[Federal Register Volume 79, Number 166 (Wednesday, August 27, 2014)]
[Rules and Regulations]
[Pages 51090-51091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20330]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9691]
RIN 1545-BL24
Debt That Is a Position in Personal Property That Is Part of a
Straddle
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of temporary regulations.
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SUMMARY: This document contains final regulations relating to the
application of the straddle rules to a debt instrument. The final
regulations clarify that a taxpayer's obligation under a debt
instrument can be a position in personal property that is part of a
straddle. The final regulations primarily affect taxpayers that issue
debt instruments that provide for one or more payments that reference
the value of personal property or a position in personal property.
DATES: Effective Date: These regulations are effective on August 27,
2014.
Applicability Dates: For dates of applicability, see Sec.
1.1092(d)-1(e).
FOR FURTHER INFORMATION CONTACT: Mary Brewer, (202) 317-6895 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background And Explanation Of Provisions
1. Summary of Prior Notices of Proposed Rule Making and Temporary
Regulations
This document contains amendments to 26 CFR Part 1. On January 18,
2001, a notice of proposed rulemaking (REG-105801-00) (the 2001 NPRM)
was published in the Federal Register (66 FR 4746). The 2001 NPRM
broadly addressed the application of the straddle rules and section
263(g), and it included proposed regulation Sec. 1.1092(d)-1(d) to
clarify the circumstances under which an issuer's position under a debt
instrument is treated as a position in personal property that is part
of a straddle under section 1092 of the Internal Revenue Code. No
public hearing was requested or held. Written and electronic comments
responding to the 2001 NPRM were received, and the only commenter that
substantively addressed proposed Sec. 1.1092(d)-1(d) urged its
adoption.
On September 5, 2013, temporary and final regulations (TD 9635)
were published in the Federal Register (78 FR 54568). In Sec.
1.1092(d)-1T(d), the temporary regulations adopted the text of proposed
Sec. 1.1092(d)-1(d), as published in the 2001 NPRM. As had been
proposed in the 2001 NPRM, to make room for a substantive paragraph
(d), the 2013 final regulations redesignated as paragraph (e)(1) the
section's effective/applicability date provisions, which had formerly
been designated as Sec. 1.1092(d)-1(d). The temporary regulations
added a new paragraph (e)(2) containing the applicability date that had
been proposed in the 2001 NPRM. A notice of proposed rulemaking (REG-
111753-12) (the 2013 NPRM) cross-referencing the temporary regulations
was published in the same issue of the Federal Register (78 FR 54598).
No public hearing was requested or held. No written or electronic
comments responding to the notice of proposed rulemaking were received.
This Treasury decision adopts the provisions in the 2013 NPRM
without substantive change. In addition, this Treasury decision amends
the effective/applicability date provisions in Sec. 1.1092(d)-1(e) to
provide explicitly the dates for those portions of Sec. 1.1092(d)-1
that were added by a 1993 Treasury decision (TD 8491) as discussed
further in section 3 of this preamble.
The corresponding temporary regulations are removed. The remainder
of the 2001 NPRM remains proposed.
2. Overview of the Final Regulations
The final regulations provide guidance under section 1092 regarding
the circumstances in which an issuer's obligation under a debt
instrument may be a position in actively traded personal property and,
therefore, part of a straddle.
Section 1092(d)(1) defines ``personal property'' to mean ``personal
property of a type that is actively traded.'' A debt or obligation
generally is not property of the debtor or obligor. Nevertheless, if a
debt instrument provides for payments that are (or are reasonably
expected to be) linked to the value of personal property as so defined,
then the obligor on the instrument has a position in the personal
property referenced by the debt instrument. Therefore, as was proposed
[[Page 51091]]
in the 2013 NPRM, Sec. 1.1092(d)-1(d) of the final regulations
expressly provides that an obligation under a debt instrument may be a
position in personal property that is part of a straddle.
3. Dates of Applicability of the Regulations
The final regulations adopt the effective/applicability date set
forth in the 2013 NPRM by providing that Sec. 1.1092(d)-1(d) applies
to straddles established on or after January 17, 2001 (the date on
which the 2001 NPRM was filed with the Federal Register). No inference
is intended with respect to straddles established prior to January 17,
2001. In appropriate cases, the IRS may take the position under section
1092(d)(2) that an obligation under a debt instrument was part of a
straddle prior to the effective/applicability date of Sec. 1.1092(d)-
1(d) if the debt instrument functioned economically as an interest in
actively traded personal property.
In addition, the final regulations clarify the effective-date
paragraph (Sec. 1.1092(d)-1(e)) to reflect the applicability of
provisions in Sec. 1.1092(d)-1 that were originally proposed in 1991
and adopted in 1993. On July 10, 1991, a notice of proposed rulemaking
(FI-16-89) (the 1991 NPRM) was published in the Federal Register (56 FR
31350). The 1991 NPRM primarily addressed accounting for notional
principal contracts but also proposed a new Sec. 1.1092(d)-1,
regarding the definition of actively traded personal property for
purposes of the straddle rules. Proposed Sec. 1.1092(d)-1(a) clarified
the definition of actively traded personal property, and proposed Sec.
1.1092(d)-1(b) enumerated several categories of established financial
markets. See 56 FR 31353. The preamble also stated, ``Proposed
regulation section 1.1092(d)-1 is proposed to be effective for notional
principal contracts entered into on or after July 8, 1991.'' See 56 FR
31350. (July 8, 1991, was the date on which the 1991 NPRM was filed
with the Federal Register.)
However, the text of the 1991 proposed regulations contained an
effective date only in paragraph (c), which was the portion of the
proposed regulations that focused on which notional principal contracts
would be treated as actively traded personal property. See proposed
Sec. 1.1092(d)-1(c)(2) (``(2) Effective date. This paragraph (c)
applies to notional principal contracts entered into on or after July
8, 1991.'').
Final regulations (TD 8491) (the 1993 Treasury decision), which
issued Sec. 1.1092(d)-1, were published in the Federal Register on
October 14, 1993 (58 FR 53125). The 1993 Treasury decision moved the
effective date for paragraph (c) to a new paragraph (d), and added an
October 14, 1993, effective date for new paragraph (b)(1)(vii). The
1993 Treasury decision, however, like the 1991 NPRM, did not contain
explicit effective dates for paragraph (a) or for the portion of
paragraph (b) that had appeared in the 1991 NPRM.
Accordingly, these final regulations revise Sec. 1.1092(d)-1(e) to
include explicit effective/applicability-date provisions for all
paragraphs of Sec. 1.1092(d)-1.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866, as
supplemented by Executive Order 13563. Therefore, a regulatory
assessment is not required. It has also been determined that section
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and because the regulation does not
impose a collection of information on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to
section 7805(f) of the Internal Revenue Code, the proposed regulations
preceding these final regulations were submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on their
impact on small business. No comments were received.
Drafting Information
The principal author of these regulations is Mary Brewer, Office of
Associate Chief Counsel (Financial Institutions and Products). However,
other personnel from the IRS and Treasury Department participated in
their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR Part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by removing
the entry for Sec. 1.1092(d)-1T and by adding an entry in numerical
order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1092(d)-1 also issued under 26 U.S.C. 1092(b)(1). * *
*
0
Par. 2. Section 1.1092(d)-1 is amended by revising paragraphs (d) and
(e) to read as follows:
Sec. 1.1092(d)-1 Definitions and special rules.
* * * * *
(d) Debt instrument linked to the value of personal property. If a
taxpayer is the obligor under a debt instrument one or more payments on
which are linked to the value of personal property or a position with
respect to personal property, then the taxpayer's obligation under the
debt instrument is a position with respect to personal property and may
be part of a straddle.
(e) Effective/applicability dates--(1) Paragraphs (a) and (b) of
this section apply to positions entered into on or after October 14,
1993.
(2) Paragraph (c) of this section applies to positions entered into
on or after July 8, 1991.
(3) Paragraph (d) of this section applies to straddles established
on or after January 17, 2001.
Sec. 1.1092(d)-1T [Removed]
0
Par. 3. Section 1.1092(d)-1T is removed.
John Dalrymple.
Deputy Commissioner for Services and Enforcement.
Approved: July 24, 2014.
Mark J. Mazur
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2014-20330 Filed 8-26-14; 8:45 am]
BILLING CODE 4830-01-P