Final Regulation_TD8529

[Federal Register: March 18, 1994]

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DEPARTMENT OF THE TREASURY
26 CFR Parts 1 and 602

[TD 8529]
RIN 1545-AR91

Limitations on Corporate Net Operating Loss Carryforwards

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final income tax regulations relating
to the determination of whether stock of a loss corporation is owned as
a result of being a qualified creditor for purposes of section
382(l)(5)(E) of the Internal Revenue Code of 1986, as amended. These
rules will help a loss corporation determine whether it is eligible for
the special rules of section 382(l)(5).

DATES: These regulations are effective as of March 18, 1994.
For dates of applicability of these regulations, see the
``Effective date'' paragraph in the SUPPLEMENTARY INFORMATION portion
of the preamble.

FOR FURTHER INFORMATION CONTACT: Diana MacKeen Fulton of the Office of
Assistant Chief Counsel (Corporate), Office of Chief Counsel, Internal
Revenue Service, 1111 Constitution Avenue NW., Washington, DC 20224
(Attention: CC:DOM:CORP:5) or telephone 202-622-7550 (not a toll-free
number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collections of information contained in these final regulations
have been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3504(h))
under control number 1545-1275. The estimated annual burden per
respondent with respect to the Secs. 1.382-9(d)(2)(iii) and (d)(4)(iv)
statements varies from 10 minutes to 1 hour, depending on individual
circumstances, with an estimated average of 15 minutes. The estimated
annual burden per respondent with respect to the Sec. 1.382-9(d)(6)(ii)
elections varies from 10 minutes to 2 hours, depending on individual
circumstances, with an estimated average of 1 hour.
These estimates are approximations of the average time expected to
be necessary for a collection of information. They are based on such
information as is available to the Internal Revenue Service. Individual
respondents or recordkeepers may require more or less time, depending
on their particular circumstances.
Comments concerning the accuracy of these burden estimates and
suggestions for reducing these burdens should be directed to the
Internal Revenue Service, Attn: IRS Reports Clearance Officer, PC:FP,
Washington, DC 20224, and to the Office of Management and Budget,
Attention: Desk Officer for the Department of the Treasury, Office of
Information and Regulatory Affairs, Washington, DC 20503.
This document also amends the table of control numbers in
Sec. 602.101 by restoring a control number (1545-1281) for Sec. 1.382-3
that was removed by T.D. 8490 (58 FR 51571 (1993)).

Background

This document contains final regulations to be added to the Income
Tax Regulations (26 CFR part 1) under section 382 of the Internal
Revenue Code (Code). The final regulations provide rules relating to
the determination of whether stock of a loss corporation is owned as a
result of being a qualified creditor for purposes of section
382(l)(5)(E) of the Code.
Proposed regulations on this subject were set forth in a notice of
proposed rulemaking published in the Federal Register on May 10, 1993.
See 58 FR 27498 (1993). (That document also withdrew earlier proposed
regulations on this subject that had been published in the Federal
Register on September 23, 1991 (56 FR 47921 (1991))). The IRS received
comments on the proposed regulations and held a public hearing on July
16, 1993. Having considered the comments and the statements made at the
hearing, the IRS and the Treasury Department adopt the proposed
regulations as revised by this Treasury decision.

Explanation of Provisions

Section 382(l)(5) of the Code provides special rules for ownership
changes resulting from bankruptcy proceedings. A loss corporation that
qualifies for the special rules can use its loss carryforwards, after
certain reductions, against its post-change income without limitation
by section 382(a). A loss corporation qualifies only if its pre-change
shareholders and creditors own at least 50 percent of its stock after
the ownership change. Section 382(l)(5)(E) provides that stock issued
in exchange for indebtedness counts toward the 50 percent threshold of
section 382(l)(5) only if the indebtedness (1) was held by the creditor
at least 18 months before the bankruptcy filing, or (2) arose in the
ordinary course of the trade or business of the loss corporation and
was held at all times by the same beneficial owner. The proposed
regulations published in the Federal Register on May 10, 1993, contain
rules for determining if stock received by creditors counts toward the
50 percent threshold of section 382(l)(5).
The final regulations adopt the proposed regulations with several
changes to respond to comments. The changes, as well as certain
comments that were not adopted in the final regulations, are discussed
below.

A. Treatment of Certain Indebtedness As Continuously Owned by the Same
Owner

The proposed regulations include a de minimis rule that allows a
loss corporation to treat indebtedness as always having been owned by
the beneficial owner of the indebtedness immediately before the
ownership change if the beneficial owner is not, immediately after the
ownership change, either a 5-percent shareholder or an entity through
which a 5-percent shareholder owns an indirect ownership interest in
the loss corporation (a 5-percent entity). The de minimis rule does not
apply to indebtedness owned by a person whose participation in
formulating a plan of reorganization makes evident to the loss
corporation that the person has not owned the indebtedness for the
requisite period. This exception applies regardless of whether the
participant exchanges the indebtedness for stock pursuant to the plan
or transfers the indebtedness to other persons prior to the effective
date of the plan.
One commentator recommended that the exception to the de minimis
rule be deleted because it is unclear and unlikely to work well in
practice. The commentator suggested that the speculative investors who
are the target of the rule are likely to sell their debt prior to the
effective date of the plan. Unless the loss corporation could identify
the purchasers of the debt, it would have difficulty applying the
exception.
The final regulations retain the exception to the de minimis rule.
The loss corporation should not be able to disregard the fact that a
creditor has not held its debt for the period required by section
382(l)(5)(E) if that fact is made evident by the creditor's
participation in the formulation of the plan of reorganization. The
need for the requirement that the loss corporation take these facts
into account outweighs any potential difficulty the loss corporation
may have in applying the requirement if the creditor that participates
in formulating the plan transfers its debt prior to the effective date
of the plan.

B. Tacking Rules

The proposed regulations allow the tacking of the ownership periods
of a transferee and transferor of debt in certain circumstances for the
purpose of determining whether the debt meets the continuous ownership
requirement of section 382(l)(5)(E).
The proposed regulations include a rule which permits tacking for a
transfer pursuant to a subrogation in which a bank or insurance company
acquires a claim against a loss corporation by reason of a payment to
the claimant under a letter of credit or insurance policy. Commentators
recommended that the rule be expanded to cover transfers pursuant to
security arrangements regardless of whether the transferee is a bank or
the arrangement is evidenced by a letter of credit. The final
regulations adopt this recommendation.
Commentators also recommended that a tacking rule be added to cover
factoring transactions. Corporations in certain industries customarily
sell (or ``factor'') their accounts receivable as a means of financing
their operations. In response to this recommendation, an additional
tacking rule has been added to the final regulations. This rule applies
to a transfer of an account receivable in a customary commercial
factoring transaction made within 30 days after the account arose to a
transferee that regularly engages in such transactions.

C. Treatment of Accrued Interest on Qualified Indebtedness

The proposed (and final) regulations generally provide that stock
received by a creditor counts toward the 50 percent threshold of
section 382(l)(5) only to the extent that the creditor receives the
stock in full or partial satisfaction of qualifying indebtedness held
for the requisite period. In response to a comment, the final
regulations clarify that such indebtedness held by a creditor includes
interest accrued thereon.

D. Effective Date

The proposed regulations were to apply to ownership changes
occurring on or after the date the Treasury decision adopting the
regulations was filed with the Federal Register. The preamble to the
proposed regulations expressed an intent that taxpayers not be
disadvantaged by the withdrawal of the earlier proposed regulations and
requested comments on ways to achieve that result.
The final regulations apply to ownership changes occurring on or
after the date the Treasury decision adopting the proposed regulations
is filed with the Federal Register. As commentators recommended,
however, the final regulations allow elective retroactive application
of the rules of the regulations to ownership changes that occurred on
or after January 1, 1987. If the loss corporation elects retroactive
application, it may also revoke any prior election made under section
382(l)(5)(H) to not have section 382(l)(5) apply.

Special Analyses

It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866. It
has also been determined that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act
(5 U.S.C. chapter 6) do not apply to these regulations, and therefore,
a Regulatory Flexibility Analysis is not required. Pursuant to section
7805(f) of the Code, the notice of proposed rulemaking was submitted to
the Chief Counsel for Advocacy of the Small Business Administration for
comment on its impact on small business.

Drafting Information

The principal author of these regulations is Diana MacKeen Fulton,
Office of Assistant Chief Counsel (Corporate), Internal Revenue
Service. However, other personnel from the IRS and Treasury Department
participated in their development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in
part as follows:

Authority: 26 U.S.C. 7805 * * *.

Section 1.382-9 also issued under 26 U.S.C. 382(l)(1)(B),
(l)(3), and (m).
* * * * *
Par. 2. In Sec. 1.382-1, the table of contents is amended by:
1. Continuing to reserve the entry for 1.382-9, paragraph (c).
2. Adding entries for paragraphs (d) through (d)(6)(ii)(C).
3. The additions read as follows:

Sec. 1.382-1 Table of contents.

* * * * *

Sec. 1.382-9 Special rules under section 382 for corporations
under the jurisdiction of a court in a title 11 or similar case.

* * * * *
(c) [Reserved]
(d) Rules for determining whether stock of the loss corporation
is owned as a result of being a qualified creditor.
(1) Qualified creditor.
(2) General rules for determining whether indebtedness is
qualified indebtedness.
(i) Definition.
(ii) Determination of beneficial ownership.
(iii) Duty of inquiry.
(iv) Ordinary course indebtedness.
(3) Treatment of certain indebtedness as continuously owned by
the same owner.
(i) In general.
(ii) Operating rules.
(iii) Indebtedness owned by beneficial owner who becomes a 5-
percent shareholder or 5-percent entity.
(iv) Example.
(4) Special rule if indebtedness is a large portion of
creditor's assets.
(i) In general.
(ii) Applicable period.
(iii) Determination of ownership change.
(iv) Reliance on statement.
(5) Tacking of ownership periods.
(i) Transferee treated as owning indebtedness for period owned
by transferor.
(ii) Qualified transfer.
(iii) Exception.
(iv) Debt-for-debt exchanges.
(6) Effective date.
(i) In general.
(ii) Elections and amended returns.
(A) Election to apply this paragraph (d) retroactively.
(B) Election to revoke section 382(l)(5)(H) election.
(C) Amended returns.
* * * * *
Par. 3. Section 1.382-9 is amended by:
1. Revising the last sentence of paragraph (a).
2. Adding paragraph (d).
3. Revising the second sentence of paragraph (e)(1).
4. The revisions and additions read as follows:

Sec. 1.382-9 Special rules under section 382 for corporations under
the jurisdiction of a court in a title 11 or similar case.

(a) * * * Terms and nomenclature used in this section, and not
otherwise defined herein (including the nomenclature and assumptions in
Sec. 1.382-2T(b) relating to the examples) have the same respective
meanings as in section 382 and the regulations thereunder.
* * * * *
(d) Rules for determining whether stock of the loss corporation is
owned as a result of being a qualified creditor--(1) Qualified
creditor. A qualified creditor is the beneficial owner, immediately
before the ownership change, of qualified indebtedness of the loss
corporation. A qualified creditor owns stock of the new loss
corporation (or a controlling corporation) as a result of being a
qualified creditor only to the extent that the qualified creditor
receives stock in full or partial satisfaction of qualified
indebtedness (including interest accrued on such indebtedness) in a
transaction that is ordered by the court or is pursuant to a plan
approved by the court in a title 11 or similar case. For purposes of
this paragraph (d)(1), ownership of stock after the ownership change is
determined without applying the attribution rules generally applicable
under section 382(l)(3)(A) or Sec. 1.382-2T(h).
(2) General rules for determining whether indebtedness is qualified
indebtedness--(i) Definition. Indebtedness of the loss corporation is
qualified indebtedness if it--
(A) Has been owned by the same beneficial owner since the date that
is 18 months before the date of the filing of the title 11 or similar
case; or
(B) Arose in the ordinary course of the trade or business of the
loss corporation and has been owned at all times by the same beneficial
owner.
(ii) Determination of beneficial ownership. For purposes of
paragraph (d)(2)(i) of this section, beneficial ownership of
indebtedness is determined without applying attribution rules.
(iii) Duty of inquiry. The loss corporation must determine that
indebtedness that the loss corporation treats as qualified
indebtedness, other than indebtedness to which paragraph (d)(3)(i) of
this section applies, has been owned for the requisite period by the
beneficial owner who owns the indebtedness immediately before the
ownership change. The loss corporation may rely on a statement, signed
under penalties of perjury, by a beneficial owner regarding the amount
of indebtedness the beneficial owner owns and the length of time that
the beneficial owner has owned the indebtedness.
(iv) Ordinary course indebtedness. For purposes of this paragraph
(d)(2), indebtedness arises in the ordinary course of the loss
corporation's trade or business only if the indebtedness is incurred by
the loss corporation in connection with the normal, usual, or customary
conduct of business, determined without regard to whether the
indebtedness funds ordinary or capital expenditures of the loss
corporation. For example, indebtedness (other than indebtedness
acquired for a principal purpose of being exchanged for stock) arises
in the ordinary course of the loss corporation's trade or business if
it is trade debt; a tax liability; a liability arising from a past or
present employment relationship, a past or present business
relationship with a supplier, customer, or competitor of the loss
corporation, a tort, a breach of warranty, or a breach of statutory
duty; or indebtedness incurred to pay an expense deductible under
section 162 or included in the cost of goods sold. A claim that arises
upon the rejection of a burdensome contract or lease pursuant to the
title 11 or similar case is treated as arising in the ordinary course
of the loss corporation's trade or business if the contract or lease so
arose.
(3) Treatment of certain indebtedness as continuously owned by the
same owner--(i) In general. For purposes of paragraph (d)(2) of this
section, a loss corporation may treat indebtedness as always having
been owned by the beneficial owner of the indebtedness immediately
before the ownership change if the beneficial owner is not, immediately
after the ownership change, either a 5-percent shareholder or an entity
through which a 5-percent shareholder owns an indirect ownership
interest in the loss corporation (a 5-percent entity). This paragraph
(d)(3)(i) does not apply to indebtedness beneficially owned by a person
whose participation in formulating a plan of reorganization makes
evident to the loss corporation (whether or not the loss corporation
had previous knowledge) that the person has not owned the indebtedness
for the requisite period.
(ii) Operating rules. For purposes of paragraph (d)(3)(i) of this
section: (A) If a loss corporation has actual knowledge of a
coordinated acquisition of its indebtedness by a group of persons,
through a formal or informal understanding among themselves, for a
principal purpose of exchanging the indebtedness for stock, the
indebtedness (and any stock received in exchange therefor) is treated
as owned by an entity. A principal element in determining if an
understanding exists among members of a group is whether the investment
decision of each member is based upon the investment decision of one or
more other members.
(B) If the loss corporation has actual knowledge regarding stock
ownership described in Sec. 1.382-2T(k)(2), the loss corporation must
take that ownership into account in determining which beneficial owners
of indebtedness are, immediately after the ownership change, 5-percent
shareholders or 5-percent entities. The loss corporation is not
required to take into account an ownership interest described in
Sec. 1.382-2T(k)(4) unless the loss corporation has actual knowledge of
the ownership interest.
(C) The term 5-percent shareholder includes any person who is a 5-
percent shareholder of the loss corporation within the meaning of
Sec. 1.382-2T(g), without regard to the option attribution rules of
section 382(l)(3)(A) or Sec. 1.382-4(d) (or, if applicable, Sec. 1.382-
2T(h)(4)).
(D) Paragraph (d)(3)(i) of this section does not apply to
indebtedness if the loss corporation has actual knowledge immediately
after the ownership change that the exercise of an option to acquire or
dispose of stock of the loss corporation would cause the beneficial
owner of the indebtedness immediately before the ownership change to
be, after the ownership change, either a 5-percent shareholder or a 5-
percent entity. An interest that is treated as an option under
Sec. 1.382-4(d)(9) (or Sec. 1.382-2T(h)(4)(v) if applicable) is treated
as an option for purposes of this paragraph (d)(3)(ii)(D).
(iii) Indebtedness owned by beneficial owner who becomes a 5-
percent shareholder or 5-percent entity. If the beneficial owner of
indebtedness immediately before the ownership change is a 5-percent
shareholder or 5-percent entity immediately after the ownership change,
the general rules of paragraph (d)(2) of this section apply to
determine whether the indebtedness has been owned for the requisite
period by the beneficial owner.
(iv) Example. The following example illustrates paragraph (d)(3) of
this section.

(A)(1) L is a loss corporation in a title 11 case. The plan of
reorganization of L approved by the bankruptcy court provides for
the satisfaction of claims by the issuance of new L common stock to
its creditors as follows:

A--2 percent
B--7.5 percent
C--2.5 percent
P1--3 percent
P2--10 percent
P3--4.9 percent
P4--4.9 percent
P5--4.9 percent

(2) P2 is owned by Public P2. B owns 10 percent of the stock of
P1 and L has no actual knowledge of this ownership. L has actual
knowledge that D owns P3, P4 and P5. In addition, L has actual
knowledge, immediately after the ownership change, that C owns an
option to acquire newly-issued stock of L that, if exercised, would
increase C's percentage ownership of L stock from 2.5 percent to 8
percent. An ownership change of L occurs on the date the plan
becomes effective.
(B) Under paragraph (d)(3)(i) of this section, L may treat the
indebtedness owned by A and P1 immediately before the ownership
change as always having been owned by A and P1. Neither A nor P1 is
a 5-percent shareholder immediately after the ownership change.
Further, because P1 owns less than 5 percent of the L stock (and L
has no actual knowledge of B's ownership interest in P1), P1 is
treated as an individual, and the L stock owned by P1 is not
attributed to any other person, including B. See Sec. 1.382-
2T(h)(2)(iii). Therefore, P1 is not a 5-percent entity.
(C) Paragraph (d)(3)(i) of this section does not apply to the
indebtedness owned by B, C, P2, P3, P4, or P5. B is a 5-percent
shareholder immediately after the ownership change. L has actual
knowledge immediately after the ownership change that the exercise
of C's option would cause C to be a 5-percent shareholder
immediately after the ownership change. (L does not take into
account the effect of the exercise of the option, however, in
determining the percentage stock ownership of any person other than
C because the deemed exercise would not cause any other person to be
a 5-percent shareholder or a 5-percent entity after the ownership
change.) P2 is a 5-percent entity, because Public P2, a 5-percent
shareholder, owns an indirect ownership interest in L through P2.
P3, P4, and P5 are 5-percent entities because D, a 5-percent
shareholder, owns an indirect ownership interest in L through P3,
P4, and P5. Because L has actual knowledge that D would be a 5-
percent shareholder but for the application of Sec. 1.382-
2T(h)(2)(iii), that section does not apply to P3, P4, or P5. See
Sec. 1.382-2T(k)(2). Thus, under Sec. 1.382-2T(h)(2)(i), the L stock
owned by P3, P4, and P5 is attributed to D, and D is a 5-percent
shareholder. Because paragraph (d)(3)(i) of this section does not
apply to the indebtedness owned by B, C, P2, P3, P4, and P5, L may
treat as qualified indebtedness only indebtedness that it determines
had been owned by such persons for the requisite period. See
paragraph (d)(2)(iii) of this section.

(4) Special rule if indebtedness is a large portion of creditor's
assets--(i) In general. Indebtedness is not qualified indebtedness if--
(A) The beneficial owner of the indebtedness is a corporation or
other entity that had an ownership change on any day during the
applicable period;
(B) The indebtedness represents more than 25 percent of the fair
market value of the total gross assets (excluding cash or cash
equivalents) of the beneficial owner on its change date; and
(C) The beneficial owner is a 5-percent entity immediately after
the ownership change of the loss corporation (determined by applying
the rules of paragraph (d)(3) of this section).
(ii) Applicable period. For purposes of paragraph (d)(4)(i) of this
section, the term applicable period means the period beginning on the
day 18 months before the filing of the title 11 or similar case (or the
day on which the beneficial owner acquired the indebtedness, if later)
and ending with the change date of the loss corporation.
(iii) Determination of ownership change. For purposes of paragraph
(d)(4)(i) of this section, the determination whether a beneficial owner
of indebtedness has an ownership change is made under the principles of
section 382 and the regulations thereunder, without regard to whether
the beneficial owner is a loss corporation and by beginning the testing
period no earlier than the latest of the day three years before the
change date, the day 18 months before the filing of the title 11 or
similar case, or the day on which the beneficial owner acquired the
indebtedness.
(iv) Reliance on statement. Paragraph (d)(4)(i) of this section
does not apply to indebtedness if the loss corporation obtains a
statement, signed under penalties of perjury, by the beneficial owner
of the indebtedness that states that paragraph (d)(4)(i) of this
section does not apply to the indebtedness.
(5) Tacking of ownership periods--(i) Transferee treated as owning
indebtedness for period owned by transferor. To determine whether
indebtedness transferred in a qualified transfer is qualified
indebtedness, the transferee is treated as having owned the
indebtedness for the period that it was owned by the transferor.
(ii) Qualified transfer. For purposes of paragraph (d)(5)(i) of
this section, a transfer of indebtedness is a qualified transfer if--
(A) The transfer is between parties who bear a relationship to each
other described in section 267(b) or 707(b) (substituting at least 80
percent for more than 50 percent each place it appears in section
267(b) (and section 267(f)(1)) or 707(b));
(B) The transfer is a transfer of a loan within 90 days after its
origination, pursuant to a customary syndication transaction;
(C) The transfer is a transfer of newly incurred indebtedness by an
underwriter that owned the indebtedness for a transitory period
pursuant to an underwriting;
(D) The transferee's basis in the indebtedness is determined under
section 1014 or 1015 or with reference to the transferor's basis in the
indebtedness;
(E) The transfer is in satisfaction of a right to receive a
pecuniary bequest;
(F) The transfer is pursuant to any divorce or separation
instrument (within the meaning of section 71(b)(2));
(G) The transfer is pursuant to a subrogation in which the
transferee acquires a claim against the loss corporation by reason of a
payment to the claimant pursuant to an insurance policy or a guarantee,
letter of credit or similar security arrangement; or
(H) The transfer is a transfer of an account receivable in a
customary commercial factoring transaction made within 30 days after
the account arose to a transferee that regularly engages in such
transactions.
(iii) Exception. A transfer of indebtedness is not a qualified
transfer for purposes of paragraph (d)(5)(i) of this section if the
transferee acquired the indebtedness for a principal purpose of
benefiting from the losses of the loss corporation by--
(A) Exchanging the indebtedness for stock of the loss corporation
pursuant to the title 11 or similar case; or
(B) Selling the indebtedness at a profit that reflects the
expectation that, by reason of section 382(l)(5), section 382(a) will
not apply to any ownership change resulting from the title 11 or
similar case.
(iv) Debt-for-debt exchanges. If the loss corporation satisfies its
indebtedness with new indebtedness, either through an exchange of new
indebtedness for old indebtedness or a change in the terms of
indebtedness that results in an exchange under section 1001--
(A) The owner of the new indebtedness is treated as having owned
that indebtedness for the period that it owned the old indebtedness;
and
(B) The new indebtedness is treated as having arisen in the
ordinary course of the trade or business of the loss corporation if the
old indebtedness so arose.
(6) Effective date--(i) In general. This paragraph (d) applies to
ownership changes occurring on or after March 17, 1994.
(ii) Elections and amended returns--(A) Election to apply this
paragraph (d) retroactively. A loss corporation may elect to apply this
paragraph (d) to an ownership change occurring prior to March 17, 1994.
This election must be made by the later of the due date (including any
extensions of time) of the loss corporation's tax return for the
taxable year which includes the change date or the date that the loss
corporation files its first tax return after May 16, 1994. The election
is made by attaching the following statement to the return: ``This is
an Election to Apply Sec. 1.382-9(d) Retroactively with Respect to the
Ownership Change on [Insert Date of Ownership Change] That Occurred in
Connection with the Title 11 or Similar Case filed on [Insert Date of
Filing].'' This statement must be accompanied by the amended returns
described in paragraph (d)(6)(ii)(C) of this section. An election under
this paragraph (d)(6) is irrevocable.
(B) Election to revoke section 382(l)(5)(H) election. A loss
corporation may elect to revoke a prior election made under section
382(l)(5)(H) with respect to an ownership change occurring before March
17, 1994 by including the following statement with its election to
apply Sec. 1.382-9(d) retroactively: ``This is an Election to Revoke a
Prior Election Made Under Section 382(l)(5)(H) With Respect to the
Ownership Change on [Insert Date of Ownership Change] That Occurred in
Connection With the Title 11 or Similar Case Filed on [Insert Date of
Filing].''
(C) Amended returns. If the retroactive application of this
paragraph (d) affects the amount of taxable income or loss for a prior
taxable year, then, except as precluded by the applicable statute of
limitations, the loss corporation (or the common parent of any
consolidated group of which the loss corporation was a member for the
year) must file an amended return for the year that reflects the
effects of the retroactive application of the rules of this paragraph
(d). If the statute of limitations precludes the filing of an amended
return for one or more such prior taxable years, the loss corporation
(or the common parent) must make appropriate adjustments under the
principles of section 382(l)(2)(A) in subsequent taxable years to
reflect the difference between the losses and credits actually used in
such prior taxable years and the amount that would have been used in
those years applying the rules of this paragraph (d).
(e) Option attribution for purposes of determining stock ownership
under section 382(l)(5)(A)(ii)--(1) In general. * * * An option that is
owned as a result of being a pre-change shareholder or qualified
creditor and that, if exercised, would result in the ownership of stock
by a pre-change shareholder or qualified creditor is not treated as
exercised under this paragraph (e). * * *
* * * * *

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

Par. 4. The authority citation for part 602 continues to read as
follows:

Authority: 26 U.S.C. 7805.

Par. 5. Section 602.101(c) is amended by revising the entries for
1.382-3 and 1.382-9 to read as follows:

Sec. 602.101 OMB Control numbers.

* * * * *
(c) * * *

------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described control No.
------------------------------------------------------------------------

*****
1.382-3.................................................... 1545-1281
1545-1345

*****
1.382-9.................................................... 1545-1260
1545-1120
1545-1275
1545-1324
*****
------------------------------------------------------------------------

Margaret Milner Richardson,
Commissioner of Internal Revenue.

Approved: February 24, 1994.
Leslie Samuels,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 94-6085 Filed 3-17-94; 8:45 am]
BILLING CODE 4830-01-U