Guidance Under Subpart F Relating to Partnerships and Branches

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

[REG-104537-97]

RIN 1545-AV11

Guidance Under Subpart F Relating to Partnerships and Branches

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking, notice of proposed rulemaking by

cross-reference to temporary regulations and notice of public hearing.

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SUMMARY: The IRS and Treasury Department are issuing temporary

regulations, published elsewhere in this issue of the Federal Register,

relating to the treatment under subpart F of certain branches of a

controlled foreign corporation (CFC) that are treated as separate

entities for foreign tax purposes. The text of the temporary

regulations also serves as the text of these proposed regulations. In

addition, this document contains proposed regulations relating to the

treatment of a CFC's distributive share of partnership income. This

document also provides notice of a public hearing on these proposed

regulations.

DATES: Written comments must be received by June 24, 1998. Outlines of

oral comments to be discussed at the public hearing scheduled for July

15, 1998, must be received by June 24, 1998.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-104537-97), room

5226, Internal Revenue Service, POB 7604, Ben Franklin Station,

Washington DC 20044. Submissions may be hand delivered between the

hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:T:R (REG-104537-97),

Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue,

NW., Washington DC. Alternatively, taxpayers may 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 room 2615, Internal

Revenue Building, 1111 Constitution Avenue NW., Washington, DC 20224.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Valerie

Mark, (202) 622-3840; concerning submissions and the hearing, Mike

Slaughter (202) 622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

I. In General

In these proposed regulations, and in temporary regulations

published elsewhere in this issue of the Federal Register, the Treasury

and IRS set forth a framework for dealing with the issues posed by the

use of certain entities which are regarded as fiscally transparent for

the purposes of U.S. tax law, with regard to the application of subpart

F of the Internal Revenue Code.

Subpart F was enacted by Congress to limit the deferral of U.S.

taxation of certain income earned outside the United States by foreign

corporations controlled by U.S. persons. Limited deferral was retained

after the enactment of subpart F to protect the competitiveness of

controlled foreign corporations (CFCs) doing business overseas. See S.

Rep. No. 1881, 87th Cong., 2d Sess. 78-80 (1962). This limited deferral

furthers the objective of allowing a CFC engaged in an active business,

and located in a foreign country for appropriate economic reasons, to

compete in a similar tax environment with non-U.S. owned corporations

located in the same country.

Conversely, one of the purposes of subpart F is to prevent CFCs

from converting active income that is not easily moveable and is earned

in a jurisdiction in which a business is located for non-tax reasons

into passive, easily moveable income shifted to a lower tax

jurisdiction primarily for tax avoidance. Moreover, when subpart F was

first enacted it was realized that related person transactions can be

easily manipulated to reduce both United States and foreign taxes.

Consequently, in enacting subpart F, Congress provided that

transactions of CFCs that involve related persons generally give rise

to subpart F income with certain enumerated exceptions.

Hybrid branches, by definition, are not regarded as fiscally

transparent under foreign law. Thus, they are particularly well suited

for the type of tax avoidance described above. In light of the recent

proliferation of hybrid branches, Treasury and the IRS believe that it

is appropriate to consider the issues related to transactions involving

hybrid branches, or other hybrid entities, under subpart F.

The use of other organizations that are fiscally transparent for

U.S. tax purposes, including partnerships, raise additional issues.

These entities may or may not be fiscally transparent under foreign

law. In the context of subpart F, issues similar to those raised in

connection with hybrid branches are raised in connection with

partnerships. (Other fiscally-transparent entities, such as grantor

trusts, will be the subject of guidance issued in conjunction with the

finalization of regulations under section 672(f).)

The entity classification regulations of Secs. 301.7701-1 through

301.7701-3 (the check-the-box regulations) make entity classification

generally elective, in part so that taxpayers can choose a tax status

consistent with their business objectives. This administrative

provision, however, was not intended to change substantive law.

Particularly in the international area, however, the ability to more

easily achieve fiscal transparency can lead to inappropriate results

under certain substantive international provisions of the Code. Thus,

the Treasury and the IRS believe that it is necessary to provide

additional guidance regarding the use of hybrid entities in the

international context. See preamble to T.D. 8697, 61 Fed. Reg. 66585

(December 18, 1996).

II. Controlled Foreign Corporation's Distributive Share of Partnership

Income

In Brown Group, Inc. v. Commissioner, 77 F.3d 217 (8th Cir. 1996),

vacating and remanding 104 T.C. 105 (1995), a Cayman Islands

partnership with a Cayman Islands CFC partner earned commission income

from selling footwear purchased in Brazil on behalf of the CFC's U.S.

parent. This commission income would have been subpart F income,

specifically foreign base company sales income under section 954(d), to

the CFC if it had earned this commission income directly and under the

same circumstances in which the partnership earned this income. The Tax

Court held that the CFC's distributive share of this commission income

was subpart F income. The Eighth Circuit, vacating and remanding the

Tax Court's decision, held that the CFC's distributive share of this

commission income was not subpart F income.

In response to the Eighth Circuit's opinion, the IRS announced that

it intended to issue regulations under subpart F to confirm its

position that whether a CFC partner's distributive share of partnership

income is subpart F income generally is determined at the CFC partner

level. See Notice 96-39 (1996-2 C.B. 209).

These proposed regulations would address the treatment of a CFC

partner's distributive share of partnership income

[[Page 14670]]

under subpart F. These regulations apply to all categories of subpart F

income, not only to foreign base company sales income, which was at

issue in Brown Group. These regulations would provide specific rules

that apply to determine a CFC partner's distributive share of foreign

personal holding company income, foreign base company sales income,

foreign base company services income, and earnings invested in United

States property.

The approach taken by these proposed regulations is based on the

provisions of subchapter K and subpart F and the policies underlying

those provisions. The legislative history of subchapter K indicates

that a partnership distributive share should be characterized by using

the approach that best serves the Code or regulations section at issue.

Subpart F limits deferral of U.S. income tax on common types of passive

income received by CFCs, as well as on certain other types of easily

moveable income. To allow a CFC to avoid subpart F treatment for items

of income by the simple expedient of receiving them as distributive

shares of partnership income, rather than directly, is contrary to the

intent of subpart F.

Explanation of Provisions

Under these proposed regulations, income and deductions would be

characterized at the partnership level. If any part of the

partnership's gross income would be subpart F income if received

directly by partners that are CFCs, it must be separately stated under

section 702. Comments are requested as to whether this rule should not

apply for ownership levels under certain thresholds. The regulations

under section 702 also would be clarified to expressly provide that an

item must be separately stated when, if separately taken into account

by any partner, the separately stated item would affect the income tax

liability of that partner or any other person. This clarification

incorporates in the regulations the position of the IRS. See Rev. Rul.

86-138 (1986-2 C.B. 84) (holding that a subsidiary partnership in a

multi-tiered arrangement must separately state items which, if

separately taken into account by any partner of any partnership in the

multi-tiered arrangement, would affect the income tax liability of that

partner).

The regulations under section 952 would also be clarified to

expressly include within the definition of subpart F income a CFC's

distributive share of any item of gross income of a partnership to the

extent the income would have been subpart F income if received by the

CFC partner directly. The proposed regulations would further provide

that, generally, in determining whether a distributive share of

partnership income is subpart F income, whether an entity is a related

person and whether activity takes place in or outside the CFC's country

of incorporation is determined with respect to the CFC partner and not

the partnership. Thus, on the Brown Group facts, the income in issue

would retain its character as commission income from the sale of shoes

purchased in Brazil on behalf of a U.S. parent for sale in the U.S. It

would be determined at the CFC partner level that the shoes were

manufactured and sold for use outside of the CFC's country of

incorporation (Cayman Islands), and that the U.S. parent was a related

person with respect to the CFC. Thus, the income would be foreign base

company sales income.

The proposed and temporary regulations also address the question of

whether a CFC's distributive share of partnership income can qualify

for the exceptions from foreign personal holding company income

treatment. Some of these exceptions are based on whether the income is

earned in a transaction with a related person that is incorporated, or

uses property, in the CFC's country of incorporation. The proposed and

temporary regulations address the application of those exceptions.

Other exceptions are based on the activities performed by the CFC in

connection with the property through which it earns the income. The

proposed regulations would provide that the exceptions requiring

activity will generally apply if the exception would have applied to

the income had the partnership itself been a CFC. This requirement is

not met if the partnership can qualify for the exception only by taking

into account the separate activities of its partners (e.g., the

partnership owns property and the CFC provides the management

services).

These proposed regulations would amend the rules regarding the

application of the manufacturing exception of Sec. 1.954-3(a)(4). The

regulations would clarify the Service's current position that, in

general, a controlled foreign corporation can apply the exception only

if it has performed the manufacturing activities itself. Thus,

manufacturing activities of a contract manufacturer will not be taken

into account.

Nevertheless, the manufacturing activities of a partnership may be

taken into account under the distributive share rules when the

partnership sells the property that it manufactures. These proposed

regulations would clarify how the manufacturing exception of

Sec. 1.954-3(a)(4) applies in the context of the distributive share

rules. As previously noted, the general rules would provide that income

that could be foreign base company sales income at the CFC partner

level is separately stated and that determinations as to relatedness

and the relevant country are made at the partner level. Consistent with

the framework outlined above, these regulations would allow a CFC's

distributive share of sales income to be excluded, under the

manufacturing exception of Sec. 1.954-3(a)(4), when the partnership's

activities with respect to the property it sells (without regard to the

CFC partner's activities) would be sufficient to constitute

manufacturing.

Treasury and the IRS are considering applying foreign base company

sales income rules in the context of manufacturing branches of

partnerships. Comments are requested as to the appropriate scope of

such rules.

Under the general rule for determining whether a CFC partner's

distributive share includes subpart F income, a CFC partner's

distributive share of partnership income earned from performing

services for or on behalf of a person that is a related person with

respect to the CFC partner will be foreign base company services

income. These proposed regulations also would describe how the

substantial assistance rule of Sec. 1.954-4(b)(1)(iv) applies when the

CFC earns services income through a partnership. When the partnership

is performing services for a person unrelated to the CFC partner but

the CFC partner provides substantial assistance to the partnership

contributing to the performance of those services, the partner and the

partnership would be regarded as separate entities and the substantial

assistance provided from the CFC to the partnership would cause the

CFC's distributive share of the services income to be treated as

foreign base company services income. Treasury and the IRS are

considering applying similar principles to branches. Comments are

requested on this issue.

Finally, consistent with Rev. Rul. 90-112 (1990-2 C.B. 186), the

regulations would provide that, for purposes of section 956, a CFC

partner's investment in U.S. property includes the U.S. property held

by a partnership to the extent of the CFC's ownership interest in the

partnership. Comments are requested on this issue.

III. Hybrid Branches

Temporary regulations, published elsewhere in this issue of the

Federal Register amend the Income Tax

[[Page 14671]]

Regulations (26 CFR part 1) relating to sections 952 and 954 by adding

rules relating to the treatment under subpart F of certain branches of

a CFC or a partnership in which a CFC is a partner that are treated as

separate entities for foreign tax purposes. The text of those temporary

regulations also serves as the text of the proposed regulations. The

preamble to the temporary regulations explains the reasons for the

addition.

IV. Proposed Effective Date

These regulations are proposed to apply for taxable years of a

controlled foreign corporation beginning on or after the date the final

regulations are published in the Federal Register. For prior periods,

the IRS will rely on principles and authorities under subpart F and

subchapter K to apply an aggregate approach, including Sec. 1.701-2(e)

and (f) of the regulations for periods for which it is effective.

Special Analyses

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in Executive Order

12866. 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 Code, this notice of proposed

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 written comments (preferably a

signed original and eight (8) copies) that are timely submitted to the

IRS. All comments will be available for public inspection and copying.

A public hearing has been scheduled for July 15, 1998, at 10 a.m.,

in room 2615, Internal Revenue Building, 1111 Constitution Avenue NW.,

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

admitted beyond the 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 written comments by June 22, 1998 and submit an outline of

topics to be discussed and time to be devoted to each topic (signed

original and eight (8) copies) by June 24, 1998.

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 Valerie Mark of the

Office of the Associate Chief Counsel (International), IRS. 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 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income

taxes, Penalties, 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 26 CFR part 1 continues to

read in part as follows:

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

Par. 2. Section 1.702-1 is amended as follows:

1. Paragraph (a)(8)(ii) is revised.

2. A new paragraph (c)(1)(v) is added.

The addition and revision read as follows:

Sec. 1.702-1 Income and credits of partner.

(a) * * *

(8) * * *

(ii) Each partner must also take into account separately the

partner's distributive share of any partnership item which, if

separately taken into account by any partner, would result in an income

tax liability for that partner, or for any other person, different from

that which would result if that partner did not take the item into

account separately. Thus, if any partner is a controlled foreign

corporation, as defined in section 957, items of income that would be

gross subpart F income if taken into account by the controlled foreign

corporation must be separately stated for all partners. Under section

911(a), if any partner is a bona fide resident of a foreign country who

may exclude from gross income the part of the partner's distributive

share which qualifies as earned income as defined in section 911(b),

the earned income of the partnership for all partners must be

separately stated. Similarly, all relevant items of income or deduction

of the partnership must be separately stated for all partners in

determining the applicability of section 183 (relating to activities

not engaged in for profit) and the recomputation of tax thereunder for

any partner.

* * * * *

(c) * * *

(1) * * *

(v) In determining whether the de minimis or full inclusion rules

of section 954(b)(3) apply.

* * * * *

Par. 3. In Sec. 1.952-1, paragraphs (b) through (f) are

redesignated as paragraphs (c) through (g), respectively, and a new

paragraph (b) is added to read as follows:

Sec. 1.952-1 Subpart F income defined.

* * * * *

(b) Treatment of distributive share of partnership income--

(1) In general. A controlled foreign corporation's distributive

share of any item of income of a partnership is income that falls

within a category of subpart F income described in section 952(a) to

the extent the item of income would have been income in such category

if received by the controlled foreign corporation directly. For

specific rules regarding the treatment of a distributive share of

partnership income under certain provisions of subpart F, see

Secs. 1.954-1(g); 1.954-2(a)(5); 1.954-3(a)(6); 1.954-4(b)(2)(iii); and

1.954-6(g).

(2) Example. The application of this paragraph (b) may be

illustrated by the following example.

Example. CFC, a controlled foreign corporation, is an 80-percent

partner in PRS, a foreign partnership. PRS earns $100 of interest

income that is not export financing interest, as defined in section

954(c)(2)(B), from a person unrelated to CFC. This interest income

would have been foreign personal holding company income to CFC, under

section 954(c), if it had received this income directly. Accordingly,

CFC's distributive share of this interest income, $80, is foreign

personal holding company income.

* * * * *

Par. 4. Section 1.954-1 is amended as follows:

[[Page 14672]]

1. Paragraphs (c)(1)(i)(A) through (D) are redesignated as

(c)(1)(i)(A)(1) through (4), respectively.

2. A new paragraph heading for newly designated paragraph

(c)(1)(i)(A) is added.

3. New paragraphs (c)(1)(i)(B) through (E) are added.

4. Paragraph (g) is added.

The additions read as follows:

Sec. 1.954-1 Foreign base company income.

* * * * *

(c) * * *

(1) * * *

(i) Deductions against gross foreign base company income--

(A) In general.* * *

* * * * *

(B) through (E) [The text of the proposed paragraphs (c)(1)(i)(B)

through (E) is the same as the text of Sec. 1.954-1T(c)(1)(i)(B)

through (E) published elsewhere in this issue of the Federal Register].

* * * * *

(g) Distributive share of partnership income--(1) Application of

related person and country of organization tests. Unless otherwise

provided, to determine the extent to which a controlled foreign

corporation's distributive share of any item of gross income of a

partnership would have been subpart F income if received by it

directly, under Sec. 1.952-1(b), if a provision of subpart F requires a

determination of whether an entity is a related person, within the

meaning of section 954(d)(3), or whether an activity occurred within or

outside the country under the laws of which the controlled foreign

corporation is created or organized, this determination shall be made

by reference to such controlled foreign corporation and not by

reference to the partnership.

(2) Example. The application of paragraph (g)(1) of this section is

illustrated by the following example:

Example. (i) CFC1, a controlled foreign corporation organized in

Country A, is an 80-percent partner in Partnership, a partnership

organized in Country B. CFC2, a controlled foreign corporation

organized in Country B, owns the remaining 20 percent interest in

Partnership. CFC1 and CFC2 are owned by a common U.S. parent, USP.

CFC2 manufactures Product A in Country B. Partnership earns sales

income from purchasing Product A from CFC2 and selling it to third

parties located in Country B that are not related persons with

respect to CFC1 or CFC2. For purposes of determining whether CFC1's

distributive share of Partnership's sales income is foreign base

company sales income under section 954(d), CFC1 is treated as if it

purchased Product A from CFC2 and sold it to third parties in

Country B. Under section 954(d)(3), CFC2 is a related person with

respect to CFC1. Thus, with respect to CFC1, the sales income is

deemed to be derived from the purchase of personal property from a

related person. Because the property purchased is both manufactured

and sold for use outside of Country A, CFC1's country of

organization, CFC1's distributive share of the sales income is

foreign base company sales income.

(ii) For purposes of determining whether CFC2's distributive

share of Partnership's sales income is foreign base company sales

income, CFC2 is treated as if it directly sold Product A to third

parties within Country B. Therefore, Product A is both manufactured

and sold for use within CFC2's country of organization. Thus, CFC2's

distributive share of Partnership's sales income is not foreign base

company sales income.

Par. 5. In Sec. 1.954-2, paragraphs (a)(5) and (a)(6) are added to

read as follows:

Sec. 1.954-2 Foreign personal holding company income.

(a) * * *

(5) Special rules applicable to distributive share of partnership

income--(i) [The text of the proposed paragraph (a)(5)(i) is the same

as the text of Sec. 1.954-2T(a)(5) published elsewhere in this issue of

the Federal Register].

(ii) Certain other exceptions applicable to foreign personal

holding company income. To determine the extent to which a controlled

foreign corporation's distributive share of an item of income of a

partnership is foreign personal holding company income, the exceptions

contained in sections 954(c)(2) and Sec. 1.954-2(b)(2) and (6),

(e)(1)(ii), (f)(1)(ii), (g)(2)(ii), and (h)(3)(ii), shall apply only if

any such exception would have applied to exclude the income from

foreign personal holding company income if the controlled foreign

corporation had earned the income directly, determined by taking into

account only the activities of, and property owned by, the partnership

and not the separate activities or property of the controlled foreign

corporation or any other person.

(iii) [The text of the proposed paragraph (a)(5)(iii) is the same

as the text of Sec. 1.954-2T(a)(5)(iii) published elsewhere in this

issue of the Federal Register].

(6) Special rules applicable to exceptions from foreign personal

holding company income treatment in circumstances involving hybrid

branches --(i) [The text of the proposed paragraph (a)(6)(i) is the

same as the text of Sec. 1.954-2T(a)(6) published elsewhere in this

issue of the Federal Register].

* * * * *

Par. 6. Section 1.954-3 is amended as follows:

1. The second sentence of paragraph (a)(4)(i) is revised.

2. The first sentence of paragraph (a)(4)(ii) is revised.

3. Paragraph (a)(6) is added.

The revisions and addition read as follows:

Sec. 1.954-3 Foreign base company sales income.

(a) * * *

(4) * * *

(i) * * * A controlled foreign corporation (selling corporation)

will be considered, for purposes of this paragraph (a)(4), to have

manufactured, produced, or constructed personal property that it sells

if, as a result of the operations conducted by such selling corporation

in connection with the property that it purchased and sold, the

property sold is in effect not the property that it purchased. * * *

(ii) * * * If, prior to its sale of property that it has purchased,

a selling corporation substantially transforms the property, the

selling corporation will be treated as having manufactured, produced,

or constructed such property. * * *

* * * * *

(6) Special rule applicable to distributive share of partnership

income--(i) In general. To determine the extent to which a controlled

foreign corporation's distributive share of any item of gross income of

a partnership would have been foreign base company sales income if

received by it directly, under Sec. 1.952-1(b), the property sold will

be considered to be manufactured, produced or constructed by the

controlled foreign corporation within the meaning of paragraph (a)(4)

of this section only if the manufacturing exception of paragraph (a)(4)

of this section would have applied to exclude the income from foreign

base company sales income if the controlled foreign corporation had

earned the income directly, determined by taking into account only the

activities of, and property owned by, the partnership and not the

separate activities or property of the controlled foreign corporation

or any other person.

* * * * *

Par. 7. In Sec. 1.954-4, paragraph (b)(2)(iii) is added to read as

follows:

Sec. 1.954-4 Foreign base company services income.

* * * * *

(b) * * *

(2) * * *

(iii) Special rule applicable to distributive share of partnership

income. A controlled foreign corporation's distributive share of a

partnership's services income will be deemed to be derived from

services

[[Page 14673]]

performed for or on behalf of a related person, within the meaning of

section 954(e)(1)(A), if the partnership is a related person with

respect to the controlled foreign corporation, under section 954(d)(3),

and, in connection with the services performed by the partnership, the

controlled foreign corporation provided assistance that would have

constituted substantial assistance contributing to the performance of

such services, under paragraph (b)(2)(ii) of this section, if furnished

to the controlled foreign corporation by a related person.

* * * * *

Par. 8. Section 1.954-9 is added to read as follows:

Sec. 1.954-9 Hybrid branches.

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

Sec. 1.954-9T published elsewhere in this issue of the Federal

Register.]

Par. 9. In Sec. 1.956-2, paragraph (a)(3) is added to read as

follows:

Sec. 1.956-2 Definition of United States property.

(a) * * *

(3) For purposes of section 956, if a controlled foreign

corporation is a partner in a partnership that owns property that would

be United States property, within the meaning of paragraph (a)(1) of

this section, if owned directly by the controlled foreign corporation,

the controlled foreign corporation will be treated as holding an

interest in the property equal to its ownership interest in the

partnership and such ownership interest will be treated as an interest

in United States property.

* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

Par. 10. The authority citation for 26 CFR part 301 continues to

read in part as follows:

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

Par. 11. Section 301.7701-3 is amended as follows:

1. Paragraph (a) is amended by adding a sentence at the end of the

paragraph.

2. Paragraph (c)(1)(iv) is amended by adding a sentence at the end

of the paragraph.

The additions read as follows:

Sec. 301.7701-3 Classification of certain business entities.

(a) [The text of the proposed paragraph (a) of this section is the

same as the text of Sec. 301.7701-3T(a) published elsewhere in this

issue of the Federal Register.]

* * * * *

(c) * * *

(1) * * *

(iv) [The text of the proposed paragraph (c)(1)(iv) of this section

is the same as the text of Sec. 301.7701-3T(c)(1)(iv) published

elsewhere in this issue of the Federal Register.]

* * * * *

Michael P. Dolan,

Deputy Commissioner of Internal Revenue.

[FR Doc. 98-7890 Filed 3-23-98; 12:58 pm]

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