effeff. diswgarded. If a New b t i t y shareholders may reauli in
=zed as a h e w Enoty. Tbe deferral
disadvantageous stale tax consequences
d e s do not apply afier a deemed
or Acquiring issues its instrument to
Agency in c u m c c ~ ~ owlLb
n h e
in those states where banking
T a b l e Transier. The final reguiations
corporabocs arenot pennitled T O file
Isus clarity that Continuing E q u ~ t y
acqu~sibonof an lnstituf on, tht value
of t h e i n s m e n r is I I O ~included in the
consolidated returns wilh nonbarhng
- m u only i f the Lnsututioa is rml ( i ) a
corporahons. Under the prcposed
3ridge B d . (ii) in Agency receivership. purchase price. Consequently. a New
Encity or Acquiring n a y have a basis
mgularions, a bank bclding corpora~ion
o: (iii)treared 1s a New Entity. '['he
( h e disalfiliared h s ~ ~ u r i o n ' s
shor,iall In h e asseu acquired [or
adification to b e d e f i n i ~ o nc i
dcerned acquiredl born the failed
Continuing Equity ~snot intended as m
shareholder) wouhd hsve 10include in
Institubon. The final regula~~ons
income t h e loll charge without the
s u b s t ~ t i v echange. The Continuing

.

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Federal Register

Val. 60, No. 245- 1 Thursday, December 21. I 095 / Rules and Regulations 66093
FIRREh. T h e election made lor h r firat
subsikary bound all htum subsidimus
placsd in Agency reesivership.To
eddmss the conctm tbrt the scope of
Lhe proposed consistency rule was tm

The final regulations main the
limitation on noncollcclion in cases of
The IRS and Traasufy agree that the
ContinuingEquity.ThtIRSmd
toll charge is more appropriately
Treasury betitve that the limitation i s
indudcd in the income of the
epproptiste lor transsetions in which
W t u t i o n line.,tha entity that is
broad. the T-dregulations modify the
h ency assists an lnstitution while
. reimbursed by hgdrrey for its loss).
consltency rub to nquirs, generally,
el owing old shareholder6 to retain their
beuw h e toll charge reprasents
that a mrrsolidated group must eleet
ownership. NoncoHection should not
aecxierated FFA income. Tbus. h e h a 1 consistently only for subsidiary
.
inun to the benefit ot the hti!ution's
rsgulalions pmndu that the InsLitution. Institutions placed in Agency
old sbareholdcrs, who would heva use
rather than ib member fbarehaldenreceivership w i h h Gve years of each
of the Institution's 10while escnping
'
t&er the toll chaga into income.
other.
responsibility lor the tax m related FFA
Toll c b q t deduction. Under the.
income. T h e congressional purpose in
Section 1.5974 Tuxoblc Tmnsfers
regulations. the Lnstitution
.
.
FIRRM to eliminate my tw subsidy lor
'-does not w i z e built-in lossar on
Section 597 applies to FTA and
assisted
transacti~nsrequires that thc
disoffiliation.-he cornmantator transactions in connection wilh which
IRS not waive i u rights rr Icmditor in
suggesled h e h a 1 @Uons
provide
FFA is provided. Tho proposed
mses whets 411 obar ac&tom and
for r "toll charga dedudion" for tbe
regulations generally define a Taxable
equity holders mtain their rights.
excess of the Institution's adjusted basis Transfer as a bansIer of deposit
over its liabilities. According to Lhs
Transferee liobility. The proposed
liabilities or stock while an institution
ammantator, such a deduction is
regulations
limited h e collec~ioi~
of a
is under Agency Contml. Howevtr. IRS
appropriate because the Lnstiturion
lailcd Jnstitution'r inmrm!axes from a
and Treasury now understand thpt il i s
i n m d economic loss while it was L
transferee in a Taxable Transfer [La.. a
possible, for Agency -toresolva an
mtmbu.of the coasolidatod group.
New Entity or Acquiring). This rule
lnstitution under its control witbout
before the lnstitution was plrced in
would not apply if [similar to tht
providing assistance, or to provide
rsceivership by Agepry.
assistance without placing an Instiiutian Continuing Equity rule discussed above
The commsntalor r rewmmendation under 11s control. ln light of h i s
under t h e heading "Deferral formula
is not adopted in &e h a 1 regulations
information. the final regulations refine w i b Continuing Equity7 there is r five
becaw r toll cbaqe deduction would
percent overlnp in the ownership of tha
the debnition of a Taxable Transfer.
m l t r a t e rtcognition of losses in
transferor lnstitution and &e New
Under
tbe
final
rtgulations.
Taxable
advanctof~slrption.Sucha
Entity or Acquiring.
Trmsferr include the w s l e r 01 any .
- deduaion is patticularly inappropriate
deposit
liability
in
connection
with
Commentston suggested that the final
b u w , federal g
-b
laws now
whicb FFA is provided or the transier
regulations sbou!d nol include the five
p e t piadag solvent institutions in
of m y assel for which Agency bas an
percen! overlap exception beceuse the
reeeivenhp. In such cases, it is .
obligrtioa (e.g.. rssers covered bv Loss
exception appean to punish former
unrzrtain whether the loss represenled
Guaranteas). Cenain vanslers of stock
owners of Ln~Utu~ons.
Lnstitut,ions have
by such a deduction will ever be
cause a Taxable Transfer if FFA is
difficulty backing omersbip. and h e
realized.
exception contains no limits on
Worthless stock deduction. Under h e provided in corneaion with the
transfer,if the Institution i s a Bridge
aggregation.
regulations. if sn el-on
to
disafiliate i s made, tht mcrnbars of h e Sank or if the Institubon has a balance
Because good faith purchasers of
consolidated group are trea~tdas having in ik dsftmd FFA account. Tht phrase assets for value generally do not have
"in connection with" should L
disposed of their s t d in the
transferee liability. the h a 1 regulations
hsatution. One commentator suggested interpreted broadly. If any pany to a
ciarib that Acquiring [the p d a s e r o i
uansaction
receives
FFA,
sll
panics
and
lba~thwfinal reguladoas clarify h a l ,
' LnstituLion's assets in an actual Taxable
all elated trsrisactions arc wlthin the
upon didfiliation. b e InstituLion's
Transfer} is not subjed to such liability
scope of these regulaljons. To provide
s t d ' i s wor&less.
in any case. This rule applits even il
certrtainiy
regarding
lax
veatment
for
The fmal regulations adchess the
shareholders of Acquiring wcrc
purchssers of slack of subsidiaries ofcoomientator'sconcerns by providing
shareholders of the selling Lnsutution.
lnslilutions
under
Agency
Control.
the
that, as a consequence of the eleaion.
The final regulations do no[, however,
final regulal~onsWeal all trahsactions in
the memben or h e consolidated goup
1-J.

,

'

f

'

m a t theu stack in the Institution as
worthless i f the Instilution is factually

insolvent on h e date the Institution is
placed in receivership [or on tbe dale
h e consolidated g o u i~s deemed to
make the e i e d o n to didfiliele). This
d e preempts o h e n v i s e applicable tests
lor wo&lessness under secuon 165 and
5 l.i;oz-19. h y wonhless smck
deduaion is sublect to h e Limibrions o l
b e loss disallowance regulatioas
(f 5 I .337[dk1 and 1.1502-201.
Lonsrstency rule. Under the proposed

rtg~lauons,e consolidated group could
e t K t 10 ~saffiliatea subsidiary
W t u u o n only if the hstilution was ils
Iirs~subsidary placed in Agency
receivership afier he enactment 01

which such a subsidiary leases 11sgroup
a s Tawable Transfers.
Section 1.597-6 Lirnitotian on
Collection oflncome Tax

Limitation when !axis borne by
Agency. The proposed regulat~ons

provided that income tax aitributable ro
the receipt oi FFA or gun on r Taxable
Transfer would nor be collec\ed born an
Institution k i r h n u t Continuing Equits i t
Agency would bear h e burden of the
tax. Commentalors suggested Ihat the
limitation on noncollec~onin cases or
C o n m u k g Equitv i s mapproprlale
bacause i t requites Agency lo gross-up
any assistance p a d lo covet h e tax
thereon.

excepl a New E n t ~ t (the
j
resulling
corporation ~r a deemed Taxable
Transler) born collection if the
Lnst~tubon'sprevious equity interests
remain outstandtog in the New Enuty,
or are reacquired or exchanged for
constdera~on.As in those cases in
which a Taxable TransIer does no1
occur. h e 1RS should remain a creditor
if all other creditors relain their inleresls
and the hstitution's previous equity
inleresls had reta~nedvalue However,
by focusing on w h e h e r previous equity
interesls retain value, h e h a 1
reguiations eliminate the need (o eack
or aggregale ~ w n e t s h i pa d d~ not
penalize any parucula~patenual
acquirors.

66094 Ftdtrai Register
~

~ 1.597-7
o

Vol. 60. No. 245 1 Thursday. December 21, 1995 I Rules end Regulations

Enf f d i v e h l ~

---

well as the ovenihing policies of the
p r o p o d regulations.

h;pmposed, them final regubations
generally apply to iwable years ending
0. or afterApril 22, '1992. However, h e
It has h e n determined that this
p v i s i o n s of these ulatims do not
Tmbsury decisjon is n d 4 sigdlicant
apply 10 EA naivDer a=-td for
regulatory aaion ns d e M in EO
t-blt ysm ending aAer April 22,
12866. Themiom, a reguh~oty
1992, ia comaion wirh an Agency
.rsse*oment is not ,mqubd.It is hereby
wui5ition h a t O C C u n berm
certified that these ngulations do not
April 22,1992.Tarpayen nut aubjed t o bave a signiGcsnt ~crrnomicimpact o n
- &we rrgulations must comply with an a substantial number of rmaU entities.
m~srprrtati~u
br thh s l a l u t t that is
T h i s certificrtion is hmsed on the lad
e w o ~ b l ain light of the legislative
that thest regulations will generally
history and mppliceble administrative
only apply to cenain finmually
pronouncements- For this purpose, the
mubled financial inrtitutiortrand the
rules contained in Notice 89-102 (1989- consolidated groups, if any, to which
2 C.B.436) apply to tbe extent provided Lhey belong. Therefore, 8 Regulatory
in tbe Notice.
Flexibility Analysis under h e
hn imvaceble denion is avrilable to Regulatory Flexibility A a (5 U.S.C.
apply the regulations to taxable y e m
chapter 6)is not regulrad. htrsuant to
prior to b e general effective dale.
sedion 7805(f)01 the Internal Revenue
However. the election cannot be made if Code, the notice of pmposd rulemalung
the batitulion's statute ~f limitations

preceding these re ulations was
bas expired or r section 338 election
submitted to the $ e f ~ a w e l for
w a s avrilabk but not made for the
Adv-cy
of ht Smsll Business
hstitutioa Inaddition, consistent
Administration Ior comment on its
t r c a m s ~ i tis q u i d in "open bank"
impact on small business.
resolutions Lhat would resul~unJer tbe
regulauons in deemed Taxabie Transfers Drafting Information
befort April 22. 1992.
The principal author of these
'kt proposed regulations required an
mgulations is Steven M. Fianagan.
electing tarcpayer to enend the statute of Office of Lhe Assislmt a i e f Gunsel
limitations for all ikms lor t h e e ye=
[Corporate),IRS.Howevtr. orher
born the dale of filing the eleaian. The
personnel h m the IRS aod Treasury
final regulations adopt a commentator's Kkpanment panidpaled In h e i r
development.
suggestion tbar the laxpayer extend h e
statute of limitations only for ilems
List of Subjects
d e c i e d by apphcarian o i the
26 Cm Part 1
reguhuons.
& hstituuon or consolidated group
Income taxes, Repomng aad
makes the e l e l i o n on its first m u a l . mcordkeeping requirements.
.. .
income tax return filed on or after
26 CFR Pati 301
March 15.1996 However. 10 make Ihe
h a l i v e election lo disatfiliale under
employ men^ taxes. Estate taxes,
5 1.5974&)(5) for an Institution pkced Excise taxes. GlIt Laxes, h o m e taxes,
m Agency receivership In a taxable year Penalees, Reporting m d rec~rdlrecprng

ending before hpril 22. 1992. a
consoltdated group must send tbt
zfiened Insi~tut~on
I h e requued

slalemcnt ~ d r j s i n g~t of the elecrrve

&wifiLation on or beIore May 3 1,1996.
h &at case, the consoIida~edgmup 1s
seemed to have elected retrwctive
~ppkcatlonof h e s e ~epulationsbut
a u s t nevwtbeless a t ~ a c hthe requtred
statementto its hrsl annual Income lax
return fiied on or after Marc11 15. 1996.
Tbs 6nal regulations provtde h a t
axpayemmay relv on [he ~ r o v i s i o n sof
i e pmpwed regulations ro the extent
d e y autd in reliancc on b e proposed
regulatiocs prior to December 21. 1995.
Such mliulce mus: he reasonable a n d
;isactions wirb respect to which such
tawpayers rely must be consistent trilb
Lbe oveniding policies of section 597. as
expressed in the leg~slativehisrory, as

mquirements.

requirements.
Adoption of Amendments ro the

Regulations

~ccordingly.26 CFR p u t s
amended as

1.

301 and

seaion 597(a1 Unless h e context otherwisa
~ q l t l ~Ihe
s , terms consolidated gmup.
member and subsidiary have the
meanings rovided in 5 1.1502-1: and
bl he- bllawing t a m s have h e
;
meanings provided belowAcquiring. The rerm A cquiringmeans
a corpomtim h a t is I transferee in r
Taxrbie Transkr, other than a deemed
lransferee in a Taxable Trmsler
described in 3 1397-Sfi).
Agency. T h e term Agency means tha

Resolution T w t #zpormbon. the
Ftderal Deposit hsurance Corporation.
any similar instmmentality of Ihe
United States government and any
predecessor or successor 01 ~s
foqoing (includingLhe Fedcnl Savings
and b a n hsuranet Cotporetion).
Agency Gnt1-01. An Institution or
entity i s under Agency Cmtrol i T
Agency is crmservntot or receiwr of tbe
hsfitution or entity, or i [ A g e n q hu
the right to appoint any of the
Institulion's or entily's directors.
Agency Obligation. Tht term Agtney ,
Obl~gationmeans a debt mstrumcnt h a t
Agency issuer to an hstitution:or to
direct or indirect owner

of

an

Institution.

Bn'dgr Bonk. The term Bridge Bonk
means an institution h a t 1s organized
by Agency to hold assels a ~ liabilities
d
of another hsutution and h a t continues'
tbt operahon of the ocher insurution's
business pending its ~cquisitionor
liquidation, and b a t i s any of rhe
rollowing(11 h nalional bank cbanered by the
ComptroHer of the C m n c v under
section 1 l(n)of the Federal Drposjr
insurance Act (12 U.S.C. 1821(n])or
sectlon ~ k h ( b ) ( l D ) I A )of kbc Federal,
Home Loan B a d Act
U.S.C
1 4 4 1nlblIlO)lAll or any successor

Yaragraph 1. The auhorijy for pan 1
is amended by adding h e [ o ~ l o n ~ n g

U.5 C.f805

'

(21 A Federal savlngs assoclatlon

chanered by the Director 01 the Uft~ce
01 Thnh Supervision under section
2 1Alb)ll D)(A) of b e Federal Ilarnc Loan
Bank Act (12 U.S.C. 1 4 4 1 a ~ ) ; l O ] ( A 1 o)r
an succeJsor seaion: or
(3) A similar lnrtitution chartered
under anr o:her s!atutory prov~sions.

~ o n s o h d o l ~Substdiaw.
d
The term

[allows.

PART 1--INCOME TAXES

A u l h o n y 26

r>.llrltlons.

For purposes of t h e regulations under

sections;

26 CFR Parl602
Reponing and xcordkeep~ng

602

$1.597-1

Cansolidoted Subsidiary means a
member of rhe coasolldated group or
which an Institution is a member that
bears Lbe same relatiunship t o the
lnsliturjon bat rhe members of a
consulidatcd group b e u 10 their

'

Seclionr 1.597-1 through 1.597-7 also
~ssueaunder 26 U.S.C. 597 and 1 5 0 2 .

Par. Z. S t c t i o n ~1 . 5 9 7 - 1 &rough
1.597-7 are added to read as follows:

common parent under s e c ~ o n
?SOS[a)11 k.

Continuing E q v i t ~An
~ . lns:iturion has
Corrrrnuing E q u i e for any raable year
ii, o n ,helast day of the taxable year. rbe

Ftderal Register / Voi. 60, No. 245 1 Thursday, December 21, 1095 1 Rules and Regulations 66095
lnsututiun is not (1)a Bridge B a n k (2)
in Agency miwrsbip, or (3)mated ss

rnsintenance payments. cod to c q or
cost of b d s reimbursement pmyments.
a New Entity.
or expetlss nimbursemenr or indemnity
ControlledEnlily. l l m term
payrnsnls. h hgmcy Obligation is
. Canhlicd Entitymoaas an entity under considered t~ hmve a b u d principal
ancy b n m L - amount notwithstanding m a
"..-- '?k e d e d Financid Assistancs (FFAJ. pmvlding for its adjustment
.
5,-- Tbc term Federal Financial Assisbnca
issuancs
to reflect a mom accurate
..., ..-.. P A ) , = & b e d by section 597(c), dettrmiaali*a d the c o n d i ~ o nof &e
.---.'
: '. maaar my raonq or prupeny pmvidsd Institution 11 the time of the aquisition.
- ---.TZ
-1.
by Agency to an lnstitution ar to r d h c l
New Entiiy. T h e l e m New Entity
A.
:-. or inownar of s t d in an
meam the new corporadon thrr Is
. Institution under d o n 40610 of the
-led
purchasi~g oftb* as*tr of
-, '.
National Housing Act (12 U,S!C
an
Old
Entity
in a Tweble Transfer
-.-- 172QfD), wctioa ZIAlbl(4) of tha Federal
deEaibd in $1.597-5&].
.
.
Homt Lwn Bank Act (12U.S.C.
old EnuW Tho t e n Old Entity m w
1441~~)~4)),~bn11(1)or13(c~o
~L
he
&c
Inrritutioa
or Consolidated
Federal Deposit insurance Ad (12
Subsidiary tbat is trea~edas selliig 411
U.S.C 1821[l). l023Ic)). or under a n y
of its assets in a Taxable Trensfet
similar provision of law. h n y such
described in 5 1.597-5b).
money or pmpert y is FFA. mgardless 01
Aesidual Entify,The ttrm RtsiduaI
whtthu the Institution or sny of its
Entiiymemt the entity that remains
dElirrs issuts Agency r nuts or other
ahar an lnstitution transfers deposh
obbgation, stock warrants, w other
liabilities to a Bridge Bank.
-

+

'

---%.+,-

--

.

'

righu to .quire stock in c o m m o n
- with Agency's provision d the money

ur ppmwy. FFA indudes Nd Worth
~ssistmes,Loss Guarantee payments,
yield rnsiarehance payments cost to
carry or cost 01 funds reimbursement
pa-merits, expanse reimbmement or
indemnity payments. and interest

(induding original issue discount) on an
Agency Obligation.'

p 1 . 5 9 7 4 Taxallon of F d a d F h a t ( J
Assr~mnca
(4) Inclusion in incamec(lJ In
genemi. Except as atberwise provided
in ths w]auons -dtr s ~ o 597,
n sll
FFh i s indubble as ordinary income to
Ibs recipient at the time t h e FFA is
received0, accrued in accprdance
b e recipient's metbod of accounting.

[Z) Amount currcntlyinduded in

income by an Institution wilhaut
Continuing Equity. The amount or FFh
m Institution withour Continuing

quity must includt in income in m

taxable year under paragraph [a)[l] or .
this section i s limited to b e sum 01ti) The excess at the h g l ~ i n of
g the
taxable yeat of the Inrtitut,on's
liabilities a m thedjusted basts &B
l,,,titutionus rr%ts;

[ii) The amoun~by which tbt exc-s
[or tbc taxable year of the Institution's
deductions allowed by chapter 1 of&@

h[ems)Revenue C& (other ha net
operating and capital loss carrywers]

over its gmss inc11mn (detmmsd
without regard to WA); is p a t e r than
Lhw excess at the beginning of t h e
taxable year of h e adjusted bases &the
hstitution's assets over b e Institution's

liabilities*
( 3 ) Amount cumnlly included in
income by an Instir~tlonwith
C ~ ~ f i f l ~EWirYi n 8 The m o u n t o i FFA
belore bemg placed under A g e n q
~
h
~
~
~
~ mInstit~tionwitbContjnuingEquity
~
t
~
l
~
Control was, a b-k
or domestic
of
money, the fair
must include m income in a taxeble
budding and Ioan association witbur the is ha
market vdue of any property [other than Yearuder paragraph
his
m
a of section 597 (including a
s @ & o ~is limited to LhE S W ofan hgencyObligation), and the isrue
Bridge Bankt b c r p l as othem~sa
(i] The excess a1 b e b e g i ~ i n gof t h e
p r i e of any Agency Obligation
provided in tbt regulations under taxable Y ear-of* hstitutjon's
(determined under 5 1,597-3 (c)[2)),
~ e c t i o n597, I h s term Institution
liabilities over k e adjusted bases 01tEe
d u d w a New Enlity or Acquiring h t Institution [and not tbe nominal
.
.
recipien1)-istreated as receiving directly hstituhon's-assets;
-is a bank or domestic building and loan
(ii]
T
b
e
grealcr
oia s e a t i o n w i t h i n h e m e ~ n of
g
m y FFA that Agency provides In a
(A) Tba excess for the taxablc year of
&on 597.
taxable year to a d i r e c ~or indirect
the h s l i t u ~ o n ' deduaions
s
allowed by
b s s Guomnree.The tern Ldss
shambolder of the Insrltution, to the
chapter 1 of h e Internal Revenue Code
Guamnlet means an agreement
extant money or px openy 1s transferred
lo!her &an net operahng and capital
punuant to wbicb Agency or a
ro the lnstitutjon pursuant to a?
loss carryovers) over 11s pross rncome
Conuolltd Entity g u a m n t e ~or agrees to agreemen! wlh Agencv.
{Z) Cmss ~,fercnces.See paragraph {c) Idcfermined wirbot~cregard to FFA);or
pay an laslitution a specified amount
(B)The excess lor the taxable year of
u?on the disposilion or cbarge-off [in
o f h i s section lor rules regarhng h e
the deductions allowed b!- cbapler 1 of
timmg ol inclur~onof c t ~ a r rf
! FA. See
whole or in p M ) ofspecific e s s ~ t s .an
the Internal Revenue C d e (oLher him
paragraph Id) ofthis section lor
qmement pursuant to which an
addrtianal rules regarding b e treatment net operaung and capital Ioss
h s t i t u t i ~ nhas a right to put assets lo
c a ~ n v e r so)f the consolidated group 01
of FFA received i n c o n n e c ~ o nw i h
Agency or a Controlled Entity a! a
whlcb b e Instlluuon is a member on
m s f e n of money or propeny 10
specified price, or a sirnilu
the l a s t day oft b e instilution's taxable
arrangement.
Agency or a Controlled Entity, or paid
year over b e group's gross income
Net h ' o h Assrstance. The term Ncl
pursuant Lo a Loss Guarantee. See
(determined wilhou t q a r d tr, FFA):
U'orth Assistonce means money or
5 1 597-5(c)(1) far additional mles
and
regarding h e ir~clus~un
of Net W o n h
property (including an Agency
{iii) The excess of rhe amom! ol any
obligation to the extent it has a f i e d
Assistance is kt income of an
net operatrng loss can-yover of h e
prinapal amount) tbat Agent)' provldes lnrtitulion.
Insti~uliun( w in h e case o l a carryover
(b) Boris of property rho! rs FFA. 11
as an integral part of a Taxable Transfer,
FFA consists of property. h e
born a consulida!ed return year 01 the
other ban FFA t b a ~a c m e s after the
Ins~~~ution's
basis in the propeny q u a l s !nst~tutran'scurrent consolidated group,
date of the Taxable Transfer. For
the net operating loss carryover or b e
example. Net Worth Assistance does not the lair market value s1 t h e propefiy
ucludc Loss Cuvantee paymenls, yield (otber han an Agency Obligauon) or t h e group) to the taxable year ove: h e
Institution. T h e term Institution
means an enlity t h a t is. or immediately

_

Toxabie rmsfcc
The
Ihe meaning pmvided in
5 1.597-5(a](l).

Tmn5fer

. -. .
jrrue price of h e Agency Obljgition, es
dttemlned under 5 1.597-3It)(2),
(c) Timing of inclusion ajrertnjn
F F A 4 1 ) Scope.T h i s patsgraph [c]
limils b e amount of FFA ar! lnstitution
must include in income currently undtr
cenain drcwostmoa and provides
rules for the d e f e r 4 inclusion in
incoma of mounts in exof thaw
limits, This porngraph (c)does not apply
to a N e w Entity or Acquiring.

~

66096 Federal Rwster I Vol. 60. No. 245 1

Thursday. k e r n b e t

21, 1995 /

deductions a l l o w 4 by chapter 1 oftbe
lnternal Ravenue M e (orbtr than net
operating and -pits1 10% carryovml
over ib gross income
@) institutions wifh Continuing
Eqwty. h t h e case plan krstitution with
ContinuingEquity. the amount
d e k d in h s p w p h (cl(4l(iiil i s
the mount by which the Institution's
~ddudioru
allowed by chap[= 1 o I the
atmtm!in u#rrdmce with the
Internal Revenue Code (other than net
%-wts
ofthis paregraph (eI(4).
anynvera]
fistartitution musl add the amaun~of opcmhg and capital 1w d its gross income [talung into
my FFA thnt b not currently included
aaxrunt FFA included in incomb under
in b c u under
~
purgtmph (cN21 or
parP apb (c)I3] ofthis W o n ) .
(cj(3) of this section to its d e f e n d FFA
bv?Addifiond deferred FFA
a - t m ~ ih.hslitutiofi murt deenare
the M a n e e 01its delerred FFA account N c ~ p t u * by an inrtitution wilh
extent that. as
by tbr mount of deiemd FFA included Canfjfl~ing
Equity. To
01
end o[ a taxable Year, t h e
in income under parsgraphs (c)(a)(ii),
cumulative amount of FFA deferred
(iv) and {v) ofthis suction. (See a h
p~gnph[d)(~)(i](B)otthisssaionlor underparagrapb(c)[3lofhsstction
othtr adjustments that decrease the
that an Insritution with Continuing
Equity has recaptund under this
deZemd FFA account] If. under
P ~ P P[c)(d)
~ i s less
the
pmgmph (c)[3) of this seaion. FFh is
cwnulativeamount of FFA defemd
n o t m t l y included in 'mcome in a
Uhder P - B ~ P ~[c)(3) 01 t h i s sxtion .
-ble
y w . the b t i ~ u t i o n
thereafter
mud rnsintrin itr dtfemd FFA emnut tbal the Institution would hmve
onaRM(6rfiin.6tstou~)basis[e.g... - ~ t - d i f & a t F F A b a d b * ~
i n d u d 4 irJ ineomt ratably over t h e six
for purposes OI
b e 6mt spnteqce of
para pb (c)('l)liv) PI h i s stctionl.
taxable years immediately fallowing the
(il&emd f f A recuptun. In my
iunblt
of dahlral. the I n s t i t u t i ~ ~
year in which an lnslitutian has must include that difle~nc*in income
anlout d d b e d in paragraph [c)(3l(i)

ofthirdon.
. (4) &fend FFA--(I) Mainrenonce of
pccount. An lnni~utjonmust establish r
defer& FFA account cornmenag in
tho 5 d m b l c year in which i t rscciva
FFA that is not cumntly included in
iamm* d e r pwragmpb (c)[21or tcI(3)
oft)& section, md must maintain that

Rules and Regulations

corporation becoming a Consolida~ed
Subsidiary ol Js Institution.
(6)Opcroting rules+] Bad debt
E S C ~ S FOK
.
purposes of parapaphs (c)[t). [c1(3)and Ic)(rl of this section.
t h o rdjurld baser of an Lnstitution's
assets are reduced by the a m o u t of &e
Lnstitution's rsserves for bad debts
mder section 585 or 593, other thm
suppIemmtd msenes under -?on
593.

(iil Awyegution of ConsdJidated
S ~ b r i d i ~ t For
s . purposes ol this ,
paragraph (c], an Institution i s t t a t e d as
a single mtity t h a ~includes t h m income.
erpanses. assets. liabilities. and
athibutts of its Coosolidaltd
Subsidiaries, w i h appropriate
adjustments to prevent duplication.
bii) Alternative minimum tux. To

computeIhcn~temativem~imum
twable income attributable to FFh of an

Insljtution for any taxebls ysar under
section 55. t h e rules o l this section, and
relaled d e s , are applied by using
alternative minimum tax basis.
deduetjons. ,andall dher ilems ~ q ~ i r t d
10 b tnken-into accounl. All other
alternative minimum tw provisi~os
continue to apply. ( 1 )E ~ n j n and
g ~ profits, FFA.lbat i s
not cumntly included in Income under
aMuaini!~deIemdFFhaccount.
r~r&etaxableYeu.hlnstitutionwih h i s ~ p p b ~ c ) i s i ~ c l u d e d i n
Conmuing Equity must include in
earnings and profits lor aH purposes of
it
hdudc In income an
income the balan~cofits defemd FFA
~ h htcmal
c
Revenw Code lo the extent
q u d io the leser of the amount
d r s ~ ~ i n p ~ n g ~ p h ( ~ ) ( 4 ) ( i i i ]aoCfc~Oi ur n ' i a ~ t ~ n b l e Y c a r i n w h i c h i t mdatLhetimeitirincludedinincme
liquidate, ceases to do business.
under h i s paragrsph { c l
A,,
or
,
be
,balancein ,ts d e f e n d
transfers (other than to a Bridge Bank)
[d) Tmnsm of money o r p r o p e q to .'
F F A accouot.
substantially all ol i t s assacr and
Agency. and property subjecr :a (I Loss
(iii) ~~~~d
r=nprure ompunt-+A)
institutions without Continuing Equity!abilities. or is deemed 10 transfer all of C u ~ m n t ~ t - ( l TmnsferJ
)
ojprope* :W
iu assets under 51.597-Sib).
.Agency. The transfer of propeny to
[I]In geneml. In the case af an
tv] O~tiOnal
arctiem led rmpturc of Agency or a Controlled Entity i s a
htituuon witbout Continuing Equity,
FFA.An institution that has a
taxable sale ar exchange in which the
; b c amount described in !his parapaph dele+ FFA accomt may include in
hStitution
ir
a s realizing an
Ic](4)[iii)is b e amount by which~ ~ J T h e e x c e s s I ~ r I h e ~ a x a b l t y e s r o'fn ~ e ~ s b a l a n c e o T i l s d e f e ~ d F F aAm o u n t e q u a i t e
@ccoUnton its timely filed (including
[i) The pmpefly's lair market value; or
;he hstituuon'~
deductions allowad by
txten~iom)original income l a x retwn
( i i l For propeny subjaa ro a Loss
1ntema] Revenue coda
&apter 1 of
for any taxable Year that i t is not under
Guarantee. the greater of the property's
loher b a n net operating and capital
Agency Conual. The balance of t t s
falr market value or the guaranteed
:'-5
-overs)
over jts gross m c m e
de[emd fFA account 15 income on Lhe value or price at which the propeny can
inlo account FF.4 included in
be put at the lime of kansfer.
-4corna under paragraph Icll2) of this
lasl
of ha! Year.
~ c t i o r r )i;s greater ban

{i,] n e Inrliiurion's remaining equity
of thebeginningo f the taxable year.
I?)Rcmoinir;g equ~ty.The

3sutution's remaining equitv isI,]Tbc amount at Lbe beglnntng o l [he
=able year in which the deferred FFA
xcounr was ssiabiished equal 10 \he
;dlusted bases of the Ins!itutjonhsassets
sinus h e 1nfirlution.s liabilltles iwhlch
kmountrnay be poslr,ve or nega~ivc),
?ius

(iiJ The Instttution's taxable income
,compured withour n g u d 10any
-over
horn a n y orher y ~ a r i]n any
subsequent [axathe year or years: minus
(1i11The excess in m y subsequent
:axable year or years o[ the Lnstilutlon's

(51 Exceptions 10 l j m ~ l a t l o non
~ use

01

IQS-S. In c o m ~ u i j nan~ I n s l ~ t u l r ~ n ' s
taxable income or alternative minimum
rwable income bra taxable year.
sections 56(d)11), 3 8 2 and 583 and
55 1.1502-15. 1-tSo2-21 and 1 . r 5 0 2 - 2 2
do nor limit lhe use o f 'he altributes o[
h e hstitution to h e e*[enld 11any.
b e lnclusl~nD ~ F F A
(including
recaptured FFAf in incame resulls in
laxable income or alternative minimum
~ w a b l eincome Ideremined without
tagard 10 h i s paragraph Ic)(511Tor the
~axableyear.ThisparagraphIc)Ijldoes
nor apply to any limi~ationunder
secllon 392 or 383 or 5 1.1502-15.
1 1502-21 or 1.1502-22 thal a r o s e ~ n
connection w ~ ot
h

pnor to a

,,,rh recpecl lo
by a ~ S Guamntee
S
other than
on transfer to Agency. [ i ) FFA provided
( 2 ) FFA

COV,,~

pursuant to a LOJJGunranice with
respect 10 covered property is included
,1 the amount reallzed with respect lo
h e propens to h e exrent h e total
amount reallred does not exceed the
grearer of( A ) The properly's fair marker value:
at

( B ) The guaranteed value or prlce a1
whicb h e propeny can be pula! h e
t~rneoftransler.
( ~ iFor
) the purposes of t h i s paragraph
[d)(2),relerences to an arnounl realized
includeamounts obta~nedin h o l e or
panid satisfaciion of loans, amounts

F d t r a l Register I Vol. 60. No. 245 1 Thursduv. December 21. 1995 1 Rules and Regulations 66097

obrainsd by *urn ot charging 00 or
marking to market coverod property,
and otbw bmoualr cimiluly nlated to
property. whethw or not disposed oL
(3) T q e n t ofmA m e 1 4 in
b a g s lor pmpcrty. Ffh indudad in
the amount realizsd for property under
this parapaph Id) is not iociudible in
income under p m p p h (aI(1) of this
ssetioa. The mount realized is treated
-inthe same m m o r as if realized horn
r perm olber than Ageney or a
Contdlsd Entity. For example. gain .
mtwibutlbh to FFA-ved
with
mspect to 4 capital assst retains its
cbaraetu 4s capital gain. S i m i h l y , FFA
m i v d with r e s p a to property thal
h u h e n c b q e d o l l for income tax
purpose is treated as a recovery to the
extent of lbe amount previously charged
olf. Any FFA provided in excess of tht
amount realized under this paragraph
[d) is includible in income under
p a m p p b (a)Il) of h a s seaion.
I4I Adjustment to FFA--(I) In gcneml.
If an Innitulion pays or t r t n s f e ~money
or propcrty to Agency or Controlled
btiry, the amount of money and lair
market vdut 01 the pmperty is M
,

adjustment to iU FFA to the extent tbe
amount paid and transferred exceeds
the amount of money and fair market
value of pmpeny Agenty or a

transferring money or ohnr propeny i s
nol the membcr that w i v e d FFA. .
[5) Mannw of making o d j u s ~ e n t lo
r
FFA-4i) Reduction of FFA and d e f e n d
FFA An Institution adjusts IIS -A
under pagraph (d)(B of this csaiou by
rsdudng in Lbs following order md in M agpgrte amount not grsrlar thla b
adj~ent(A) Tho+amountof any FFA that is
othewistr includible in income for the
tkub1t ywr (hfotk application of
.
p a n p p b [c) of his saction);snd
(B)Tho balaaca lbut not below m ).
in the delsrrsd FFA account. if any.
maintriad under puagraph [c)I4)of
this section.
Iii)Deduction of excess ornounis. I1
tbe emaunt ofthe adjustment exceeds
the sum of the amounts described in
paragraph (d)(51(i) 01h i s section, the
lnstitulion niay deduct h e excess to the
extent the deduction d w s not exceed
the amount oiFFA included in income

for prior taxable years reduced by tbe
amount o l deductions allowable under
&is paragraph (d)(5)(ii)in prior taxable
years.
(iii) Additional adjustments. h a y
adjustment to FFA in txccsr o l the s u m
of the amounts described in pamgnphs
(d)(S)[i]and [ii) of this section is

55 1.597-l(bI (defining FFA) and
1.597-3(b].
Example 2. Tmnsler ofproperly lo Agency..
(il InslifulionM.0 ulondw year t u p t y w
wirhoul ConrInuiag Equity because it tr ~n
Agency mceivenhip. is not mmcmbcr of 4
597(c):

~onsolidotedp u p and has not h n
q u i d in r Tumble Tnnrfer. At th.
b i n n i n g of 1998. M's rsmrInIng q u i t y is SO
mnd M bog a defend FFA account-ot S10
million. Ageney:doer not providm any FFA !o
h4 in 1998. During the ymr, M transfen
property not covtmd by ILoss G w n n t ~
to
Agency and d m not receive sny
w n s l d t n t i o a The pmpcrty bas an adjusted
basis of I s rnillloa mnd Imu market value
of $1 million BI Ihw time of the mnsbr. M
hnr no ohhtr trxmblm income or loss in 1998.
(ii) Undrr 5 1.597-211dH13. M is treated u
selling the pmpcfiy for $1 million, i t s fair
muktt value, thus m g a i z i n g a S4 millinn
loss IS5 million-SI million). In addition.
k a u s r M did not rtceivc my consideration
-born Agency. undtt 5 1.597-Z(dX4) M has an
adjusvatnr 10 FFA of $1 million, the amount
by which the fair rnnrktt vnlue 01the
transferred propony ($1million) rxcceds the
consideration M received from Agency [SO).
Beaust no FFA i s provided to M in 199B.
this adjusbnent nduas h e bpimnce of M'I
d t f e m d FFA accDuot to 59 million IS10

d i l o n 4 l million). Staion 1.597z(d)(S)[i][B). B t u u r t M's S4 million l ~ r s
causes M's deductions to e r m d its gross
inwrna by S4 million in 1998 sad M has no
remaining equity, under 5 1.5972lc][4){iii)(A) M must include Sr m~llion01
d t f t m d FFh in income. and must d t m a s t
Iht ternlining S 9 m i l l i ~ nbelance 01iu
d e f t m d FFA atcount by the same amount.
leavlng a b s l a c t 01 55 million.
h o m p l t 3. b s Guomnlee.
~
lnstitutio; Q.
a cnltndrr year faxpayer. sells an ssstt
covered by a Loss Gummutee to an u m l a t t d
thud p u t y bt 51.000. q ' s adjusted basis in
the mrasr rr the time of rmle and tbe asset's
guarrnttcd value mrt both Slo.om. Punuanr
kn rht Loss Guamntn. Agency pays Q 56.000

Conwlled Entity ~ r o v i d e sin exchange. treated[ A ) By M lnstitucion other than a New
[ii) Deposit insumnce. This paragraph
Entity or Acquiring, as a deduction of
(d)(4)does not apply to amounts paid lo
the amounl in excess of FFA received
.
~ g t n c ywith respecf t o deposit
that is required to be uansferred 10
met.
Agency
under section 1 1(g] of the
[iii] Treatment of an interest held by
Fedttal Deposit Insurance Act (12
Agency or o ConrroUed E n t i t H A ) In
g c n d . For purposes of this paragraph U.S.C1021(g]]; or
(dl, an interest described in f .597-3b) (B)By a N e w Entity or Acquiring. as
an adjustment lo the purchase price
is not trtatcd as propeny when
,
transferred by the issuer to Agency or a paid in the Taxable Transfer [see
11SfO.OO+S4.MKI). Q ' s amount realized from
5 1.338bF3T).
Conwiled Entity nor wben acquired
(el Examples. The Intloning examples the sale oi the asset is S 1 O . W i54.000 born
born Agency or a Contmlled Entity by
the third party and 56,000 h m Agtncy}.
illustrate the provisions of h s secljon:
the issuer.
1.597-2(d)I2). Q realizes no gain vr
m) Dispositions to persons other than Example 1. Tirn~ngo( rntlusion ofFFA I n 5ec:ion
loss on the salt (S10.00[M10.000 501, snd
issuer. On tbt date Agency or a
CoaooHed Entity transfers an interest
desaibed in 5 1.597-3&] 10 a holder
o h e t Lhan tbe Issuer. Agenq or a

ConuoUed Entity, the issuer is treated
lor purposes of h i s paragraph (d][q) as
h a t u g transferred to Agency an amount
o t money equal to he sum of he
amount of money and the fair market
value o I propeny h a t was paid by h e
new, holder as considerahon for the
interest.
[ I VConsolidofed
]
groups. For
purposes of chis paragraph (dl, an
glnmtution will be trealed as b a v ~ n g
made any tra~sferto Agency or a
Conmtltd Entjty b a t was made bv any
other r n e m k r o!;ts ccnso1)dated group.
Tie consolida~edgroup must make
appropriate investment bas1 r
ad)ustmenrr to the ex;enr h e member

income. (i)lnstitution M,m caltndmr v e u
taxpayer without Con~lnurngEquity becaust
i t i s in Agtncy mceivtrsh~p,Ir not a rnernbtt
or a consolida~tdgmup and has not been
acquimd in a Taxable Transfer. On J a n u a r y
1. 1997.

M has

asset^ with a

ioial adlusted

basis of 5100 miHron and lola) l i a b i l ~ ~ lof
ts
5120 rn~llion.M ' s deductions do not exceed
i r s grusr Income (determined withou~mgard
to FFA) for 1997. Agtnc! provides $30
m ~ l l i o not FFA to M in 1997. The amount of
r h ~ sFFh
M must include In income in
1947 l r limted by 5 1.597-2(c)121 to S 2 0
mlllion. tht m o u n t by which M's liabili~ies
( S l f a rn~llionlexceed the [oral a d i u s ~ e dbasis
01 its a s r t t s ( 5 1 0 0 million) a t t h e beglnn~ng
of the l a ~ a b l eyear. Punuanl lo 5 1.597Z{cll~)(il.
M murl establish a d t l c m d FFA
account [or t h e remaining S 1 0 million.
( i i ) li A ~ c n c y~nskeadIrnds M he 530
rnili~on,hi's ~ndeblednrsrlo Asency rr
o~sregwdedand t h t rtrul~sarc :hr same as
in p a r a p p h (i)01 L h ~ sExomplr I S u l r o n

-

therelorn lncludcs none of tht S 6 . W 01 FFA
~t m e i v e s pursuant to Iht Loss Guaranlcs rn
Income. Section 1.597-2(d)(31

g I 5 9 7 3 Othtr rules.
(a) Ownership o j assets. For e l l
Income Lax purposes. an l n s t i t u t ~ o n15
rrealed as the owner ol all assets
covered by a t o s s Guaran~ee.yield
malnrenance agreernenl, or cosl lo carry
or cost 01 f u a d s reimbursement
agreemenl, regudless of whether
Agency [or a Conuolled Entity)
orherwise would bc treaied as the owner
llnder general pnnc~plesol illcome
laxauon.
(b)Debr and rgu1ty interests received
by Agency. Debt instruments, slocli.
warrants. OF other fights ro acquire stock
of an Inslitutlon l o r any OIi t s al6liates)
that Agency or a Conuolled En!ily

66098 Fedtrrl Register / Val. 60. No. 245 I
'

m i v e x in connection with n
m c t i a n in which FFA i s provided
not -led
u debt. d o c k or other
squity interests of or in the issuer for
wy p u p s o dthe Internal Revmue
M e wbile held by Agency or a
mmUvd Entity. 01&a date Agency
or a Con~U8d
Entity transl~rsa
htmrt d&bsd
in l i s paragraph (b]
to holder other than Agency or a
a n d t d Entity, t h e interest is treated
u Lving b a n newly issued by Be

&*age

21, 1995

B m k to which another Bridge Bafik
mnsferr daposit liabilities.
(e) ~ S disailownnce.
S
F w purposes d
5 1.1502-20. FFA and thr mount
described in 5 ~.59f+Ig)I31 am h a l e d

'

issuer to the holder with an issue prim
e q d to the &urn of &u amount of
money and the fair markat value of
dmpcily paid by tbe n m holder in

Thursday, December

-

sr m s-orbinsry
gain dispwihn
within t b d moaning of $ I.1502.
20(e)P)Mand a Tawble Transfar i s
treated as aa applicable rose1
acquisition uadsr s ~ t i n n1060(c] wilbia
h e maning OI 5 1.1502-

I Rules and Regula~ions

--

in pmgmph (g) 01h i s section. h e rules
of h i s paragraph (dl epply to m s l e r s
to Bridge U,In gencnl, r Bridge
Bank wad i t s a a m i a t e d Residual h t i t y

are tagsthat treated as b e successor
entity to the traRslerring'lnstitution.If
sn Institution b s l e r s deposit
liabilities to a Bridge Bank (whethw or
nol it rlw transfern assets), h a

lnrtihutjon recognizes no gain w loss on
thtr transfer and the Bridgt Bank
succwdr to the transferring institution's
.201c)I2)~iI~A)II).
IT) L . b s s ~
and dedudionr w i t h - r s s p ~ t basis i~
m y transfend assets. The
.
to mvcred assets. Prior to the
assodated Rwiduai Entity retains ~ts
disposition of an assel covered by n Loss basis in any assets i t c o n h u e s to hold.
Guarantee, fhb ass8t cannot k charged
lmmtdiately after the transfer, the
on. marked lo a market value,
Bridge Bank succeeds to and lakes into
depmc~ated,amortized. a r o ~ t r w i s a
nceount the trenderring hstitution's
m a t e d in a manntr h a t supposts an
i t t m s desaibed in section 38'1[cj
aclual er possible diminuiion of value
(subiecl t o the c o n d i ~ o n sand
below the greeltr d the asset' bightst
limitations s p h e d in sectllrn 381(c)j.
guaranteed vdut or the highest price at taxpayer identihcationnumhr ("TIN"),

.

for the interest.
Agency Obljgalibns--(I] In
gc,,eml. ~ c e p ls
t o&e-se
provided
in his p-graph (c). the original Issue
dICD
m]ts
~ tof seeljons 1271 at seq.
apply to Agency Obligations.
d e k m d FFA account. and aceourti
[z) Issue price ofAgency Obligaiions
the 4sse1
be ut+
[g) Anti-abuse rule. 0 regulations
receivable for him FFA as despibed
p m ~ d s d0s Net Worth Assistance. The
under
section
5
9
7
must
be
apptied
in
a
in paragraph (g)(4)(ii) of this d o n .
pnEe of an hgency
~ b b hat
~ ~ ~ , ~ ~
pmvidd ss N~~ worth Assis,atlea and mmner coaristsnt with I b e p u r p o s ~01 The Bridge Bank also suceetds 10 and
&at bars interest e l either r single &xed
5 9 7 . A c m d i n g 1 ~ - ln
conlinues tht bstening Institution's
structuring or engaging in my
taxable yeu.
mte or r qualihtd floating rate land
12) Tmnsfers to Q Bridge Bank from
a phcipal P w s e ist0
provides for no contingent payments) is tTansdon,
a
c
h
i
e
v
~
~
t
a
x
r
e
r
u
l
t
~
a
~
i
s
i
n
c
~
~
i
m~~fip!eInstihrtio~s-I~1wo6rmore
s
te~t
the 1-r
ofthe s WI ofthe present
w i h the purposes 01 senion 597 and h e Lnstitutions mnsftr deposit liabilities to
values of all paymenk due undsr the
the same Bridge B a n k tbe a l a s in
obhgati~n.discounted at a rate q u a 1 ro qula'iOns
the
~
~ rate (wihin
d
~
~Commissioner
~
l can make appropriate
paragraph (dllll or
m d f i e d to
extent pmvlded i a
meaniPg ol secoon 12741d)(11 and 1 3 ~ mdjusments to income, deducuons and
paragraph (d)(2). TheBridge 0aalr
for hedale of issuance. or he. other items t h a t would tm cornistan1
succeeds to h e TR.I and continues the
stmid
amounr of the
with those purposes
taxable year OF the Institution h a 1 .
Ahgation. The issue pried of an
5 t . 5 9 ~ 4 ~ d d g aB a n k end Agency
tnulsfers the largest amouni or deposit+
Obligation Q a t bars a qualified noating ConvOL
Tbr f u a b l t y e a n of the ~ t h t r
nit ofiotel.e5$[wiihlnthe meaning bT
(a]SCUPG.This section provides rules -sferring
hsti!utldas doseat b e time
5 1.127551bU is determined h a t i n g &st apply to a Bridge Bank nr other
of the transftr. I f all the transfwor
he dLgationas
a
ate
lnstifution under Agency h m l mdjo- bshtutions
members besame
interns1 equal t o the rate in effect on the m,,,ciions in
an hsbtution
consolidsted group. the Bridge Bank's
date o f i s $ u ~ c e
under the obligalion.
transfers deposit liabilities {whether or
-back
of 1 0 %to
~ ~ lnstitubon that

A

en*

( 3 ) A d j u ~ e n t s t o p n n c i p a ~ ~ ~ unn0 1t -t h e 1 n s t i t u t r o a 4 1 ~ 0 ~ 1 e r s a s s e r s j ~ m s r c r j t h e ~ a r g e s t a m o u n i o ~ d ~ p ~ ~ i ~ ~
Exept as provided in 5 1.597to a Bridge Bank,
i s not limited by section 381b)(3). T h e
(; d ) ( l ~ i v ) ,this p-paph
Ic)131 applies
&I Stetus as taupa-wr A Bridge Bank Ilmitauonsof sedtion 381@)(3) do apply
if Agency modifies or exchanges an
or otbw Institution under Agency
lo the Bridge E d ' s c w b a c k s GI losses
.fgeac).Obligalion provided as Net
Conb-01is n corporation wlthln the
to all otber rransferor Instilutions. I f h e
W o n h Asdsiance [ora successor
meaning of sechon 7 7 0 1 (a)13) for all
uansreror Inshtutiofis are no! a l l
ohheation). The lssue pnce 01he
p q o s e s of h e Lntemal Revenue Code
members oi t h e samt consollda~ed
m d 6 c d new A g e n Dbligaboh
~
is
and i s subled l o a l l Internal R e v e n u e
group, rhe limriations of s e a l a n
delemmed ~mder~ a r a € T a ~(c)
h s (1)and Code provisions b a t generally apply to 381fb)(3) applj, w l h respec1 to ail
; 2 ) of ~s se~Qon.if the issue price i s
corporations. including those e1amg {a transferor Insctutions. See paragraph
mter I ~tbe
M
adjusted issue price of
mehods or accounting and lo
( g ) [ 6 ) ( r i01) t h i r section lor addi~iunal
tbt carting Agencv Obljga!ion. Ihe
mquirrrnents for filing mturns, even if
r u l e s b a t appiy if two or more
difierence is ~ e a t e das F A . Ir the issue Agcncv owns stock o l h e 1nrhtu1ion.
hrtitutions that are no! members of tbe
p n a is less ban the adlusted issue
(cl No section 382 ownerrhip chonge. same consolidated group transfer
? n u of the e x i s u g A g e n p Obligatiun, Thr: imposition o I Agency Control, h e
dep0~11Ijabijjt~es!o the same Brldge
tbs ddferenct is ~ r e a ~ easdarr
mcelLation of Institubon siock .!b
Bd.
adiuslrrrenl~oF F h under 4 1 597(e) Tmlmenl u/ Bridge Boni 3nd
Agency. a Iransaciion in wbicb an
as u single entit!-. A
hslitution transfers deposit liabilities to Rcsiducl E~~trty
21dl(4).
Id) S~ccessorsTo the ex.ient
Bridge Bank and its assocalcd Rcs~dual
a Bridge Bank. and arr elecbon u d e r
necessary to efiectuate the purposes of
Eatit? ar Enti:ies are treated as a single
paragraph Igl ni Lhis settion are
e n ~ i t yfor Income tax purposes and must
b e ternletisus under section 5 9 7 , an
disregarded in de~ermitlmgwbeher an
entiy's treatment under the regulahus ownership chaqgr b a s occurred wi~hir, file a single comblned Income lax
nrurn. The Bndge Bank 1s responsible
appLes to ils successor-A successor
the meaning oI s e c t ~ o n382Ig).
lor filjng all income la>; returns and
hdudts a transferee ir. a trmsaction to
Id) Tmnrfers to Bhdge 60nks-Il) In
stalcmerltr lor this singlc enlity and t s
when s e a o n sel{a) applies or a Bridgt gcneml. Excep: a s otherwise provided

Ftderal R g i d t r / Vol. 60, No. 245 1 Thursday, December

21. 1 995 /

the agenk DI sach associated Rssidual
Entity to the slma extent u i f the Bridp

immsdialtiy b f o m the subrid~ary
lnstitution to which the eJsction applies
i s platad in Agency receivership (or.in
Bade were the mmmon p a m t of athe uss of A d-td
alemion under
m ~ l i d a t e dgmup Muding t h o
*
Residual Entity.-Thetum Institution
p m p p h (gI(6)of h s section.
immsdiatoly kEora the cansolidatad
indudes r Residual Entity that files r
group is deemad to make tho electjon)
combmad m m - w i t h its associated
and in the following order.Bridgt B&
,. .(i) All adjustments of tbe institution
(0 Rules a plicuble to members of
sad its CDnsolidatmd Subsidjarits undw
mnsalidate fp u p d l ) Status as
munbbK..Unlasran a l d a is made *, . section 4 1 8 am aramlrrntsd;
(ii) Defemd i n t s ~ o m p a n ygains md
undsr paragraph IB) of this d o n .
lossaswith rwpsct to the Institution md
-Agency Control of m Institution does
ik COnsolidalud Subsidiurios m taken
not termin~trtho instjtulionls
into m u n t d the Institution ahd its
rn-hip
in r coa#lli&tbd group.
Stock of r subsidiary that is canceled by Cousolidated Subsidiaries take into
recount m y - o k ritems rsquired under
~ g a n c yis ~ t e as
d held by ti14
mwnbers of thr consolihtsd gtoup t h a t tha regulations uudtr seaion 1502 lor
members that k o m e nonmsmkrs
huld the st& prior to its canc8Uation.
wiLhin tba meaning of 5 1.1502-32(d)(%):
If an Institulion is a membar of I
(iii) The tambla year of the lnstitution
consolidsted group immediately berore
it trsasfen devosi! lirbilities to a Bridge and its Consolidated Subsidiaries clam
md the Insritution includes the m o u n t
Bank m d r to theB d . the
desmibed in paragraph (gI(3)ofthis
Institution'sstatus as tb* common
section in iacomm as ordinary income as
p e n t or. unbu an e l d o n is madt
under paragraph of Lhfs W o n , as 4 its last item for that taxable year;
(iv) 7 % ~members of the consolidated
subsidiary of the group. If a Bridge B d
group owning the c~mmonstock ofthe
.su&
to an Institutian's mtus PS a
subsidiq, its stock i s tmatbdas hdd by Institution indudt in income my execs
loss account witb m p a t to the
&a sharebolden of the t m n s f d g
Institution, and tha st& basis or exrrss Institution's s u under 51.1502-19
and any otbar items rtquhd undtr rhe
-1- amount or h e Institution c d t s
regulations under section 1502 for
w t r tothtBridgeBaPk. A Bridge Bank
members b a t own stock of corporations
is m t e d rs owning st& owned by its
thai b m e nonmsmbtrs within the
arpodated Residual Entities, including
maanin of 5 1.1 502-32(d)(4): and
fmpurposes of d c temining
(v) I f k e hstitution's liabilities
rnmbtrship in an affiliated p u p .
exceed t h e aggregate lair market value of
(2) No 30-day election to be excluded
ib assets cn the date Iht Insbrution is
fmm consoltdated group. Neither an
placed in Agency receivtnhip (or, in
Institutiw nor any of ilr Consolidated
tbe case of a deemed election under
Subsidiaries may bt exduded fmm a
paragiaph (gI(6) of h i s s e a i o n . on the
consolidated group for a !-blt year
under 9 1.1
502-76lb#5)(ii). as contahed dale the consolidared p u p is deemed
to make the election). h e members of
in 26 (=FR part 1 edition revised April
the consolidated group treat their stock
I , 1994, if the hsti~utionis under
in the Insbrution as w o d e s s . (See
Agency Control a! any time during lbs
$5 '1.337(d)-1and 1.1502-20 lor
yw.
polential Limitations on Lhe group's
(3) Coordinotian with consolidated
r r t m regulations. Tbc pmrisions of h e worthless stock deduction.] In all other
cases. the consolidated group wall be
regulations under section 597 take
,

,

-

,

precedence over c o n f l i h g pmnsions
UI the regulabonr under section 1502.
Ig) Elective disoffiliotion-41) In
general. A consolidrred group of which
an lnnitutjon is H subsidiary may elect
lmvocably not 10 include the
htitution in i t s affiliated poup l f t b t
Institution hr placed in Agency
rec~ivershp[whelher or not assets or
deposit liabilities o l lbe Insotut~onare
m i e r r e d to a Bndge Bank). S e t
pmgmph (gH61of h i s section for
arrsumstances undtr which a
cdasolidared group is deemed to make
this elecbon.
12) Consequences ojeltctlon. I f the
e l d o n u d e r this paragraph (g) is
made wilh respmt I U an Institution. the
following consequences occur

Rules and Regulations 66099

%tion 593. For purposes of h i s
paragraph lgII31, an Institution is watsd
as 4 single entitv that indudes the mlr
and liabilities of its Consolidated
Subsidiaries. with appropriate
adjustmmts to pmvent duplicatioa The
amount described in this puagmph
[gl(3) for alternative minimum tax

purposes is determined using
alternrtivr minimum tax-her,
deduaions, and all other items mquked,
to be hksa inlo accoun~In computing
t h e i n m a r s in the p u p ' s taxable

incurnu or alternative minimum lwabls
income. seetioris 56(d)(l]. 382 and 383

md 55 1.1502-15.1.1502-21 md
1.1502-22 do not limit the usa of the
attributes of the Institution and its
Consobdared Subsidiaries to the extent.
if any. Lha! the inclusion ofthe amount
described in this paragmph (g)(3) in
incornt would result in the group
having taxable income or alternative
minimum ~ k w b l income
t
Idttermined
without regard to this sentence) for the
taxable year. The pmcedhg sentenn
does not apply Lo any limitation under
section 382 or 303 or 95 1.1502-15.
1.1502-21. or 1.1502-22 that aross fn
connectionwithorpriortoo
corporati on becoming n CoosoLdatsd
Subsidiary of tht Lnstitutiuh.
14) Treatment oflnrtituiions after
disofiliution-(i) In gencml. If the
election under tbis paragraph (g) 1s
made with respect to an Institution,

immedia~elyafter the lnstitutjon

Ir

,

,

.

,

placed m Agency rectivershlp (or,i n
tbe caso of r dwrned elsction under
paragraph (g)(6) of this section.

immediately a h ~ the
r consolidated
gro.~pi s deemed to make h e elecbon].
the Institution and each of its
Consolidated Subsidiarits an treated for
income tax purposes as n t w
corporations that are no1 members of h c
electing group's affiliated group. Each
new corporation retains h e TIN of the
corresponding disaffilialed corporation
and is trestcd as having received the
treated as owning stock 01 a nonmember assets and Iiabili~ieso i b e
corporation until such stock IS d~sposed conesponding disarfilrated corporation
of or becomes wortblerr under rules
in a vansaction to which seclion 351
otherwtse a pllcable
applies {and in w b t d no gain was
[3l Toll clarge. ~ b amount
c
dercnbed recognized under section 3 5 7 1 ~or
)
in this patagraph tgII31 is h e excess of
othenvise). Thus. be new corporation
the Institu~aon'sliabillt~esover the
has no net operating or capr:al loss
adjusted baser of its assets rmrnediately carr).forwards. An election under h i s
belore tbe hslitubon is placed I n
paragraph (g) does nm terminate the
Agency receivership [or. in the case of
single entity treatment of a Bridge Bank
a derned elect~onunder paragraph
and its ~ e s i d u a Entilies
l
provided in
[g)(6) of t h i s sectlon, irnmedaately before paragraph [el of this section
the consolida~edgroup js deemed to
[ i i ) FFA A new Institution IS veated
a5 bavlng a non- interest bearlng.
make t h e eleaion). In cornpuling h i s
nonuansferablc account rece~vableior
amount, the adiusted bases of an
InsGtu~on'sassels are reduced by the
hlwe FFA wih a basis equal to the
amount described in paragraph (g113i ol
amount ol the lns~itutlon'sreserves for
this section. I i a disalliliated h s ! ~ t u r ~ o n
bad debrs under seaion 5 8 5 or 543.
other &an supplemenla1

reserves

under

has a deferred FFA account a: h e time

.66100 Fsdtral Register I Vol.
,

60,

No. 245 1 Thursday, December 21, 1995

1

Rules and Regulations

statement md rccompmying csrtified
to mJra the e k t i o n described in h r
mail m i p t sa part of its 6 d income *
p m p p h Ig)with mspact to its
rshlrn filed sfiw the due &ts under ~ubsidiaryInstitution. If deposit
j inlo
tbat deferred FFA aanuat. ~sx
(iii) ~illttgbf consolidalcd & m a If
t h j s m p h &)[5) for such m a m e n t
liobiliti~sof motbar lnslitutioa that is r
A natemunt must be attached to h s
a di-ted
btitution b
fuboidlary memlmr of my c v ~ l i d a ~ d
~ ~ d d 4 t SubAdiarie~
s d
&Ith8 t(mt of retun i d a L I l J g that the indindud
p u p mbquently are t r s a a f d to
its -bation.
the corresponding hew who signsd the eleaioa was nutborized the B d d g Bmlr, tbs mnsolidatmj p u p
to do SO ou behalf of the corrdidated
b t i t u t i a is r ~ q u b d
t o file a
of w b & the h s t i w o n is subsidiary
mah hit
corralidatad income tax mtum with the - p u p . A p n g -at
i s h m b d lo make the slsction
eleaion undsr the authdty or s t a i m
rnb#diUkS in nmrdanw with tha
d d m in this pmgnph'(gl ~ t h
61OzIi)or ~Lhnrwice.
tior under sectJon 1502.
rsspcct.to that M t u t i o n at the time o f ,
(B)Consistencyh m t d on
the subssquent tr6nsIer.
iv) Status as Institution. If bn
tXfth'I~ti:vtelactr'ons. A coarotidatbd
m t u t i o n is d i d l i a t e d undar &is
.(h)-Examples.The following examples
pagraph Igl,the resulting new
group m y m4ke an d5nmtfvb sleetion .1Uuruatc i h b p+ovirionr rrffhir e o n :
. ~orporstian1e bated as an Institurion
under this pmgaph (g#5) with mtpect
F r p y m n X, tbe comaon p n n t
fmpurpows of tbe regulations under * to subd&k?r h d i t u u a
of. -li
14yoa , o w the
'
sadion 597 regardless ot whether i t is 4 A F n q m i v e * ~ only if
gmuP
[with a b.rb of54 mileon) of InetitulionM.
made. or is d m m d to
brak or domeslic buildmg and loun
mads. h e
.an insolvrnt Institutionwith no Qnwlidr~td
association Within the meaning of
election under this pangnph [g] with
Sukidiuin. AI the dore ot bur~nsrron
section 597.
respect to every subsidiary htitudon of ~pril30.1996.M bas 54 million of dtpotit
(v) lass corrybocks.To the extent a
group pllmd Agtncy m i v t r s h j p limbilitier. 51 millwa of o l h a limbilihits.m d
on or afttr May 10, 1989 md w five
i
~
.f#h
8 m l d ~ t t bd ~ sof
l ~ dllb~
-back
oi~osseswould T ~ S U ~inI a
. a d b f.ir w h e t value d S 3 m i U i o h
refund bemg p d 10 n f i d u c i q under
yesrs *d
theg
dlc
&e sub+
&le 1 . E / j M 01ranivcrrhip on
section 6402(i].en hstitution or
Institution was placed in Agency
. axnrdidurion. & kdry 1.1996, Agtncy
C o ~ l i d r t c dSubsidmy with respect ro r e c c i v a ~ p .
. plum M in rrcmivership md %ins
which an election under h s parapph
Iii) Efjea on Institutions placed in
ljpuidlhag M.x hs mdc c k i o m
(g] [OW
than under paragraph (gl(6)(ii! rrccivrrship rimdtanmudy or
under 5 1.597 4Ig). M remains m m b r d
of this saction) applies is allowed 10
subrtquently.h halwIi011under rhis
t h c X a m l i d a t a d m p .her )*lr~t . 19%.
carry back I-es as if the Institution or paragraph @,.ather.thm undtr
Sation 1.597-r(fWl).
t m m p l o 2 . Fflm of Bn'dp &nk on
parspph IgNGl(ii1 ofthis section,
Consotidated Subridiq had continued
e m m ~ i d a t i o 4 i~) d d i t i foctc.
d
On May
applies to bhstitution with l - e s p ta
~
to be a member of the consolidated
1.1996, Agency plPca MID m i w n h i p ~ l d
which the ~Iectioni s made or deemed
group b t made tbe eiectim.
r ul iu msrau ~d
(5) Afirmativc e l e c h M i ) Origind
mads (the
~ ~ ~ uand~ ~ t taultf
i ~ Mdto ~ n s l e 011
deposii liabilities ro Bridge Bmnk MB.
In stitufion--(A) Mannrr of m&ng
subsidiuy institution of the p u p
[i i ) Cdnsequenacs m'thautan dsction b
placed in Agency mceivership or
election. Excepl as otherwist provided
d+Iirrte.
M q n i z e s no gain or loss fmm
in pwagrapb
o fh i s section. a
deconsolideted in canlemplatinn of
Iht h n r l e t mod MB s u m t d r IDM'S
Mis in
consolidated group makes rht el mian
Agency Control the m l P 1 of FFA
the kuufemd asleis, M's i ~ t r n r d ~ c r i b d
pmvided by this paragraph (8)by
s i u l t m e o u s l y wilh tbe original
rtction 3811~)
(subjmzt to thr conditions md
sending a written statement by cenified Institubon or wlrbin f i v e yoIrmilatianx ~ p t c i f i t din rechon 381[c)) and
mail to the affected h~titutionon or
thereafrcr.
TIN. Stchon 1.59741d)ll). l l i M had 8
'
d e f t 4 FFA rmunl. MB woujd also
(61 Deemed El&ion4il
before the later of 120 days afier its
LUC"~
lo 1 h 4 1 mtcuunL S e a i o n f .S D7Dtmnsalj&ljons
in contemp]athn,If
placemen1 in Agency receivership or
, rId)(ll.i MB mntinues M's tu*blt Yew m d
one or more members a
May 31. 1996.The stafemeaLmust
group dsconsoiidata(w,&n tbc - - . .. -- - sue-d~ to M's status as r member ol tbt X
- contain Lbc following legtnd at the top
c o n r o l i d a t F 6 ~ u psi~trMay 1.1996.
m-g
of § 1.1 502-lgIcJf1)Iii)(B)) a
of tbe page: "WIS IS h N ELECTION
SKrioa .5sT4
1 ,nd (n-MB md M arr
Insutu*on in contem~iatian watedar 1 single cnrkry Lot inam* l a x
UNDER 5 1.5974(g) f0EXCLUDE TKE subsid'q
PI ~f FFA- pw-pascr. Sacrmon I . 59 7 4 (c I.
RELOW-REFERENCED INSTTTWnON
01 Agency Conk01 Qr
AND CONSOLIDAm SUBSmLARIES h e consoldated poup i s d~ernedto
[iii) Consequences with on election lo
FROM I X E AFFLLATED GROW," a d rnakc chc election described i n this
drsoffii~o;e.I[, on July 1.1996. X makes an
rlection undtr 5 1.59?+(g) with respcct lo
must indude ! b e nants and t ~ r y e r
paragraph Igl with respect to ae
M, rhc I u l l o w ~ n gconsequences an treated ss
Lnstiiution on the dare b e
~ d t n ~ f i c a b onumbers
n
of h e common
deconsolidarion occurs A rubsictiivy
~
C
~ ~ ~ ~ De dB ~befort
a ~ M e l placed
~
p u e n ! and oltha hstltution and
Insututlon ~s conclusively presunled LO
tnA g e n q r e c e l v e n h i ~ s1
Consolldared Subsidjanes 10 which the
m i l l ~ o n(55 millron or liabilrl~cr-Sq rnill~orr
elect:on applies, and h e date or.which
have been deconsolidated ,n
o f adlus~tdbasis) In income a s o l Ma)- 1.
contem~la'iun *gency Conbo' O r lh'
h e LnstiluLkon was placed in Agency
,996, Sttrinn 1 . 5 9 1 4 [ g j I > ) and 13) M i s
recelpt
of
FFA
i
f
e
i
~
h
e
even\
t
~
K
C
U
T
S
receivenh~p.The tonsolidated group
then tmated as a n t w corpora~~on
that IS noi
orits &&lhtia. tbs m-ding
new hstitution s u m d s to and h k w

'

2

T

~

mus! send B similar slaternen1 10 a l l
s u b s ~ d i a qInstitutions placed in Agency
r~ceivershipduring h e cons)s~ency
~ e r i o ddescribed in paragraph (gI15)[1i]
o l h i s section. (Falure 10 satrsfy Lhe
requirement in he prtced~ngsentence.
howover, does not invalidate he
elrdon w i h respect to my s ~ b s i d i a r y
Lnstiturion placed in Agency
r e c e ~ v e ~ h dunng
ip
the consistency

within six months ahet the
d econsolida~ion.
I i i ) TronsJets to Bndgc Bank from

mulbple groups. On the day an
Inslitution's transfer o f deposit
liabilities a Bridge ~ ~ n l : In he
BndRe B a d hohding deposit liabiiltie5
trorn bob a subsidra;y h511tutron and
an Institution no1 included i n i h e
~ ~ b 5 i d hstaution's
'~~y
con5olldaled
period described in paragrapb lg)(5)(1i) group, each consolidaied group of
w * h ~ c ah transferring Lns~ilutionor t h e
or this semen.) The c~nsolidaledgroup
B r ~ d g eBank is a subsidtary is deemed
must include a copy of any election
'

a member of ~ b 3e conroltdatcd group and
{hat has asstts (including I 5 1 rn~llion
sccouni rect ~ v a b l eiot f u ~ u mFFA j wrlh a
basis or SS millloh and $5 million a€
I ~ a b ~ l ~ rri ee cs c ~ v e dfmm d~saJLlln~td
corporalion M in a scC\lon 35: !ranr~clion.
New m r ~ o m t l o n
M rrlains he'I'IN

d~saffiliaiedcorporation M Srclion 1 597Q ( ~ ) ( Q ] Lmrnediarel?
.
aficr thc dlsaffi~~atinn.
new t o r p o r a l l o n M IS ~ r e a r t das m n s f e n ~ ~ g
1,s atse,s a n d deposi~1 i a b ~ l i ~ i a s Bridge
Bank MB New corporation td ncogntrcs no
gain o r loss born h e transfer and MB
succeeds to M ' r T1N and t u a o i t y e a .

-Federd Register I Vol. 60, No. 245 1 Thursday, December

21. 1,995 / Rules end Re~ulations 66101

(iil -ss
member a l w &lilted
the allocation rules of pungraph (cI(3IIi)
01this pedion. Aganq Obligrtions and
group of whkh it wu not pmriourly r
m e m k (other than pursuant t o ur
m
t
scoversd by ~ S Clurrntm
S
in the
hands 01t h New
~ Entity or Acquiring
e l e o n under 5 1.597J(g)): ot
bn) Isrua r t d such that the dod;
gn m ~ d
rs Clru n m t s . St& of a
that wrs outstandinn beiom the
[ansalidrtd Subcidisy is trsated as I
imposition or
~ o a ~ roo
r lthe
Class I1 a r ~tot the want the fair
9 1 . ~ ~74w r m c f m
ommener
of mv transaction in
market value of the b l i d a t d
(al'TwobleT m n t f c d l ) &finned.
connection with h e provision d FFh
Subsi&ary's Clarr 1 and Class Il uscts
Tbt tam Taxable Tmmfer rn. , repressats 50 pmt or 1of the vote dthe m o u n t of its Lirb!litier. 'lie
(i)
A traniaction hwhich an entify
or value of its outrtandingGI&
frir market vdus of an Agency
p i e r s to a bansfem other than r
[disregarding s t d d d b s d in e o n .Obligation i s d m d to qwl its
Bridp Baalr1sor{a)[r)and stock owned by Apacy
. adjusted issue p t i a immediately belorn
: IN Any depsft liabil5ty Iwhethw or .or a !h~mUed
Entity).
h e Ta*ablu T m u s k . The fair market
not the Institution also tnnsferr d l ,
(3) Bridge Banks and Residual.
asset m d by a Loss
value
if WA is provided in cwQetion with
Entities. If rn Bridge Bank i a -tad
u
C u a ~ t e imm&dy
c
a& h e Taxable
the mmanion; or
.salhg dl of its a w l s to 4 New Entity
Transfer
is
dwmsd la be not 16% than
(B)Any asset for whicb Ageney ~t a
under this parngmph &I, b
a
d
the greater at the asrst's highest
ConPolledhtity hms any -cia1
associated Rsridual Entity is treated os
guarrnld value or rbr highest price at
obligltion (e.g.. pursumt to a toss
sirnuibuaeously selling !IS assets to 4
whieh the aswt can k put.
Cumn~eeor Agency Obligation); or
New Entity in a Taxrble T r d a r
(dl Trcament oJa lrJbWEntilyand
(ii) A deemed transfer of assets
described in.thisp a r a p h &I.
A q u i r i n H l ) Purthart ptin. The
d e s d h d in parapph Ib) d this
ic] Trerr.Onml of mns&-(l)
FFA
pumhrse prict for msets acquind in a
secrion.
in conriectian with a Taxable Tmnsjtr.
Tawble Transferd d b d in p u a p p h
(2) Scope. TbLs section provide d t s
A tranrleror in a Tawble Transfer is
(a)(l](i]of this section i s the cost 01 the
govuaing Taxsbla Tranrfam. Rules
treated as having-directly nceived
asstts acquired See f 1 . 1 ~ 1 T [ c l ( l ) .
appliubls to both actual md dmmd
immediately btfore a Taxable Ttlnsfer
The p u c b s e prica lor assets ~cquired
asset aquisitionr ue provided in
any Net W o d Assirrsnce that Agoaq
i n 4 Taxable Transltr dcsuikd in
pamgmphr Ic) and [d) 01 this cation.
provides to the New Entity or Acquiring paragraph (A)(I)(u) of rhis d o n is the
h d m 1 5 8 7 4 ( d K l E Bridga Eunk ).W i s
mudu ria@ t t i t y that L a J u k M .ad
bu SJ d u n d lirbditisl, M w
~
t
d w b h a k r futun FFA with 4 k t b of51
dlioa, and other u w t s with L h r i r of $4
&on WGQ
1.~074(d#ll
,

-

.

.

Special d e s applicable only to dwrned
assc'pquisitioer arc pmvided in
paragaph {el of &is d o e .
&) Deemed asset aqdsitions upon
stock purchast--(l] In geneml. Ln a
deemed w f e r of assets under this
paragraph (bl. an lnstitulion (induding
aBridge0doraRe~idualEntity)or a Consolidaled S u b s i d i q of the
lnrritution {the Old Entity] is treated r s
.
sailing dl of i t s assets in m single
-don
and is m a t e d as a n t w
corporation (the NewEntity) that
- p h a s e s all of the Old Eocjp's assets
-at the dose nl tbe day immediately
p d g tbe ~ccmriceof an event
desaibed in paragraph h # 2 ) 01 this
section. However, such an event msults
in a deemed m s f e r 01 assats unda this
paragsph b)only i f it
[i)In connection wilh a translaion in
w h d FFA is provided;
(ii)While t h e Old Entity is a Bridge
Bad;
111i) While the Old Entity has a
positive balance in a deferred FFA
account (see 5 1-597-2(c](4)(v) regarding
the optional accelerated recapture of
deIemd FFA); or
tir) With respecl 10 a Consolidated
S u b s i d i q . H-hilethe Institution of .
which ir i s a Consolidated Subsidiary i s
u d e r Agency Conuoi.
( 2 ) Evrnts. A deemed transfer of assets
undcr h s paragraph @) results i l the
Old Entity[i) Becomes a non-member wirbin t h e
meaning of 5 1.1502-32(d)(4) of its
conwhdaredgroup (other
pursuant
10 an elecbon under 5 a . 5 9 f + ( g ) ) ;

in connection w i t h the transfer. (See
(a) and (c)for rules regarding
the inclusion of FFA in incame *nd
5 1.597-2(s)(l) for related rules
regsrdmg FFA provided to
sharaholders.1The Ntt Worth
Assislance is mated a s an asset of Uat
transferor that is sald to t h e New Entity
or Acquiring in the TaxabIt Tmrrer.

sum of the g r o d - u p basis of tbt stock
mquirtd in connection w i h .the Taxable
T m f e r (excludingstock acquired born
the Old or New Entity]. plus the amount
ol liabilities asnrmcd or taken subiea lo
in the deemed w f e r . plus orher
relevant items. The grossed-up b s ~ of
s
Lhe acquired slock cquais the aapiirors'
basis in the aquirad stock hpided by
(2) Amount reuliztd rn a farable
the ptrcentagt of h e Old Entity's slock
TmnsJer. La a Taxable Transftr
b y value) attributable lo the acquirtd
described in paragraph ( a ) ( ~ ) ( i01
] &s
si&
=A provided in comection with
seaion. the maul realized i s
a Taxable Translet i s not included in rhe
determined under s e a o n 1001fi)by
N t w Entity's or Acquiring's purcbast
relerence to the consideration paid for
p r i a for the acquired assets. Any Net
the assets. In a Taxablt Transfer
Worth hgsistance so pmvided i s treated
desmibd in paragraph (a)(l)(ii)of this . as an asset of the w f e m r sold lo the
section. the amount realized i s the s u m
New Entity or Acquiring in the Taxablt
of b e grossed-upbasis of the stock
Transfer.
(21 Allocation of basis--4i) In ~encml.
aquired in connect~onwith h e Taxable
t o h e w i s e pmvided i t b i s
Transfer (excluding stock a c q ~ r e dfrom ~ x c c n as
the Old or N e w Entiry], p l u tbe amount paragraph (djl21. t b e m p h a r epnce
~l
of liabililies assumed or l a k e n subject to determined m d e r paragraph ( d J ( of
t h 1 5 secuonis d l & ~ e d & o n ~the
in Ihe.deemed transler, pius other
assels uansferred in tbe Taxable
relevant items. The grossed-up basis of
h e acquired s~mkequals he rcquirors' Transfer in the same manner as amounts

4 1.597-2

-

are ailcared among aswrs under
basis In the acquired stock divided by
g 1.3381btZTlb). Icl (1) and (21
lhe percentage of b e Old Entity's stock
(ii) Modificat~onsto gentml mle The
@y value] attribu~ableto t h e aquired
allocation
rules con~alnedin paragraph
stock.
( 3 ) Alloculion oJ omount realizeddi) (c)[3)(11)DI this secrion apply 10 b e
allucatlon o i basls among assets
In geneml. Tbe amount realized under
acquired In a Taxable Transfer. N o basis
paragraph (c)(2) of h i s section IS
allocated among the assets transtemd in i s allocable to Agency's agretmen! ro
provide Loss Guarantees, yield
tbe Taxable Transfer in the same
manner as amounts are allocated among rnamlenance payments. cost lo c q or
asse~sunder § 1 338fi3-25 bl,lcill) and cost of funds mmbursern~ntpaymentd.
or expense reimbursement or ~ n d e m n i ~ y
(21.
( i i ] Mod~ficatioruto general rule. This payments. A N e w Entity's basis In asselr
i~ receives hum ~ t shareholders
s
15
paragraph (c)(3)[ii)modifies certain o l

.. . -:
. 66102 Federal Register / Vof. 60. No. 245 I Thursday, Dscembar 21. 1995 / Rules and Rqulaijons
,
.- . , #-A
: d&&sd
mder general prindplm of if B s designation is made aft= the New time of h e T d I e Transfer. the
.,.....
tmation aad i s na govsrnsd by
h t i t y or h ~ q - 6 1i~~b t p06t~ n m u h A86nq
g
~ I J S ! file dl ia#m
t r a d e r income tax Mum or the due
tm returm for the Old Entity for mas
date of t b a ~
rmturn (including
en*
on or prior to tha date of the
axteacioaslbar 4
dsarnsd uls descrihd in parsgnph Ib]
[a] ~ p e u dru a appli-blc to TaabJs 01 this d o n th t t ara not filed u 01
Tmsfm Mot arc d e b a r 4 O$#t . . . hat daib
.
. a q u i i i L i o M 1 ) Taxpyar
(5 1 Basis limited ta fair market miuc.
identification numbers. Emapt as
If dl ot ths stock of Ihe corpwrticais. .
provided in p m p p h (d(3luf rbis -not n q u i n d on the data af &o Taxabla
d o n . 8 New Eutiy r u d to the. . Transfer, the Commissionsrm , y m&
~ o [ t b e ~ f ~ ~ i n ~ d 6 8
- m
app
e mdp ~
n asb s~d j u 6 h n t s u n d ~.
u & r mm h(b)ofthS*&o~~ - - - p u e p p h ( c ) a n d ( d l o f t h i s ~ o n ~ o
(21 &nsali&i~.redSubridi-il
hi
he
t. ,
-8
a p r s d - u p basis
t e n d . A m ~ ~ l i d a S-~Y
td
&a- - the ~ 1 & 9 f a c o r p n t i o ~MFUIU
~
iu u
i3 treated a sellingits aohstI Fa a
a#gmgmls mount realized for, w h i s
---+,+a N w Eatity or Aquiring over r
.,.+
Taxable T r s ~ l ~ f c r dW
m P ~ fiJ
.. - - , 3 p r i D dof six taxable yo- beginniag in
in.the assets olhsr t h the
~ -ate
is -!ad
a~ m g e g '
m u w vdua
-lft
' :h e )arr of tbt Taxable Transfer. The . thir S K ~ ~ O D
immediately therenhtr in a mmplets
.. New Entity or AcqlFring mu* ihclude
[fl Examples. T h e following examples
liquidation to which section 332
as &nary
income the entire amount
i l l ~ s ~ tIhe
t t provisions of thir sxtion:
~pplies.The consolidated p u p a1
m m u d q lo k recaptured undc t lh*
Ecampla 1. Bmnch sale resulting in
which the Consolidated Subsidiary is 8
T d * n ~ eTms,er.
mu,ution Ir
proding rentenca in the tmable year
memht d w s not take into a c e o ~gain
t
in which an eveat occurs that would
yeu lqysr
jn
or 10son h e mle, -exchange,or
.&alsnbinclusion ol an 4diustment
mrivenhtp. M u nor 4 rntmkr d m
wwllation of st& of the Consobdated wnwlidatod p u p . Oa Ianumy 1.1w7,M
mdcr d o n 481.
Subridiarp in connsdion with tho
hms szwmillion of libbilitias (including
[iv) Cetldn post-transfer
deposit lirbilitim) and u r s t s with m
udj-tntHA)
Agency ObIiga~vns.
LE Tawabla Transfer.
adjua1.d b.& ofSIW million M hrr oo
(ii) Certain minority shartholdcr*.
adjustment tb tho principal amount.
Sharehalden ot the Cmsalidated
inwmew'wr for lW7-pr
of =Agency Obligation or a s h
Subsidiary Q11 am not mcmkn o l iba
prpmt to reRect r more & a u n t s
&~h";O~is~@n~,"&",
consolidet cd-groupthat includes tbe
-,f,,
,i, brurches
bving
dstmrihtion of tbt condition 01 thb
lnsriturion do not ~ e b g n i gain
~ a or 105s . d j u r d wj of $1 miilion)
-tion
at the time 01 the Taxable
with
T d e r is m d e before tbe earlier of Cht with nspm to shares of Consolidrted
5120 rniibon ddtpwit liabilities to N. In
Subsidiary st& retained by the
crrhnactInb with Lba -kt.
A ~ D C Y
date the New Entity or Acquiring files
shareholder. The sharthddtr's b s i s for prwides S121 million i n cash I O N .
its h i t post-msfur income L a * rut(iil fhe haauction i s r Taxable Tnnrier in
or chr due date of Bat t e t m (includmg that st& b not affmsd by the Taxable
which M raoaivsr 5121 million of Net Wonh
Tmsfer.
e&ons].
the New Eatity or
- ~ r r i s t r a c s Section
.
1.~9?-.5(~)(1).
[Mfs
(3) Bn'dge B d s and Aesidlml
A ~ must
W
adjust its basis in its
m ~ i msdimtly
d
rativiag LhsS121 millib
E
n
l
r
t
i
e
4
i
)
In
gemem'A
Bridge
acquired assets to reflect tht adjustment
o[Nlt Wad &sirlanet ~t,llelr
Or
Entity'r -Ie oibsseu to a
h m&hg adjusments t o Lhe New
th* T-bk T-l~r. ScCboa 1,$9T-5(c]f!1,)
Entity's or Acquu-mg's basis In ils
New
his
M m w i e m brlncbn bav~ngIb u i s or SI
s e d o n is m a t e d as made by a ~lngim
million mad i s treat& rs tnmsicrnng S I ~ X
- a q u d w e B . psragraph (cl(3)(ii]of
entity u d t r 5 1.597411). T b e New
. milljoa in crsb ltbeNet W
d Assirlancd to
--thi~staionjsepplidbytrtaUngan
Entity decmd to a c q ~ the
n assets bf a N ha-uchangr lor W Sass-ptioa ot SIZD
edjurrment to t h e principal amount of
- million of liabilitie~.Tbus, M renllzes 4 lass . .
Residual Entity under p m p p h fi)mf
an Agency Obligation pursuant lo rbt
his
jr no, b a l e d
a
of sz miUion on h c wansftr. The amount of
fim senLen- of this paragraph
Ihe FFA M must includu in ib income in
+ntrty
wib
be
Bridge
B
d
ior
wih
the
Id#2)[iv)(A]as o m i r i n g immediately
2 WPf i t l'miled by 5 1.597-Z/c) lo S
I ~
New Enrity
the
before the-TaxableTransfer. {See
d t l i o n . which is the s u m of Iht Sl[)[l milljon
5 1.597-3(~)[3) for rults +ding
other ~ S X ~ Sa ) d must obtain a new TEN.
t x m s of M's liebilitics ( 5 2 6 6 million] w t r
(iil Treotmenf of cmsoljduttd groups. he total adjusted basis o l i t s asserr Is100
adiusunents to h a principal amount of
At the me o f a Taxable Transfer
an,.+gencv 0bligation.l
rnill~on)nl the beginning of 1997, plus the 52
rnrllion cxcesr lor the r u a b l r *ear. which
described in paragraph (e)(l](irl oi Lhis
,B)AsseU covered byu Loss
mrul~rborn h e Tarrable Transfer. of M's
s d o n , boatmen1 of a Bndge Bank as e
Guamnte~.If, immediately aAer a
consolidated
dcducbons (whet than a P o v s n 1 over 11s
T w b l e Transfer, an asset is not covered subsidlarv member
pass ~ ~ c ooh emr lhan
~ FFA M mu51
by a LOSSGuarantee but the New Enbry p u p d e r 5 t.597-4(1)(1) ceares.
H
o
w
e
v
e
r
.
~
a
~
e
w
~
n
t
l
l
v
d
e
e
r
n
e
~
t
o
c~labl~~hrdeIcmdFFAscmunlfnrht
or Aquiring has h e right to dezignate
rcmainlng 519 rnil:ion or FFA. S e c t ~ o n
acqum b e assets o i 0 Resjdual Entity is 1,597-2ic)[41
spedhc asseLs that will be covered by a
a member 01 h e selling consolida~ed
Loss Guarantee. h e Lew Entit! or
(hii] I.;. as Acqu~~ing.
nus! allocate 11s5120
group after h e d-mtd sale. T h e ~ o p'su r n c l l i ~ nurchrst
A q u i n n g must b a t any assel so
n
=rice for t h r assets rcmind
-atsip~ted
as having been subject 10 the
basis or excess loss account in the sl&k
h m M among t h d t s s e i s . Cash i s a Class
I asset. Tbc branch essers art ID Classes nl
01 l h e Wew Entity t h a t is deemtd to
Lass Guarantee at the hme oftbe
Taxablt Trmster. Tht New Entity w
acquitc Lhs assets a[ the ResidualE b t t p and IY.N's ndjusred basu In 3t cash is 11s
nmoun~.I.c.. S t 2 1 m~llron.Sec~ion1.597i s the group's basis or excess lvss
Acquiring must adlust i t s basis in lhe
account in he
of
Bridge Bank S(dl(z1. Bccaust Ibis amount txcceds N ' S
covered asseu and in its other atquired
purchast price [or alb o l b e acgu~mdasltt~
assets to refled the desigtiation in h e
lmmed'ate'! 'om
'be deemed 5"" 3'
baskslo ~ h *
by $1 m l l l k ~ nN, allmairo
manner provided by paragraph ld)121 of adjusttd ID: the@su!ts olthe u l e .
other acquimd asseu and, undtr 5 1.5q7( 4 ) Cena'n returns I f an Old Entity
Lhis section. The New Enrjty or
5(d)(?),mua, r e u p t w rh=SI mill,om ercess
witboul Conhnung Equhly t s nor a
Aquinng mua mak3 appropriate
at an a m u a l raw o f f 1f6,667 in the SIX
c
yeam brglnnlng wih
subsidiary of a consolidated g:oup a! h e c ~ n s e ~ u i i *Iara!c)c
adjustments in subsequefit l ~ a b l years
e
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Vol. 60. No. 245 1 Thursday, December 21. 1995 1 Rules and Regulations 66103

Federal Register
l m t (subpc~to aedsntion for

vdur d tbm &.8cy note is deemed lo q u a i
by f l million, Old Enlit). MB musi indude
its hd)urt.d i u u b prjm imrn.di&tely b
k
m
in its income rbr S 1 millioa OI F A not o h
&rample 1. Stock irsuancc by Bridp Bpnk tho tmnlfor, $25 millian. Ths fair r&t
by the E A muivwblk Section 1.597-2{c).
vrluv dtbr k s is dstrned not ro k h
muting T m d e TIPnrfer. (i)On April 1.
(As olMmy 1, IM,
Dtdhtity MB'i
than h a gwmntod value of$50 millma.
liabllitms (SS,M10.00(1) did not exmad MB'F '
. : j g ~ bstltution
,
P Isp l d la rsf.ivmhip
- d u d IO matfor mssots md liabiiitirr to
P it memted *I having q u i d iu SS millim-adjurld h i s of i t s msmts. For &B
. gddgs 8 a k PB. On hugusi 31.1896. tbr
u-h w amidantion. T h u s itr k r i a in !urbla ymr. MB's dsduetionr of ~ 1 . 0 2 s . m
. [St.Ow.OOO loss htba Tumble Tnnskr,
.rswu of PB arnsut ofS2Omillion in a s h .
I t s m#&s
h m d i a t a l y after tho mnsfsr i t
~ ~ t s ~ a n d i q w1i1t1hmd justd h i s of
zam New PB m h d New P un rnmtedu
S2P.DDO intarest u;prrua and J 5 . W of w l g ~
-:
.: smdllha md 4 blr m u h t vdus ofS40
r sia#le may.Sktioa l.s974(t#3].
,
expcnrsl a d d i t s gwr incon?
&lion, md vthm noa-financial umta
h p ! & 3. Terabla Tmnsfmof pmi~sly IdismgatdingFFh) olS?S.MW)[in~west
t . , [primuilybrrPth~~trrrrdspui
meai)witb d i ~ p f i i m t s d I & ' l u ~ m . ( i ) & ~ t b n X . t b m inramel by S f ,000m.Thus. undar 5 1.597. r n djustd h i s d $5 million.
hu
w m o n prraat mf Im n s o l i d a ~ d~
p . . 2(cJ.MB iacludas in i n m e the entire
t liabilitits o f m s million i n d other
owns 111 tbr mac)r of hstituiion M. an
31,000,000ol FFA a o b t by hc FFA
- Ira Ltim d S S m i l l i o a P. tbt Residual
inml*.at isti~utionwith no C o ~ o l i d a t d ncmivmblt.)
,Entity. bddr ml astat* with an mdiurtad
Subsidiuia. On April 30. iQe6.M h u a
[viil ~ h e n t m~. l Emtity
d
M B Siuable
breis of SlOmillba md drims in litigrriw
m i l l h o t d w i t liabititid. 5 1 miition or
inearn#for Ibe ~umblrpu ending o n h a
havia8 I z m L r i a P retains no deposit
otbw lirbilitia.md m~setawith r n ldiufid
dmw 01 the Tumble Tnnsftr is SO.
li.bilitics urd b u nc ocher lirbilitim lexcspt b u i r of $4 million and 8 tau m u k a ~vdue
[viiii Rm*idual Entity M i s r l ~ ldstmcd to
itr iimbility !a Agency for having caused iu
of 53 million- On May I. 1996. Agency pimas engage in a deemed salt of iia mswk 10 Mew
deposit liabilitisr to bs satisfied).
M in m i v c m h i p . X elects under 5 1.597Entity M under 5 1.597-5b1t31. bul h e m am
Iiil On Scpttmbtt 1, 1996. A g t q u u w s
a(g1 to dirrfilirta M.Aardingly. as of May
n o t u conrqwnces as M bas no usttr or
Po to u S U ~ 100 WtCtnt of its T o n stod:
1. IS-, now wrpmtion M i a not msmhr
I i r b i l i l i ~m t the Lime 01 tbe dcuned ult.
tor 52 million a r b to X. On tbe same d8y.
of t h e X ~~ntalidmted
mup. OD May I. 1996,
Iiw) Under 1.597-HdXil. New Entity MB
~ g c n c yisrun r S25 million nac ta PB. The
Agency auu M 10 transfer dl of ib assets
b mr!ed as purchasing Old Eatity MB'r
nole beM b b a d m:a 01 I U ~ C F U ~in cx-r
end Ii.bilili.r lo B t i d p Bank MB.Under
ossels [or S5.020.OQO. the mmwnt of Ntw
5 1+5974tI.U3 m d M un themafret m8td Entity M B ' s liabililior. M l h ~ sSZ.W.W
.
IS
of ibr mpplichlt federa) rals ia e
k hr
ms single d t y which has S5 million of
a p t - k r 1.1996. Agency pmvidts b r a
d l a t a d to h a SZ milhion Agency tu-umr
ymnatwiag PB wlur DI
550
Obligation. and 53.020.WO is d - t t d
to thu
lubiliticr. ur -ual
mcivrblc Fw htun
FFA with Ibuis of51 million. md other
d l i o o for PB'r i m s ouutmding.
other Isrota Ntw Entity M B is watsd u
[ i i i ) The t t d irruanm is a Turble
*sub with r b i t of S4 millibn. Saetjon
purchrii~inlbr Turbls TmnsIer.
1.597+[81(4].
'
Example 4. LOSS ShPTjRg. InstitutionN
7-iiw
in which P8 ir m a t e 4 u ~ 1 B n g411
ofiurrralr to Inew coqmralion. Eitw PB.
[ii) During May 1996. M B cam+ S 2 5 . 0 0 0 of acquims IS-ts
and u s u m t . Liabilities of
-on
1.S97-5(bJ(:). PB i s -red
m
s
intnnrt iawme ~ n rcaues
d
fz0.md
another lns!itution in r Tumble Thnsfer.
m o n g the assets mnrlarrrd va thm
dirrctly m ~ v i n g$15 million ofNs! Worth
interarb exptnre on dcdcporiror rccouau rnd
~ i n a n c [the
e ISSUE price UI the h & e a c y
them k no ntl c h u g 8 in deposits o h thmn
p m l r of ram1 sstmte. in h e hands b i the
this rdditioad S2 0 . W or intartst expnse
banriming Ensuruuon. these arscu had b
l
;
wligatio~)immrdja$t)y b c h the T u a b l e
mcmmd on depasitw m~ounrr.MB pys
vduts of SlML.OLXI en& In eonneetion with
Tnnrlar. MOO
1.597-3(cX2); 5 1.5975(~)(1k
Tbs amount ofFFA PR musi include
55,400 of wgt t x p n s t s u d has sputht;
the T u a b l a Tmnsfer, Agency -4
ra
items o f i n ~ o m eor txprnse.
inincome 1s dtrerrn~ntdunder 5 1.597-21a]
reimbuns Instituhon N for 80 p e m n t of m y
:
(iiilOn Junt 1, 1996. Agency UUSA MB to loss bd on h e or~ginrlb k value)
rad (e). PB in turn i s daemad to m s f t r tbe
norr lo Ntw PB lo tqt Taeblr frrnshr.
~ s s u t100 v n t of its stock to corpmtion
realitad on rhs disposition or &age-on of'
r q a h a with 520 million o l msh, all I ~ S
Y. In conomtion w l ~ htht stock icsumncm.
the three pmpertics. This *magerne nt
-1
outsmding Ivith Ib ~ i of
r $50
Agency pmvidts ra Agcacy Oblig81mafor 52 wnstrhrtas a lars G u w ~ a rThus.
.
in
miuion mil no olhar !TA.
rllmting buis, Institution N mats the t h m
nillioa) mnd Irs other.non-financial gsrals
(iv) T h e t l d krvanct msul!s in r Taxable
jnith b s l r 01 55 miHiorl). T h e -WI
p a m h as C l u s Il m u t r s . By v m u t of the
&d
by PB h m the sale i s 5lOO m a l i ~ n , Tnnskr. &A~ou 1.597-S(b). MB 1s ~ a o r e dma m n g a m e a t with Iht Agency. I n s b ~ u r ~ oNn
,;ot -aunt ol PB's liabilities deemed to be
m t i v i n g !he ~ g e n c yObligalion immcdimialy i s rsrured that the puctls wibl not bc w o n b
less 10 i t Lban SBO,OW tach,h u s e even-if- - '
W d b y New PB.-This amount rrrllztd - - : prior mrho T w b k Tmsfet. si0a'1.597quds PB'I b a s i s an ~ t sassets and thus. PB
S(cX11. ME hu S 1 rnillroa o! basis in u r
h e ptvpurtior M w o d h s r , Agency will
&s
no gin or loss on the mnsier to New mccounk rsceivablt for FFA. This recelvrblc
rtirnburrt 60 perno! ol h r loss. A h h x ~ g h
i s hcatmd u satisfied. oflsetring 51 rcrllion ol Insrlmtion could obtain payments under the
?B.
Ibs SZ miLliwn ol FFA provided by Agency
- (i~
Residual
)
&IF P also is heated as
Lwr G u a ~ a ~ 11
~ ct hae pmpedrts arr w n h
in connectjen w~rh~ hftkwtbls Tmnrler. The man,ii is nor guararrtted t b a ~ir will reallre
~ 1 - all i t s artel3 (conris~jngof ma1 tslatt
mbrt than SBO.DOC). A t c ~ r d i n g l y . . S B oi ,s~
a d c1au-n~In litigation) for SO ( h e m o u u ~ status of lht rcmsining 5 1 million OIFFA us
0' capsldcnuon ~ e ~ v by
c P)
d to I new
includible inwmu is dc!crmintd as vf tht
the h~ghestg u a r r n ~ e dv d u t ol tbt rhm
m.pwalion (New P I lo 4 Taxable Trmsltt.
end of the turrble year under 5 1.597-Zlcl.
parcels. Insurution N will n l l a s ~ basis
c
to
the Class I! a s s e u up to their lait market
-on
1.597-5(b):31. (P'r only li*b~l~ry
i s to
However, under S 1.597-2lbl. MB ob~ainr
value. For t h i s purpose. h e [numarket value
.+gtecy and s IiabbJ~tytn Agency i n no1
5: million b a l l in Iht Agsocy Obllgat~on
vf the hrtc parceLr is not Isst ban S B 0 . W
mrd as Idebt u d e r 5 1.597-3fbI.]Thw,
rtce~vedms FFA.
? &sa
510 million loss on the transfer
( v ) Under 5 1.597-51c)(2]. in h e Tuablr
e a c t Section 1.597-S[d)lZ)[i;l: f 1.397Transfer. Old Enr~tyME 1s irta\ed as stll~ng. SIc)(3)(ii).
:,
Kcu P. The corcb~nedmrum filed by PB
10 Ntw Entity MB, a l l of Old Entity MB'r
; ~ Pdtor 19% will mnecl a lotal loss on the
'5 1.5976 LlmltMen on w l t e a o n of
;ruble Tmsfer cl S l 0 million (SO Ior PB
asstu, having r basis of 56.020.000 [!he
Income t a r
original 54 million of msset basis ss of April
md Slo million fa P). Section 1.597-5{t)(3).
Tja: e m aim ~ l mllecl
l
FFA income bum 30,1996. plus 520.000 net c ~ s hh m May
[a) Limitation on rollectian when tax
1996rctivit~ts,plus 52 rnil;lon la Iht Agtncy IS borne by Agency. If an Institution
j r >el W a d hrislance, d e i e m n t d undtr
Obligation rrctived as FFh).lor 55,020.000.
g 1.54:-Z I a l and Icl.
wiibou! Conlinuing Equilp lor m y ofi t s
-(I.) Y C W PB 45 mated as bavmg q u i r s d
t h o rmaun! of Old Enrily MB's liabrlitiet
consolidared Subsidiaries) i s liable for
ri~umedby New E n t l t y MB pursuant to rht
be w u i t acquired h m PB lor SlOO
income law tha! is ~tvibutablelo the
= d l i o ~ lht
, ~ O M Io i liobililies esrumtd. lo S m b > tTrmrfer. Thertlort. Old Eotiw M8
inclusion in lndome of FFA or gain from
dlopting basis among these a-rels. New PB
m o g n l u s , in the aggregate, a loss o[ 51
a Taxable Ttansler. h e tax urlll not be
million born tht Tlxablt Translet
mts h e Agency note and t h e loans
[vil Bcenust this S 1 m ~ l l i o nloss causes Old collecled i t i t would be borne by
auumdmg (which are covered b!. Loss
Agency. The final derermimahon of
Estity MB's deductions lo e x c t t d is g m s s
G u a r a n ~ e r as
) C1w.s 11 asseu. For h e
rnmme Idctcmrued w~rho-dlq a r d 10 FFAI
w b o ~ h e rthe tax would be borne by
v
e o l a l l m u n g bas^^, thc I a ~ rmark*!
ewntsh

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fdthl Register I

Vol. 60,

No, 245 I Thursday, December

21. 199s 1 Rules

end Rqulationr
I

(0Eff& on section 7507, mi5 #&ion
w p s d e s ibt opplicsJon of d o n
7507,mdtheregu~aticns&amder,
IDTtha uresrnent and collection d

tax hos e x p i 4 u d c r t h e rules of
section 6501 fur any tdxabls year in
which$51.597-1througb1.sg?~
would aflect the demmjnrtjon of the
la~o&pper:wi11diqatd
. .
.
eleaing antity's or ga oup's income.
iammc tax attributable to FFA.
~ d e d ~ thyx. - s w ; w shilu
d e d ~ t t i o n g~ .a , 19sh basil, or other
.bligaGonsof Agmq, un brtltutio~.P? g I.so73 E f f m amtr.
itams.
t s Ca~~~olidatd
Subsidiati~r.Collection
{a) I;IRREA ~ f f d m
e c Ssction
. ~ ~ 597.
[ii) No sdm 336 e l ~ t i o nunder
,i &a sward in-r
ta* liability under
as amsnded by d o n 1 4 0 1 or tha
rirotia 8SlO2. Tb* election ~
o be t
j r.t~o24frommmbsm
of an
F i n d d d Xasht~tibnsRelorm. Rscdvery. m dwi&
~ mpect lo aa Institutionif.
,amtution'r wmolidated gmup other
and b f m e n t AM 011989 -1.
under House ea-102, ii was a T q n t
the hstitulim or its amalidatsd
Public Law 101-73, Is g e n d l y
with mpd to which n qunlibsda&
~ ~ & i is
u no1
m n f f e c t d by this
d & v e for any FFA nceivud w
purchase was made, B timely cieetian
se&pn. -me
W w i l l co&tiPue 1fi be
acuurd by an Institution an or &m
un&r d o n 338 was not medb, m d on
to wUection except es
10.1989; and for B ~ m
Y c t i o n ifl h p d 22.1 892. a timeIy e l d o n under
spcdfiealiy lbaildd ln r b i s s u d i w. This connec~on
w
~
t
h
w
h
i
c
h
su& FFA i s
ssctiva 338 c d d no1 be made.
seni on d m DOt apply IVtax# other .
provided, unless tbs FFA i s provided in
Eiiij Inmfisiacnt matment
ban inC0m laXEL
m ~ c c t i o nwitkt an aqultjtion
Indrilution that would be New Entity. If, bJAmount of Im uttributabJs to EFA ~arursing
prior to May 10, 2989. Sea
under 5 1.597-5@), an lnstllulibn would
argdirr OB n Tmlrble T M ~ s ~ cFor
.
3 1 3 9 7 - 4 for rules regwd~ngFFA
become a New Entity before April 22,
purposes olpktagraph ( I ) of&r $eztjnn. reeived o t accaed on or eftst May 10.
1992. the eltction cannot be made w i h
the a m m m i o l h m m e tm in & tssrsbl~ .
1989. h a t mlates lo anacquisition that
mspeet ro h a t lnsti~utionunless
y e a aruibu~bhto the inclusion of FFA occumd bolare May 1D.19B9.
tiactions rre made by all relevant
or gain fmm t Twble Tmufer in h e
I&)Efleiir* date af reguhtians.
pspons such lhal 55 1.597-1 ~ r m g h
- income d to Lnstilution (or m
h P atbtrwise provided t h i s
1 . 5 9 7 4 kpply bolh before and rfrer &a
m n s u ~ i Subsidiary}
d
ts the e x a s s
S d o n . Ss 1.597-1 h u g h 1.597*
deemed salt under 51.597-5, H o w t v ~ t ,
ot the amd hmme tax l i a b ~ h ~ofy tht
apply t o taxable yea= ending on or aRer ~ h , srequinmdnl d * ~DOI apply ji,
hambnn (or thecbnssllidated gmup in hprilzz, 1992.However, !.ha provisions
55 I 397-1 through I 597-6. as
7 ~ h j C bthe btitulion is a member]; over of 05 I.597-1 through 1.5974 do not
Institution w o d d
have C W ~ W
inwars ~ rliability
*
of the hstitution ~I)P)Y FFA =cei*ed or a c a e d for
Equity
prior
t o &e deemed aie.
lor the cpnssIidatsd gmtl in which the laxable ye- emding QQ or after April
13) E x p c a reirnbursemmtr.
~
Notics
hstitulie i s r member] etemined
22,1992.in connection with an Agency t39-102.1989-2 C8.436. provides that
without m p d to FFA m gain or loss on assisled acquisition witbirr Ibe m a m g mirnbunemenis paid or a c m e d '
rbt T w b l s Transfer.
oi Notice 89-102 [ t 98+2 C.B. 436: see
p w u a n l to aa expense reimbursement
[c] Acportrng of uncolledtd lax. A
5 6~1.6Ol(d)Izl)[which does not indude or indemnity arrsngemrnt arr not
taxpayer must specify on the h n t page a ~tansferta Bridge hnk), that curs i n c l u d d in income but mt taxpayer
of Form 1120IU.5. Corporate lnmme
before A p d 22.1992. Taxpayers not
may not dedwt. or o t b e ~ r j s e\ d i e into
lef!of t h e space
Tar K e r n ) , to
subject to 45 l.sQ7-1 h u g b 1 . 5 9 7 4
accoun!,the item d c o s t or expnse u
proyjded f a "Total Tax."&@mount QI muL comply with an interpetation of
which-hr rsimbursernen\ or mdemnity ,:
bmme I ~ im
X tbs taxable year that 1%
tbsaatutt chat i s remsonable in light or
payment relates. Wih respect to rn
gotsntdly n o t
to wUsction
the legislative history und appljcable
hgcaey asristtd a q u i s ~ t i o nwilhin t h e
wrder rhir sestion Ti an lrucbtution i s a
adrninisuaCive pronauncemsnts. For
meaning ofNoticc B+IDZ h a t p c v
sukiidiary member of a rnnsdidattd - . h i s purpma. ihe rules contamed in
befor%April 22.1992, a taxpayer that
-group. me amount spdfied.83 nbL.
N o y e 89-102 apply (a the extent
~ltcrrto apply these reguhivns
subject to collectiuo is zern.
p r o r i d e f i ~the Notice.
retmactively under &is paragraph (4
(dl Assessm en ts of fox la a,7sct
(c] EJeclive gpplicuiion io prior yean
nl a y continue l o account for-theseitems.
re find^. LPcons tw that 1s not c~llected and unnroction4ll in gencml. Except under Lbu rules of Notlce a s l a z .
mder this sectiun will be a t s c ~ e dand. as limited in t h i s paragraph [cl, an
(-11 Proccdurnl ruie&i) Munner 4
chus. used to oftset m y claim ior refund eledion Is available to apply $5 1.597n o k i n g slrction. An Inshtution or
made b y ot on bchali of cbe Instiiution,
I through 1 . 5 9 7 4 t o laxable years prior
consolidated group makes !he election
the -Caasolida~edSubsidiary ar m y
to the general erfac~ivredate of rbese
provided by h i s paragraph (t) by
n:htr mtpwahon wlrh several liability
a t t a c h i n g a wrillen slaternen! to. and
regulations. A consolidarctd group may
for thr tax.
elect I D apply 59 3.597-1 through 1.597- ~rrcludingi t a s a pan 01. the laxpayer's
ft)CollPctian of tuxes from Acquiring
Dr consolidat4 group'5
amual
6 10r ail members ol Chc group in a l l
iacomp tsw rrturn Gled or,or aher
or a MW
&nt~ty-+I ) Acquiring. NB
taxable vears t o whrch seaion 597. as
March l 5 . 1 4 P 6 . The slat ern en^ must
zncnmc la liabihtv (includmg h e
amended by F W * . applies. The
cuntajn tbe Inllo~inglegend at the rup
common parent ntskts the elecrion for
several l~ability for taxes undcr
of t h e pagc. "Tli1S l S AN ELECTION
5 1 . 1 501-6) or a transferor in a Taxable h e group. An tntily tba~is nnt a
UNDUt 5 I.~Q:-~(C).'' and must contarn
member cf a consolida~edgroup may
Transfer wili be colbected from
e l e a 10 apply 9s 1.597-1 m u g h 1.597- the name, address and employer
Acquiring
6 to all taxable yews to which seaion
idenlificauon number of the taxpaver or
(2) N m Entity. Incame tax Ilabllity
parent making. & e. elecihon.
lhduding the several I i a b ~ l ~ far
l y aaxes 597. as m e n d e d bv FIRREA, auntie5
. for common
The slarement mu51 mclude a
which i t 1s not a member o l e
under 5 1.15026) of a uansleror In a
declarat~onh a t "TAXPAXR
AGREES
consolj dated group. The elcction i s
Taxable Transfer wi be col!ected horn
TO EX FEND Ti I E S T A T I m OF
rrrevac ah le.
a New*EnIily only ifslock h a t was
\ 2 ] EJect:on unavcilable Jn c e * d n
LIMTTAI'IUNS OH ASSESSbKENT FOR
a u m b u g in t h e Oid Entity remalns
c a s c s - 4 1 )Slntute ~ ~ ~ l m ; l ~ !closed
i v r l ~ THREE IZARS FROM 7% DATE OF
outitanding as stock in the New Enuly
The eiectlon cantrot be mad+ i t &e
THE FlUNG OF T11;lSELECTION
or is =acquired vr exchanged lor
period Ioraaessrnenl and ccllc~tionof
(~NDER
5 1.597-/(L). I F THE
wnsidera~o~~.

g e n e i* within b e B O d~ i m 6 0 01
~
m&imer:
[nd~armining.
,heher &iswould k b m s by Agency,

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Fsdrrd R w t r / Vol. .60..No.

24s

Thursday, h m b w

;-.:
'.<
..
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= .:
in Esajon 597(al prior tk iu-.*
..-. ' .
ammndmtnt by &a F
d
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. ....

21, 1995 1 Rules m d Kepukhm:66105* .

d

W A n O N S PERIOD WOUU] . . I
(ii) r a o b l c f - r f m
h a y taxpaPr
m WITHOUT SUM . . d b M io &hir m p p h Id) tht .
.. ;'EXTENSION, FOR ANY W S . .-...*:: under noti- Fl4-9.
would k r Nsw Lasbrurioar &form Rscovqi&
.;.;I
. ' . -d::.:hfiM;Tnl~~NYTAUBLEYEELR . E s t i t y w A q u i r r n g w i t h m t ~ t o a - . r . i~EnlomrnsutA d o f 1 e a ~ * R d : t h & ~ ,
I - .

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+
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-. . . . - . . .
. ..

~ - , ~ B Y - ~ F I L S J G O F M S ~ O N TurableTraashr0~orafttrApril2f'1:~
,'T.
e u c b p ~ p s u ~ m u s t b -~ ~ ~ ~ ~ . ' -;.*ha dohation that.sithsr
.: -:
..1092;and b f o m Decsmbsr.21. 1995.. r accffunl Lodetsrmina ~ h e i h e r a h n k ' g . .' . .
';'
.
',. : 5 f l ! m ~
-S
W I U B E FlED may apply tbs nJtr of that notics with: ' ursk am sd5cisnt to mwt claims bl
- $&mRa
.. - +.. >? a.r:.':c.,
T m L E W A F F E m m s p 6 l o =u& m~scLion. .' : r: : " . : d~positom - : .:. :.r"-+.'
..-' . .-iy?{m?!:;
..-: *,I, ,;-,.!i:-m
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...
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m
O F : ~WON.+
S
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iso
DF w c
IS'. PART ~ O ~ ~ . R O C E WD-:~-.:".E
DU~E
.-. +.
. ..
. . .
. . . .i-t-. . ; - ~ f l A m , r n S S S U a
-.::"..-.ADM~NISTRATION'..".L:..:.,
PARTM)24M8mNfFIQLNUMBERS ::....
..... UNDER THE PAPERWORK! ~;-.:~~*::<;. :. . : -- - d , R E Q ~WAmIN-.T:
m I
-.-.
e;:.
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-.a- .,. . = - A m G BY
D l r n C T . . ...". :f:. ,-, .
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by .#adms
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A
10
M
m
d
u
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6:
tu&orily
buti&br-$&
... tz:~flRETWW
S PREVlOUSLY FLLED * . .
..
..
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7
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&ntinums
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. .... PROWSIONS OF 55 1.597~1'TKROUGH:I w o n 301.7507-1 alio irsudd undc; . :..Aubhw 26 UAC 78P5<.1~:, ,*:.. . .- .
.-,- 1.5974," ind be signed by-M' . 26 U.S.C $97. '
P~r.7.1~~602.101,paragraph~e)is'~
-";individual wbo i s authorized to make ' -- . Section.301.7507-9rI& issued'under
by adding entries in
--. ' - : order to the tubla lo mad as follows: .-! , - .
+ Iht.tlcction-under his paragraph (c) on
26; u.5.C 597.
' -'- :
..
. - ...
behalf of the t q e y e r . An eleclion wilh
.- pa,- 4 - , ~ , ~ o 301.7507-1
n
ir
5
602.10; 0 ~ ~ ~ ; a n v a i n u r n L-.r .r .
to consourled P U P musk
amended by adding paragraph b)(d] to
maoa by he common pannl of the mad as follows: -. .
.,I.- .-.... . .
.
. ; '
(c)*'*
. . -. :
proit?, nor Agency. and applies lo all
5 304.797-1 Banks mnd fmst companlas
members o f t h c proup.'
.
~~[ii]E#cctofe/ectrvedisofjiliotion.Toc o v e r d . .
CFR
M s m w h t t t . OMB
Cunen"
m&e b e affirmnrivt t l t d i o n dsruibsd .- .
. . idsnrifd arKI m
: trd No.
in 5 1.5974(gHS] for an lnstitulion
.-&).
( 4 ) Tbc t c m ceased to do business,
plaad in hgcney m i v e r s h i p i n a ..
means thc bank no longer accepts
-taubit year ending klorc April 22,
- .
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-...--

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.-.
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1992. h e consolidated group must send deporils or makes loans m d discounts,
1.597-2
.-..... ....lll...I...l.. +.. f 9 5 - 1 ~ :
;
Iht affected hslitutioa b e Sulement
and is winding up ib alfurr aod is in ; 1 5 9 7 4 ..............................
.
i9 5 1 3 ~ ) .
I , 5 9 7 4 .,.. 2.2 ...-..-..
-....-........ 1#513(X1
. .duaibed in 5 1.5974[g)(Sl on or befort the process of liquidatingiis asseis to
31.1996. Notwithstanfig the pay depositors. bank will not be
1.597-7 .+ ..................................
1M51m .
- .May
.. _. . .
requirements ofparagraph (cI(l)[il of '
considered 10 hcvc ceased ro do
-- .
.
-.
- - .thk d o n . a consolidated group .
. business on account o l a tmnsaction in
s e n b g such a staiement 1s deemed to
-which the b a d -m'& the election described in, and 10
[i) Transfers assets and liabilities to a . M q m t MiLoef K i c h u h a . ... -- . .
, a p e lothe conditions contained in.
~vmmrrrionero/lnrcmolRevcnut.
Bridge Bank in a transler described in
.thisparagraph (c). The consolidated 5 1 . 5 9 7 4 oI &is chapter;
~ p p m v t d Decembr
:
4.199;.
- {ii) T;;uls[ers assets and liabili~eslo
p u p m u t nevenbeltrs attach b e
. Cynu C.Btcrbowtr, . .
. .
any person in a m s a c t i o n lo w'hich .
.statemah dtsa-ibed in paragraph .
Assishnr S ~ n i o r oy f ~ h Trmsu~y
t
........
of xis section l o i U firs1 annual senion 381ta) eppbes or in wblcb h e
. . . . . .- {c)(!)[i)
IFR Doc. 95-30627 Filed 12-2-5:
8:4S am]
b w ~ tau
e return filed on or ~ f r e .r
- Lrmsferse receives propeny HI^
BltUHG m a - 1 4
,
- M i d 15,1996.
urnsferred basis:
Id) Rdiancc on p ~ o r g u i d o n c e 4 i ]
(iii) T r m s i e r ~asset1 or l~abililiest o
-, #atice 8SIO2. Tar;payers may rely on' - any person in a transact~onin which
E;ouu 85-102,1989-2 C.B. 4 3 6 . lo h e
Federal Fiomeial Assistznce la5 dehned
e n e n t b e y acled in reliance on b a t
in section 5971 i s pro~ided\ o any pan?
Norice prior lo April 2 2 . 1992. Such
10 h e ~ransacuon.unless a l l ht Federal
reliurce musl be reasonable and
,. , . 'Financial Asststance is d c p ~ : l
varsacbons wirh respec! to which
insurance under 5 301.330--4{d): or
v - r p i ~ e r srely must be consis~en:tt-ith
( I V ) Trr*.sicrs assets o: li2bill:1e< to
.
u;t overrid~ngpol~cleso f searon 597. as W.V pens.? i n a uansactlon similar I D
e w ~ r t s s e din me leg~slativehiston.
ani tsans~cliondescribed ~ r :paragraphs
i ? ) ~ o t ~F14645-M
c t
In ~ t n c m l .
b ) { 4 ) 1,) l h o u @ [ilij or t ! i s secuon.
~ D > U n46-89 w a s ?ublishtd in the
This parag;aph b){;)applrtr t o iaxablt
Ftdtml Register On A ? j ] 23,1g9213'
years eod~c: on or ahc: April 2 2 , 1992.
Fil 1;804). Taxpayers n a y rely on the
Par. 5. Seaior: 3 0 1 . i S O i - 9 i s
prot=slons or 59 1.597-1 ~ O U 1.59:F
~
amended by zddlng a sentence lo b e
6 o i ~ ~ l n o 3 c e t o h e e x ~ e n t c h te......
!n~~ ~o [~r~~-~~awe r- z s h [ d l ~ o r e a d a s i o l l o ~ ~ + s :
ir; zliance on lbose proririonr prior ro
D e c 9 z ~ e 21.
r 1995.Such reliance must 5 3 0 1 . 7 5 0 7 4 Termjnat~on01 lmmun~!y
be xasonabie and uansaciionr i-ik
I d ) ' ' ' For : z x a ' d e ) ; e x 5 e n a ~ n gon
T B S ? to
~ lvh~cn
t a p a v e r s rcl:: musl be
o:aIrer A p n l 21. 1992. d e t o s j l
consistent wiih h c overndlcg policies
~hsurancedoes no; i n c i ~ ;edc;21
~i
of sxtion 597.a s e x ~ r e s s e d~n h e
Financial As5ir:ance (as deilnei ~n
legislative lustor\.. a s ~ v e ! ! as the
section 597) m a o*&er pa!menls
o v e - z i h g p ~ l ~ c i of
e snotice FI-56-89.
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