Intangibles Under Sections 1060 and 338

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-252665-96]

RIN 1545-AU82

Intangibles Under Sections 1060 and 338

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary

regulations and notice of public hearing.

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SUMMARY: In the Rules and Regulations section of this issue of the

Federal Register, the IRS amends the temporary regulations under

sections 1060 and 338(b) of the Internal Revenue Code (Code) relating

to purchase price allocations in taxable asset acquisitions and deemed

asset purchases. The amendments revise the treatment of intangible

assets in such acquisitions to take into account the enactment of

section 197 by the Omnibus Budget Reconciliation Act of 1993. The

regulations provide guidance to parties to taxable asset acquisitions

and to deemed asset purchases resulting from elections under section

338. The text of those temporary regulations also serves as the text of

these proposed regulations. This document also provides notice of a

public hearing on these proposed regulations.

DATES: Written comments must be received by April 16, 1997. Outlines of

topics to be discussed at the public hearing scheduled for Thursday,

May 22, 1997, at 10 a.m. must be received by May 1, 1997.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG 252665-96), room

5228, Internal Revenue Service, POB 7604, Ben Franklin Station,

Washington, DC 20044. In the alternative, submissions may be hand

delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG

252665-96), Courier's Desk, Internal Revenue Service, 1111 Constitution

Avenue NW., Washington, DC. Taxpayers may also submit comments

electronically via the internet by selecting the ``Tax Regs'' option on

the IRS Home Page, or by submitting comments directly to the IRS

internet site at http://www.irs.ustreas.gov/prod/tax__regs/

comments.html. The public hearing will be held in the Commissioner's

Conference Room, room 3313, Internal Revenue Building, 1111

Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Brendan

O'Hara at (202) 622-7530; concerning submissions and the hearing,

Michael Slaughter, (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

The temporary and final regulations published in the Rules and

Regulations section of this issue of the Federal Register amend the

current temporary regulations under sections 1060 (Sec. 1.1060-1T) and

338(b) (Secs. 1.338(b)-2T and 1.338(b)-3T), and related examples in the

final regulations under section 338 (Sec. 1.338-3), concerning the

treatment of acquired intangible assets.

The text of those temporary regulations also serves as the text of

these proposed regulations. The preamble to the temporary and final

regulations explains the reasons for the amendments.

The amendments only address the effect of the enactment of section

197. The IRS and Treasury also intend to study other aspects of the

current regulations under sections 1060 and 338(b). The current

regulations have been the subject of public comments. The IRS and

Treasury welcome further comments on all issues raised by the current

regulations concerning purchase price allocation under sections 338(b)

and 1060.

Special Analyses

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in EO 12866. Therefore,

a regulatory assessment is not required. It also has 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

regulations do 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, this

notice of rulemaking will be submitted to the Chief Counsel for

Advocacy of the Small Business Administration for comment on its impact

on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any comments that are submitted timely

to the IRS. All comments will be available for public inspection and

copying.

A public hearing has been scheduled for Thursday, May 22, 1997, at

10 a.m. in the Commissioner's Conference

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Room, room 3313, Internal Revenue Building, 1111 Constitution Avenue

NW., Washington, DC. Because of access restrictions, visitors will not

be admitted beyond the Internal Revenue Service Building lobby more

than 15 minutes before the hearing starts.

The rules of 26 CFR 601.601(a)(3) apply to the hearing.

Persons that wish to present oral comments at the hearing must

submit comments by April 16, 1997 and submit an outline of the topics

to be discussed and the time to be devoted to each topic by May 1,

1997.

A period of 10 minutes will be allotted to each person for making

comments.

An agenda showing the scheduling of the speakers will be prepared

after the deadline for receiving outlines has passed. Copies of the

agenda will be available free of charge at the hearing.

Drafting Information

The principal author of these regulations is Brendan P. O'Hara,

Office of the Assistant Chief Counsel (Corporate), IRS. 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.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be 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 * * *

Par. 2. Section 1.338(b)-2 is added to read as follows:

Sec. 1.338(b)-2 Allocation of adjusted grossed-up basis among target

assets.

[The text of this section is the same as the text of the amendments

to Sec. 1.338(b)-2T published elsewhere in this issue of the Federal

Register].

Par. 3. Section 1.338(b)-3 is added to read as follows:

Sec. 1.338(b)-3 Subsequent adjustments to adjusted grossed-up basis.

[The text of this section is the same as the text of the amendments

to Sec. 1.338(b)-3T published elsewhere in this issue of the Federal

Register].

Par. 4. Section 1.1060-1 is added to read as follows:

Sec. 1.1060-1 Special allocation rules for certain asset acquisitions.

[The text of this section is the same as the text of the amendments

to Sec. 1.1060-1T published elsewhere in this issue of the Federal

Register].

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 97-655 Filed 1-9-97; 2:53 pm]

BILLING CODE 4830-01-U