[Federal Register Volume 78, Number 154 (Friday, August 9, 2013)]
[Rules and Regulations]
[Pages 48606-48607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-19227]



Internal Revenue Service

26 CFR Part 1

[TD 9622]
RIN 1545-BI96

Guidance Regarding Deferred Discharge of Indebtedness Income of 
Corporations and Deferred Original Issue Discount Deductions; 

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.


SUMMARY: This document contains corrections to final regulations and 
removal of temporary regulations (TD 9622) that were published in the 
Federal Register on Wednesday, July 3, 2013 (78 FR 39984). The final 
regulations provide necessary guidance regarding the accelerated 
inclusion of deferred discharge of indebtedness (also known as 
cancellation of debt (COD)) income (deferred COD income) and the 
accelerated deduction of deferred original issue discount (OID) 
(deferred OID deductions) under section 108(i)(5)(D) (acceleration 
rules), and the calculation of earnings and profits as a

[[Page 48607]]

result of an election under section 108(i). In addition, these 
regulations provide rules applicable to all taxpayers regarding 
deferred OID deductions under section 108(i) as a result of a 
reacquisition of an applicable debt instrument by an issuer or related 

DATES: This correction is effective on August 9, 2013 and is applicable 
on or after July 2, 2013.

FOR FURTHER INFORMATION CONTACT: Robert M. Rhyne, at (202) 622-7790 
(not a toll free number).



    The final regulations and removal of temporary regulations (TD 
9622) that are the subject of this correction are under section 108(i) 
of the Internal Revenue Code.

Need for Correction

    As published, the final regulations and removal of temporary 
regulations (TD 9622) contains errors that may prove to be misleading 
and are in need of clarification.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:


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

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

Par. 2. Section 1.108(i)-0 is amended by revising paragraph (b) to read 
as follows:

Sec.  1.108(i)-0  Definitions and effective/applicability dates.

* * * * *
    (b) Effective/Applicability dates--(1) In general. The rules of 
this section, Sec.  1.108(i)-1, and Sec.  1.108(i)-2, apply on or after 
July 2, 2013, to reacquisitions of applicable debt instruments in 
taxable years ending after December 31, 2008. In addition, the rules of 
Sec.  1.108(i)-3 apply on or after July 2, 2013, to debt instruments 
issued after December 31, 2008, in connection with reacquisitions of 
applicable debt instruments in taxable years ending after December 31, 
    (2) Prior periods. For rules applying before July 2, 2013, see 
Sec.  1.108(i)-0T, Sec.  1.108(i)-1T, Sec.  1.108(i)-2T, and Sec.  
1.108(i)-3T, as contained in 26 CFR part 1, revised April 1, 2013.

Par. 3. Section 1.108(i)-1 is amended by revising the third and fourth 
sentences of paragraph (b)(2)(iii)(D), and the fifth and seventh 
sentences of paragraph (c) Example 3 (ii) to read as follows:

Sec.  1.108(i)-1  Deferred discharge of indebtedness income and 
deferred original issue discount deductions of C corporations.

* * * * *
    (b) * * *
    (2) * * *
    (iii) * * *
    (D) * * * Appropriate adjustments must be made to take into account 
any issuances or redemptions of stock, or similar transactions, 
occurring during the taxable year of distribution or any of the 
preceding three taxable years. If the electing corporation has a short 
taxable year for the year of the distribution or for any of the 
preceding three taxable years, the amounts are determined on an 
annualized basis. * * *
* * * * *
    (c) * * *

    Example 3.  * * *
    (ii) * * * However, under paragraph (b)(2)(iii)(A) of this 
section, S's distribution to P is an impairment transaction and the 
net value acceleration rule is applied with respect to the assets, 
liabilities, and deferred items of P (S's successor). * * * 
Accordingly, under the net value acceleration rule of paragraph 
(b)(2)(iii)(A) of this section, S is required to take into account 
its $400 of deferred COD income immediately before the distribution, 
unless value is restored to P pursuant to paragraph (b)(2)(iii)(C) 
of this section.
* * * * *

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2013-19227 Filed 8-8-13; 8:45 am]