Rev. Proc 2008-27

26 CFR 1.956–1: Definition of United States property.
(Also: 956(c)(2)(J).)

Rev. Proc. 2008–26
SECTION 1. PURPOSE
This revenue procedure sets forth circumstances in which the Internal Revenue Service (Service) will not challenge
whether a security is a “readily marketable security” for purposes of section
956(c)(2)(J) of the Internal Revenue Code
(Code). No inference should be drawn
regarding whether a security would be
described in section 956(c)(2)(J) if it falls
outside the scope of this revenue procedure. Furthermore, there should be no
inference regarding whether securities
within the scope of this revenue procedure
would be readily marketable or would
not be readily marketable for purposes of
section 956(c)(2)(J) but for this revenue
procedure. In addition, this revenue procedure does not address any United States
federal income tax issue arising under any
other section of the Code.
SECTION 2. BACKGROUND
Section 951(a)(1) requires that a United
States shareholder of a controlled foreign
corporation include in gross income for his
taxable year in which or with which such
taxable year of the corporation ends certain amounts including the amount determined under section 956 with respect to
such shareholder for such year. Section
951(a)(1)(B).
The amount determined under section 956 is generally the lesser of (i) the
excess (if any) of the United States shareholder’s pro rata share of the average of
the amounts of United States property
held (directly or indirectly) by the controlled foreign corporation as of the close
of each quarter of the controlled foreign
corporation’s taxable year over the amount
of earnings and profits described in section 959(c)(1)(A) with respect to such
shareholder or (ii) the United States shareholder’s pro rata share of the applicable
earnings (as defined in section 956(b)(1))
of such controlled foreign corporation.
Section 956(a).

May 27, 2008

The term United States property includes an obligation of a United States
person, excluding, however:
an obligation of a United States person
to the extent the principal amount of the
obligation does not exceed the fair market value of readily marketable securities sold or purchased pursuant to a sale
and repurchase agreement or otherwise
posted or received as collateral for the
obligation in the ordinary course of its
business by a United States or foreign
person which is a dealer in securities or
commodities.
Section 956(c)(2)(J) (emphasis added).
Current market conditions and liquidity
constraints are creating some uncertainty
regarding whether a security is “readily marketable” for purposes of section
956(c)(2)(J). For example, the market for
certain securities that were readily marketable in the past has become severely
curtailed. As a result, there is uncertainty whether many securities are readily
marketable in the current economic environment even though they are of a type
that are readily marketable under ordinary
market conditions. In response to taxpayers’ concerns, this revenue procedure
provides certainty to taxpayers by setting
forth circumstances under which the Service will not challenge whether a security
is “readily marketable” for purposes of
section 956(c)(2)(J) to the extent that it is
of a type that would be readily marketable
under ordinary market conditions.
SECTION 3. SCOPE
This revenue procedure applies to
determine whether securities are “readily marketable” for purposes of section
956(c)(2)(J) for any day during calendar
years 2007 or 2008 for which it is relevant
whether securities are readily marketable
for purposes of that section.
SECTION 4. APPLICATION
With respect to a determination within
the scope of this revenue procedure, the
Service will not challenge whether a security is readily marketable for purposes
of section 956(c)(2)(J) if the security is of
a type that was readily marketable at any
time within three years prior to the effective date of this revenue procedure. For
example, the Service will not challenge

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whether a mortgage-backed security or
corporate debt security (whether secured
or unsecured) is “readily marketable” if
such a security is described in Section 3 of
this revenue procedure and is of a type that
was readily marketable at any time within
three years prior to the effective date of
this revenue procedure.
This revenue procedure does not address any other issue relating to the qualification of a transaction under section
956(c)(2)(J) (e.g., whether the transaction
is undertaken in the ordinary course of
business by a dealer in securities or commodities).
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective
May 12, 2008.
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue
procedure is John H. Seibert of the Office of Associate Chief Counsel (International). For further information regarding this revenue procedure, contact
Mr. Seibert at (202) 622–0171 (not a
toll-free call).
26 CFR 1.1445–2: Situations in which withholding is
not required under section 1445(a).
(Also: §§ 897; 1445; 1.897–1; 1.897–2; 1.897–5T;
1.897–6T; 1.1445–5.)

Rev. Proc. 2008–27
SECTION 1. PURPOSE
This revenue procedure provides a
simplified method for taxpayers to request relief for late filings under sections 1.897–2(g)(1)(ii)(A), 1.897–2(h),
1.1445–2(c)(3)(i),
1.1445–2(d)(2),
1.1445–5(b)(2), and 1.1445–5(b)(4) of the
Income Tax Regulations.
SECTION 2. BACKGROUND
.01 Section 897(a)(1) of the Internal
Revenue Code treats the gain or loss of
a nonresident alien or foreign corporation
from the disposition of a U.S. real property
interest as if the taxpayer were engaged in
a trade or business in the United States,
and as if such gain or loss were effectively

2008–21 I.R.B.

connected with such trade or business under sections 871(b) or 882. A U.S. real
property interest includes an interest in real
property located in the United States or the
Virgin Islands and any interest (other than
an interest solely as a creditor) in a domestic corporation unless the taxpayer establishes that the corporation was at no time
a U.S. real property holding corporation
(USRPHC) during the period described in
section 897(c)(1)(A)(ii).
.02 Section 1.897–2 provides requirements to establish that a corporation is not
a USRPHC. Unless these requirements are
satisfied, it is presumed that a domestic
corporation is a USRPHC.
.03 Section 1445(a) generally requires
the transferee of a U.S. real property interest to withhold 10 percent of the amount
realized by the foreign person on the disposition of the U.S. real property interest. Section 1445(b) and the regulations
thereunder provide several exceptions to
this general requirement. In addition, section 1445(e) provides special rules for certain dispositions and distributions. Section 1445(e)(1) requires withholding on
certain dispositions of U.S. real property
interests by a domestic partnership, domestic trust, or domestic estate. Section
1445(e)(2) requires withholding on certain
distributions by foreign corporations. Section 1445(e)(3) requires withholding on
distributions by certain domestic corporations to foreign shareholders. Section
1445(e)(4) addresses taxable distributions
by domestic or foreign partnerships, trusts,
or estates, and section 1445(e)(5) provides
rules relating to dispositions of interests
in such entities. Section 1445(e)(6) addresses certain distributions by a regulated
investment company or real estate investment trust.
.04 One exception to section 1445 withholding involves nonrecognition transactions. Pursuant to section 1.1445–2(d)(2),
a transferee is not required to withhold if
the transferee provides notice that, by reason of the operation of a nonrecognition
provision of the Internal Revenue Code or
the provisions of any United States treaty,
the transferor is not required to recognize
any gain or loss with respect to the transfer. Under section 1.1445–2(d)(2)(i)(A),
the transferor may provide a notice to the
transferee that the transferor is not required
to recognize gain or loss. The notice
must include the information described

2008–21 I.R.B.

in section 1.1445–2(d)(2)(iii). The transferee must provide a copy of the notice
to the IRS within 20 days of the transfer. § 1.1445–2(d)(2)(i)(B). Similarly, in
transfers described in section 1445(e), an
entity or fiduciary otherwise required to
withhold is not required to withhold if, by
reason of the operation of a nonrecognition
provision of the Internal Revenue Code or
the provisions of any United States treaty,
no gain or loss is required to be recognized
by the foreign person with respect to which
withholding would otherwise be required.
§ 1.1445–5(b)(2)(i)(A). Withholding is not
required if, within 20 days of the transfer,
the entity or fiduciary delivers a notice
to the IRS that includes the information
described in section 1.1445–5(b)(2)(ii).
§ 1.1445–5(b)(2)(i)(B).
.05 Another exception to withholding involves the transfer of an interest
in a domestic corporation which is not
a USRPHC. Because section 897(a)(1)
does not apply to the gain (or loss)
from a foreign person’s disposition of
stock in a domestic corporation that is
not a USRPHC, section 1445 does not
require the transferee to withhold upon
a foreign person’s disposition of stock
in a domestic corporation that is not a
USRPHC. To establish that an interest
in a domestic corporation was not a
U.S. real property interest as of the date
of the disposition, the foreign person
must either obtain a statement from the
corporation or a determination from the
IRS. To qualify for the rule permitting a
statement from the corporation, a foreign
transferor must obtain from the transferred
domestic corporation a statement that the
domestic corporation is not a USRPHC
as of the date of the disposition. This
statement must be obtained no later than
the date, including any extensions, on
which a tax return would otherwise be
due with respect to the foreign transferor’s
disposition.
§ 1.897–2(g)(1)(ii)(A).
The domestic corporation must mail
a notice of the statement to the IRS
within 30 days after it is provided to the
foreign transferor, unless it meets the
requirements of section 1.897–2(h)(4)(i).
§§ 1.897–2(h)(2) and 1.897–2(h)(4)(i).
If the IRS has been so notified, and the
transferee receives a copy of the statement,
then the transferee is not required
to withhold.
§§1.897–2(g)(1)(ii)(B)
and 1.1445–2(c)(3)(i).
Similarly, in

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transactions involving the transfer of an
interest in a domestic corporation which
is not a USRPHC under section 1445(e),
where the transferor or its fiduciary
obtains a statement that the domestic
corporation is not a USRPHC, and timely
notice of such statement is provided to
the IRS pursuant to section 1.897–2(h),
section 1.1445–5(b)(4)(iii) provides that
no withholding is required.
.06 Under section 301.9100–1(c), the
Commissioner may grant a reasonable extension of time to make a regulatory election or certain statutory elections under all
subtitles of the Code, except subtitles E,
G, H, and I, if the taxpayer demonstrates to
the satisfaction of the Commissioner that
the taxpayer acted reasonably and in good
faith, and that granting the relief will not
prejudice the interests of the government.
§ 301.9100–3(a). Section 301.9100–1(b)
defines the term “regulatory election” as
an election whose due date is prescribed
by a regulation, a revenue ruling, revenue
procedure, notice, or announcement published in the Internal Revenue Bulletin.
The statements and notices described in
sections 1.897–2(g)(1)(ii)(A), 1.897–2(h),
1.1445–2(c)(3)(i),
1.1445–2(d)(2),
1.1445–5(b)(2), and 1.1445–5(b)(4) all
fall within the definition of a regulatory
election.
.07 The Commissioner has authority under sections 301.9100–1
and 301.9100–3 to grant an extension of time if a taxpayer fails to
file a timely election under sections 1.897–2(g)(1)(ii)(A), 1.897–2(h),
1.1445–2(c)(3)(i),
1.1445–2(d)(2),
1.1445–5(b)(2), or 1.1445–5(b)(4). Section 301.9100–3 provides that the Commissioner will grant an extension of time
when the taxpayer provides the evidence
to the satisfaction of the Commissioner
that the taxpayer has acted reasonably and
in good faith, and the grant of relief will
not prejudice the interests of the government.
SECTION 3. SCOPE
This revenue procedure provides
a simplified method to request relief for certain late filings under sections 1.897–2(g)(1)(ii)(A), 1.897–2(h),
1.1445–2(c)(3)(i),
1.1445–2(d)(2),
1.1445–5(b)(2), and 1.1445–5(b)(4). This
procedure is in lieu of the letter ruling

May 27, 2008

procedure that otherwise would be used
to obtain relief under section 301.9100–3.
Accordingly, user fees do not apply to
corrective action under this revenue procedure, and a taxpayer can request relief by
applying for a letter ruling under section
301.9100–3 only if the taxpayer is denied
relief by the IRS pursuant to this revenue
procedure.
SECTION 4. APPLICATION
.01 Eligibility for Relief. A taxpayer is
eligible for relief under section 4.03 of this
revenue procedure for a late filing under
sections 1.897–2(g)(1)(ii)(A), 1.897–2(h),
1.1445–2(c)(3)(i),
1.1445–2(d)(2),
1.1445–5(b)(2), or 1.1445–5(b)(4) if a
statement or notice described in one or
more of those sections was not provided
to the relevant person or the IRS by the
specified deadline and the taxpayer has
reasonable cause for the failure to make a
timely filing.
.02 Procedural Requirements for Requesting Relief. Once the taxpayer becomes aware of the failure to file the
statements or notices required by sections 1.897–2(g)(1)(ii)(A), 1.897–2(h),
1.1445–2(c)(3)(i),
1.1445–2(d)(2),
1.1445–5(b)(2), or 1.1445–5(b)(4), the
taxpayer must file the completed statement or notice with the appropriate person
or the IRS, as applicable. The completed
statement or notice filed with the appropriate person or the IRS must state at the
top of the document that it is “FILED
PURSUANT TO REV. PROC. 2008–27.”
With respect to a completed statement or
notice required to be filed with the IRS under sections 1.897–2(h), 1.1445–2(d)(2),
or 1.1445–5(b)(2), as applicable, the taxpayer must attach an explanation describing why the taxpayer’s failure to timely
file the statement or notice was due to reasonable cause. Additionally, within the explanation, the taxpayer must provide that it
filed with, or obtained from, an appropriate
person the statements or notices required

May 27, 2008

under sections 1.897–2(g)(1)(ii)(A),
1.1445–2(c)(3)(i), 1.1445–2(d)(2)(i)(A),
or 1.1445–5(b)(4)(iii)(A), as applicable.
The completed statement or notice attached to the taxpayer’s explanation must
be sent to the Ogden Service Center, P.O.
Box 409101, Ogden, UT 84409.
.03 Relief for Late Filing. Upon receipt
of a completed application requesting relief under this revenue procedure, the IRS
will determine whether the requirements
for granting additional time have been satisfied. The IRS will notify the taxpayer
in writing within 120 days of the filing of
the completed application if the IRS determines that the failure to comply was not
due to reasonable cause, or if additional
time will be needed to make a determination. For this purpose, the 120-day period shall begin on the date the taxpayer
is notified in writing that the request has
been received and assigned for review. If,
once such period commences, the taxpayer
is not again notified within 120 days, then
the taxpayer shall be deemed to have established reasonable cause.
SECTION 5. EFFECTIVE DATE
This revenue procedure applies to all
requests for relief received after June 26,
2008. Taxpayers that have ruling requests
pending as of May 27, 2008, are not required to use the procedures of this revenue procedure. However, if taxpayers
have not received a determination of their
request as of May 27, 2008, they may withdraw their request consistent with the procedures in Rev. Proc. 2008–1, 2008–1
I.R.B. 1, (or any succeeding document).
In that event, the IRS will refund the taxpayer’s user fee.
SECTION 6. PAPERWORK
REDUCTION ACT

of Management and Budget in accordance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–2098.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection displays a valid OMB control
number.
The collection of information in this
revenue procedure is in section 4.02. This
information is required to be submitted
to the applicable service center in order
to obtain relief for late filings under sections 1.897–2(g)(1)(ii)(A), 1.897–2(h),
1.1445–2(c)(3)(i),
1.1445–2(d)(2),
1.1445–5(b)(2), or 1.1445–5(b)(4). This
information will be used to determine
whether the eligibility requirements for
obtaining relief have been met. The collection of information is required to obtain
a benefit. The likely respondents are businesses or other for-profit institutions.
The estimated annual burden per respondent varies from 3 to 5 hours, depending on individual circumstances, with an
estimated average of 4 hours. The estimated number of respondents is 200.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
SECTION 7. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Jeffrey P. Cowan of the
Office of Associate Chief Counsel (International). For further information regarding this revenue procedure, contact
Jeffrey P. Cowan at (202) 622–3860 (not a
toll-free call).

The collection of information contained in this revenue procedure has been
reviewed and approved by the Office

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2008–21 I.R.B.