[Federal Register: June 18, 2002 (Volume 67, Number 117)]
[Rules and Regulations]               
[Page 41324-41329]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18jn02-9]                         

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

[TD 9000]
RIN 1545-BA62

 
Modification of Tax Shelter Rules III

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: These regulations modify the rules relating to the filing by 
certain taxpayers of a statement with their Federal income tax returns 
under section 6011(a) and the registration of confidential corporate 
tax shelters under section 6111(d). These rules also affect the list 
maintenance requirement under

[[Page 41325]]

section 6112. These regulations affect taxpayers participating in 
certain reportable transactions, persons responsible for registering 
confidential corporate tax shelters, and persons responsible for 
maintaining lists of investors in potentially abusive tax shelters. The 
text of these regulations also serves as the text of the proposed 
regulations set forth in the notice of proposed rulemaking on this 
subject in the Proposed Rules section of this issue of the Federal 
Register.

DATES: Effective Date: These regulations are effective June 14, 2002.
    Applicability Date: For dates of applicability, see Sec. 1.6011-
4T(g) and Sec. 301.6111-2T(h).

FOR FURTHER INFORMATION CONTACT: Danielle M. Grimm or Tara P. Volungis, 
202-622-3080 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in these regulations have 
been previously reviewed and approved by the Office of Management and 
Budget in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)) under control number 1545-1685.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid OMB control number.
    Books and 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.

Background

    This document amends 26 CFR parts 1 and 301 to provide modified 
rules relating to the disclosure of reportable transactions by certain 
individuals, trusts, partnerships, S corporations, and other 
corporations on their Federal income tax returns under section 6011 and 
the registration of confidential corporate tax shelters under section 
6111.
    On February 28, 2000, the IRS issued temporary and proposed 
regulations regarding section 6011 (TD 8877, REG-103735-00), section 
6111 (TD 8876, REG-110311-98), and section 6112 (TD 8875, REG-103736-
00)(collectively, the February regulations). The February regulations 
were published in the Federal Register (65 FR 11205, 65 FR 11215, 65 FR 
11211) on March 2, 2000. On August 11, 2000, the IRS issued temporary 
and proposed regulations regarding sections 6011, 6111, and 6112 (TD 
8896, REG-103735-00, REG-110311-98, REG-103736-00) (collectively, the 
August 2000 regulations). The August 2000 regulations were published in 
the Federal Register (65 FR 49909) on August 16, 2000, modifying the 
February regulations. On August 2, 2001, the IRS issued temporary and 
proposed regulations regarding sections 6011, 6111, and 6112 (TD 8961, 
REG-103735-00, REG-110311-98, REG-103736-00) (collectively, the August 
2001 regulations). The August 2001 regulations were published in the 
Federal Register (66 FR 41133) on August 7, 2001, further modifying the 
February 2000 regulations.
    The rules under sections 6011, 6111, and 6112 are designed to 
provide the IRS and Treasury with information needed to evaluate 
potentially abusive transactions. The IRS and Treasury have considered 
and evaluated compliance with the disclosure, registration, and list 
maintenance requirements under sections 6011, 6111, and 6112 and have 
determined that certain additional changes to the temporary and 
proposed regulations are necessary to improve compliance with the 
regulations and to carry out the purposes of sections 6011, 6111, and 
6112. The IRS and Treasury continue to evaluate all the comments and 
recommendations received. Moreover, the IRS and Treasury intend to make 
substantial additional changes to the rules under sections 6011, 6111, 
and 6112 in order to establish a more effective disclosure regime and 
to improve compliance as announced in Treasury's Plan to Combat Abusive 
Tax Avoidance Transactions (PO-2018), released on March 20, 2002. See 
http://www.treas.gov/press/releases/ po2018.htm.

Explanation of Provisions

1. Application of Sec. 1.6011-4T to Individuals, Trusts, Partnerships, 
and S Corporations

    Section 1.6011-4T generally provides that certain corporate 
taxpayers must disclose their participation in listed and other 
reportable transactions that meet the projected tax effect test by 
attaching a written statement to their Federal income tax returns. It 
has been determined that a number of these transactions are entered 
into by noncorporate taxpayers. Accordingly, in order to obtain 
information regarding potentially abusive transactions entered into by 
noncorporate taxpayers, the requirement to disclose under Sec. 1.6011-
4T is extended to individuals, trusts, partnerships, and S corporations 
that participate, directly or indirectly, in listed transactions. Thus, 
if a partnership or an S corporation participates in a listed 
transaction, that partnership or S corporation must disclose its 
participation under Sec. 1.6011-4T and the partners and shareholders of 
the partnership or S corporation, respectively, also must disclose 
their participation under Sec. 1.6011-4T. The IRS and Treasury plan to 
extend in future guidance the requirement to disclose under 
Sec. 1.6011-4T to other reportable transactions entered into by 
individuals, trusts, partnerships, and S corporations.

2. Indirect Participants

    Section 1.6011-4T makes reference to taxpayers who participate 
directly or indirectly in reportable transactions. In order to obtain 
information about potentially abusive transactions entered into by 
taxpayers, the IRS and Treasury have provided clarification regarding 
indirect participation in a reportable transaction. A taxpayer will 
have indirectly participated in a reportable transaction if the 
taxpayer knows or has reason to know that the tax benefits claimed from 
the taxpayer's transaction are derived from a reportable transaction. 
However, this clarification does not imply that a taxpayer's 
participation in a transaction did not otherwise qualify as indirect 
participation in a reportable transaction for purposes of Sec. 1.6011-
4T, as in effect prior to June 14, 2002.
    For example, Notice 95-53 (1995-2 C.B. 334), describes a lease 
stripping transaction in which one party (the transferor) assigns the 
right to receive future payments under a lease of tangible property and 
receives consideration which the transferor treats as current income. 
The transferor later transfers the property subject to the lease in a 
transaction intended to qualify as a substituted basis transaction, for 
example, a transaction described in section 351. In return, the 
transferor receives stock (with low value and high basis) from the 
transferee corporation. The transferee corporation claims the 
deductions associated with the high basis property subject to the 
lease. The transferor and transferee corporation have directly 
participated in the listed transaction. If the transferor subsequently 
transfers the high basis/low value stock to a taxpayer in another 
transaction intended to qualify as a substituted basis transaction and 
the taxpayer uses the stock to generate a loss, and if the taxpayer 
knows or has reason to know that the tax loss claimed was derived from 
the lease stripping

[[Page 41326]]

transaction, then the taxpayer is indirectly participating in a 
reportable transaction. Accordingly, the taxpayer must disclose the 
reportable transaction and the manner of the taxpayer's indirect 
participation in the reportable transaction under the provisions of 
Sec. 1.6011-4T.

3. Substantially Similar Transactions

    Sections 1.6011-4T and 301.6111-2T make reference to substantially 
similar transactions. Some taxpayers and promoters have applied the 
substantially similar standard in an overly narrow manner to avoid 
disclosure. For instance, some taxpayers and promoters have made subtle 
and insignificant changes to a listed transaction in order to claim 
that their transactions are not subject to disclosure. Others have 
taken the position that their transaction is not substantially similar 
to a listed transaction because they have an opinion concluding that 
their transaction is proper. The IRS and Treasury believe that these 
interpretations are improper. Accordingly, the regulations are modified 
in Sec. 1.6011-4T and Sec. 301.6111-2T to clarify that the term 
substantially similar includes any transaction that is expected to 
obtain the same or similar types of tax benefits and that is either 
factually similar or based on the same or similar tax strategy. 
Further, the term substantially similar must be broadly construed in 
favor of disclosure. This modification does not imply that a 
transaction was not otherwise the same as or substantially similar to a 
listed transaction prior to this modification.
    For example, Notice 2000-44 (2000-2 C.B. 255), sets forth a listed 
transaction involving offsetting options transferred to a partnership 
where the taxpayer claims basis in the partnership for the cost of the 
purchased options but does not reduce basis under section 752 as a 
result of the partnership's assumption of the taxpayer's obligation 
with respect to the options. Transactions using short sales, futures, 
derivatives or any other type of offsetting obligations to inflate 
basis in a partnership interest would be the same as or substantially 
similar to the transaction described in Notice 2000-44. Moreover, use 
of the inflated basis in the partnership interest to diminish gain that 
would otherwise be recognized on the transfer of a partnership asset 
would also be the same as or substantially similar to the transaction 
described in Notice 2000-44.
    As another example, Notice 2001-16 (2001-1 C.B. 730), sets forth a 
listed transaction involving a seller (X) who desires to sell stock of 
a corporation (T), an intermediary corporation (M), and a buyer (Y) who 
desires to purchase the assets (and not the stock) of T. M agrees to 
facilitate the sale to prevent the recognition of the gain that T would 
otherwise report. Notice 2001-16 describes M as a member of a 
consolidated group that has a loss within the group or as a party not 
subject to tax. Transactions utilizing different intermediaries to 
prevent the recognition of gain would be the same as or substantially 
similar to the transaction described in Notice 2001-16. An example is a 
transaction in which M is a corporation that does not file a 
consolidated return but which buys T stock, liquidates T, sells assets 
of T to Y, and offsets the gain recognized on the sale of those assets 
with currently generated losses.

4. Projected Tax Effect Test for Listed Transactions

    Section 1.6011-4T provides that a reportable transaction is a 
transaction that meets the projected tax effect test and is either a 
listed transaction or a transaction that has at least two of five 
specified characteristics. Under Sec. 1.6011-4T, the projected tax 
effect test for listed transactions is met if the taxpayer reasonably 
estimates that the transaction will reduce the taxpayer's Federal 
income tax liability by more than $1 million in any single taxable year 
or by a total of more than $2 million for any combination of taxable 
years in which the transaction is expected to have the effect of 
reducing the taxpayer's Federal income tax liability. The IRS and 
Treasury have determined that the projected tax effect test for listed 
transactions results in inadequate disclosure. Accordingly, the 
projected tax effect test will no longer apply to listed transactions. 
Thus, any individual, trust, partnership, S corporation, or other 
corporation that participates in a listed transaction must report it 
under the provisions of Sec. 1.6011-4T.

5. Time of Providing Disclosure

    In general, the disclosure statement for a reportable transaction 
must be attached to the taxpayer's Federal income tax return for each 
taxable year for which the taxpayer's Federal income tax liability is 
affected by the taxpayer's participation in the transaction. In the 
case of a taxpayer that is a partnership or an S corporation, the 
disclosure statement for a listed transaction must be attached to the 
taxpayer's Federal income tax return for each taxable year ending with 
or within the taxable year of any partner or shareholder whose income 
tax liability is affected or is reasonably expected to be affected by 
the partnership's or the S corporation's participation in the 
transaction. In addition, at the same time that the disclosure 
statement is first attached to the taxpayer's Federal income tax 
return, the taxpayer must file a copy of that disclosure statement with 
the Office of Tax Shelter Analysis.
    If a transaction becomes a reportable transaction (e.g., the 
transaction subsequently becomes one identified in published guidance 
as a listed transaction described in Sec. 1.6011-4T(b)(2), or there is 
a change in facts affecting the expected Federal income tax effect of 
the transaction) on or after the date the taxpayer has filed the return 
for the first taxable year for which the transaction affected the 
taxpayer's or a partner's or a shareholder's Federal income tax 
liability, the disclosure statement must be filed as an attachment to 
the taxpayer's Federal income tax return next filed after the date the 
transaction becomes a reportable transaction (whether or not the 
transaction affects the taxpayer's or any partner's or shareholder's 
Federal income tax liability for that year) and at that time a copy of 
that disclosure statement must be filed with the Office of Tax Shelter 
Analysis. Notwithstanding the effective date of these regulations, for 
purposes of Sec. 1.6011-4T, as in effect prior to June 14, 2002, a 
corporate taxpayer was required to disclose a transaction that later 
became reportable on the corporation's next filed Federal income tax 
return even if the transaction did not affect the corporation's Federal 
income tax liability for that year.
    Regardless of whether the taxpayer plans to disclose the 
transaction under other published guidance, for example, Rev. Proc. 94-
69 (1994-2 C.B. 804), the taxpayer also must disclose the transaction 
in the time and manner provided for under the provisions of this 
regulation. Notwithstanding the effective date of these regulations, a 
corporate taxpayer was required to disclose a transaction in the time 
and manner provided for in Sec. 1.6011-4T in effect prior to June 14, 
2002, regardless of whether the taxpayer planned to disclose the 
transaction under other published guidance.

Effective Dates

    The regulations are applicable June 14, 2002.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant

[[Page 41327]]

regulatory action as defined in Executive Order 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. It is hereby certified that the 
collection of information in these regulations will not have a 
significant economic impact on a substantial number of small entities. 
This certification is based upon the fact that the time required to 
prepare or retain the disclosure is minimal and will not have a 
significant impact on those small entities that are required to provide 
disclosure. Therefore, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. 
Pursuant to section 7805(f) of the Internal Revenue Code, these 
regulations will be submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on their impact on small 
business.

Drafting Information

    The principal authors of these regulations are Danielle M. Grimm 
and Tara P. Volungis, Office of the Associate Chief Counsel 
(Passthroughs and Special Industries). 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 record keeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 301 are 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 1.6011-4T is amended as follows:
    1. The heading of Sec. 1.6011-4T is amended by removing the 
language ``corporate''.
    2. The heading of paragraph (a) is revised.
    3. Paragraph (a) is amended by adding ``(1) In general.'' after the 
heading.
    4. Newly designated paragraph (a)(1) is amended by adding the 
language ``corporate'' before ``taxpayer'' in the first sentence, and 
by removing the second sentence and adding three new sentences in its 
place.
    5. Paragraphs (a)(2) and (a)(3) are added.
    6. Paragraph (b)(1) is amended by revising the first sentence.
    7. Paragraphs (b)(1)(i) and (b)(1)(ii) are added.
    8. Paragraph (b)(4)(i) is amended by removing the first sentence.
    9. Paragraph (b)(5) Example 3 is amended by revising the seventh 
sentence.
    10. Paragraphs (c)(1)(iii) and (c)(1)(v) are revised.
    11. Paragraph (c)(2) Example is amended by adding the language 
``Example.'' after ``of this section:'' in the first sentence and by 
adding ``as in effect at that time.'' to the end of the third sentence.
    12. Paragraph (d)(1) is revised.
    13. Paragraph (e) is amended by removing the language 
``corporation's'' in the first sentence and adding ``taxpayer's'' in 
its place.
    14. Paragraph (g) is revised.
    The revisions and additions read as follows:


Sec. 1.6011-4T  Requirement of statement disclosing participation in 
certain transactions by taxpayers (Temporary).

    (a) Disclosure requirement--(1) In general. * * * Every individual, 
trust, partnership, and S corporation that has participated, directly 
or indirectly, in a reportable transaction within the meaning of 
paragraph (b)(2) of this section must attach to its return for the 
taxable year described in paragraph (d) of this section a disclosure 
statement in the form prescribed by paragraph (c) of this section. For 
this purpose, a taxpayer will have indirectly participated in a 
reportable transaction if the taxpayer's Federal income tax liability 
is affected (or in the case of a partnership or an S corporation, if a 
partner's or shareholder's Federal income tax liability is reasonably 
expected to be affected) by the transaction even if the taxpayer is not 
a direct party to the transaction (e.g., the taxpayer participates as a 
partner in a partnership, as a shareholder in an S corporation, or 
through a controlled entity). Moreover, a taxpayer will have indirectly 
participated in a reportable transaction if the taxpayer knows or has 
reason to know that the tax benefits claimed from the taxpayer's 
transaction are derived from a reportable transaction. * * *
    (2) Example of indirect participation. Notice 95-53 (1995-2 C.B. 
334) (see Sec. 601.601(d)(2) of this chapter), describes a lease 
stripping transaction in which one party (the transferor) assigns the 
right to receive future payments under a lease of tangible property and 
receives consideration which the transferor treats as current income. 
The transferor later transfers the property subject to the lease in a 
transaction intended to qualify as a substituted basis transaction, for 
example, a transaction described in section 351. In return, the 
transferor receives stock (with low value and high basis) from the 
transferee corporation. The transferee corporation claims the 
deductions associated with the high basis property subject to the 
lease. The transferor and transferee corporation have directly 
participated in the listed transaction. If the transferor subsequently 
transfers the high basis/low value stock to a taxpayer in another 
transaction intended to qualify as a substituted basis transaction and 
the taxpayer uses the stock to generate a loss, and if the taxpayer 
knows or has reason to know that the tax loss claimed was derived from 
the lease stripping transaction, then the taxpayer is indirectly 
participating in a reportable transaction. Accordingly, the taxpayer 
must disclose the reportable transaction and the manner of the 
taxpayer's indirect participation in the reportable transaction under 
the rules of this section.
    (3) Definition of taxpayer. For purposes of paragraphs (b)(3) and 
(4) of this section, the term taxpayer means a corporation required to 
file a return under section 11, 594, 801, or 831. For all other 
purposes of this section, the term taxpayer also includes an 
individual, trust, partnership, or S corporation.
    (b) Definition of reportable transaction--(1) In general. A 
reportable transaction is either a transaction that is described in 
paragraph (b)(2) of this section, or is a transaction that is described 
in paragraph (b)(3) of this section and that meets the projected tax 
effect test in paragraph (b)(4) of this section. * * *
    (i) Definition of substantially similar. For purposes of this 
section, the term substantially similar includes any transaction that 
is expected to obtain the same or similar types of tax benefits and 
that is either factually similar or based on the same or similar tax 
strategy. Receipt of an opinion concluding that the tax benefits from 
the taxpayer's transaction are allowable is not relevant to the 
determination of whether the taxpayer's transaction is the same as or 
substantially similar to a listed transaction. Further, the term

[[Page 41328]]

substantially similar must be broadly construed in favor of disclosure.
    (ii) Examples. The following examples illustrate situations where a 
transaction is the same as or substantially similar to a listed 
transaction:

    Example 1. Notice 2000-44 (2000-2 C.B. 255) (see 
Sec. 601.601(d)(2) of this chapter), sets forth a listed transaction 
involving offsetting options transferred to a partnership where the 
taxpayer claims basis in the partnership for the cost of the 
purchased options but does not reduce basis under section 752 as a 
result of the partnership's assumption of the taxpayer's obligation 
with respect to the options. Transactions using short sales, 
futures, derivatives or any other type of offsetting obligations to 
inflate basis in a partnership interest would be the same as or 
substantially similar to the transaction described in Notice 2000-
44. Moreover, use of the inflated basis in the partnership interest 
to diminish gain that would otherwise be recognized on the transfer 
of a partnership asset would also be the same as or substantially 
similar to the transaction described in Notice 2000-44.
    Example 2. Notice 2001-16 (2001-1 C.B. 730) (see 
Sec. 601.601(d)(2) of this chapter), sets forth a listed transaction 
involving a seller (X) who desires to sell stock of a corporation 
(T), an intermediary corporation (M), and a buyer (Y) who desires to 
purchase the assets (and not the stock) of T. M agrees to facilitate 
the sale to prevent the recognition of the gain that T would 
otherwise report. Notice 2001-16 describes M as a member of a 
consolidated group that has a loss within the group or as a party 
not subject to tax. Transactions utilizing different intermediaries 
to prevent the recognition of gain would be the same as or 
substantially similar to the transaction described in Notice 2001-
16. An example is a transaction in which M is a corporation that 
does not file a consolidated return but which buys T stock, 
liquidates T, sells assets of T to Y, and offsets the gain 
recognized on the sale of those assets with currently generated 
losses.
* * * * *
    (5) * * *

    Example 3. * * * However, E does reasonably determine that the 
terms of the leases are consistent with customary commercial form in 
the leasing industry, and that there is a generally accepted 
understanding that the combination of Federal income tax 
consequences it is claiming with respect to the leases are allowable 
under the Internal Revenue Code for substantially similar 
transactions. * * *

    (c) * * *
    (1) * * *
    (iii) A brief description of the principal elements of the 
transaction that give rise to the expected tax benefits, including the 
manner of the taxpayer's direct or indirect participation in the 
transaction.
* * * * *
    (v) An identification of each taxable year (including prior taxable 
years) for which the transaction is expected to have the effect of 
reducing the Federal income tax liability of the taxpayer, or of any 
partner or shareholder of the taxpayer, and an estimate of the amount 
by which the transaction is expected to reduce the Federal income tax 
liability of the taxpayer, or of any partner or shareholder of the 
taxpayer, for each such taxable year.
* * * * *
    (d) Time of providing disclosure--(1) In general. The disclosure 
statement for a reportable transaction must be attached to the 
taxpayer's Federal income tax return for each taxable year for which 
the taxpayer's Federal income tax liability is affected by the 
taxpayer's participation in the transaction. In the case of a taxpayer 
that is a partnership or an S corporation, the disclosure statement for 
a listed transaction must be attached to the taxpayer's Federal income 
tax return for each taxable year ending with or within the taxable year 
of any partner or shareholder whose income tax liability is affected or 
is reasonably expected to be affected by the partnership's or the S 
corporation's participation in the transaction. In addition, at the 
same time that any disclosure statement is first attached to the 
taxpayer's Federal income tax return, the taxpayer must file a copy of 
that disclosure statement with the Office of Tax Shelter Analysis 
(OTSA) at: Internal Revenue Service LM:PFTG:OTSA, Large & Mid-Size 
Business Division, 1111 Constitution Ave., NW., Washington, DC 20224. 
Regardless of whether the taxpayer plans to disclose the transaction 
under other published guidance, for example, Rev. Proc. 94-69 (1994-2 
C.B. 804) (see Sec. 601.601(d)(2) of this chapter), the taxpayer also 
must disclose the transaction in the time and manner provided for under 
the provisions of this section. If a transaction becomes a reportable 
transaction (e.g., the transaction subsequently becomes one identified 
in published guidance as a listed transaction described in (b)(2) of 
this section, or there is a change in facts affecting the expected 
Federal income tax effect of the transaction) on or after the date the 
taxpayer has filed the return for the first taxable year for which the 
transaction affected the taxpayer's or a partner's or a shareholder's 
Federal income tax liability, the disclosure statement must be filed as 
an attachment to the taxpayer's Federal income tax return next filed 
after the date the transaction becomes a reportable transaction 
(whether or not the transaction affects the taxpayer's or any partner's 
or shareholder's Federal income tax liability for that year). If a 
disclosure statement is required as an attachment to a Federal income 
tax return that is filed after June 14, 2002, but on or before 180 days 
after June 14, 2002, the taxpayer must either attach the disclosure 
statement to the return, or file the disclosure statement as an 
amendment to the return no later than 180 days after June 14, 2002.
* * * * *
    (g) Effective date. This section applies to Federal income tax 
returns filed after February 28, 2000. However, paragraphs (a)(1), 
(a)(2), (a)(3), (b)(1), (b)(4)(i), (b)(5) Example 3, (c)(1)(iii), 
(c)(1)(v), (c)(2) Example, (d)(1), and (e) of this section apply to any 
transaction entered into on or after January 1, 2001, unless such 
transaction is reported on a tax return of the taxpayer that is filed 
on or before June 14, 2002. Taxpayers may rely on the rules in 
paragraphs (a)(1), (a)(2), (a)(3), (b)(1), (b)(4)(i),(b)(5) Example 3, 
(c)(1)(iii), (c)(1)(v), (c)(2) Example, (d)(1), and (e) of this section 
for Federal income tax returns filed after February 28, 2000. 
Otherwise, the rules that apply with respect to transactions entered 
into before January 1, 2001, and with respect to any transaction 
entered into on or after January 1, 2001, and reported on a tax return 
of the taxpayer that is filed on or before June 14, 2002, are contained 
in Sec. 1.6011-4T in effect prior to June 14, 2002 (see 26 CFR part 1 
revised as of April 1, 2002).

    Par. 3. In Sec. 1.6031(a)-1, paragraph(a)(1) is amended by adding a 
sentence to the end of the paragraph to read as follows:


Sec. 1.6031(a)-1  Return of partnership income.

    (a) * * *
    (1) * * * For the rules requiring the disclosure of certain 
transactions, see Sec. 1.6011-4T.
* * * * *

    Par. 4. In Sec. 1.6037-1, paragraph (c) is amended by adding a 
sentence to the end of the paragraph to read as follows:


Sec. 1.6037-1  Return of electing small business corporation.

* * * * *
    (c) * * * For the rules requiring the disclosure of certain 
transactions, see Sec. 1.6011-4T.
* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 5. The authority citation for part 301 continues to read in 
part as follows:

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


[[Page 41329]]



    Par. 6. Section 301.6111-2T is amended as follows:
    1. Paragraph (a)(3) is amended by adding four sentences to the end 
of the paragraph.
    2. The paragraph heading for (h) is revised and the entire text 
after the second sentence is removed and four new sentences are added 
in their place.
    The revision and additions read as follows:


Sec. 301.6111-2T  Confidential corporate tax shelters (Temporary).

    (a) * * *
    (3) * * * For purposes of this section, the term substantially 
similar includes any transaction that is expected to obtain the same or 
similar types of tax benefits and that is either factually similar or 
based on the same or similar tax strategy. Receipt of an opinion 
concluding that the tax benefits from the taxpayer's transaction are 
allowable is not relevant to the determination of whether the 
taxpayer's transaction is the same as or substantially similar to a 
listed transaction. Further, the term substantially similar must be 
broadly construed in favor of disclosure. For examples, see 
Sec. 1.6011-4T(b)(1)(ii) of this chapter.
* * * * *
    (h) Effective dates. * * * However, paragraph (a)(3) of this 
section applies to confidential corporate tax shelters in which any 
interests are offered for sale after June 14, 2002. The rule in 
paragraph (a)(3) of this section may be relied upon for confidential 
corporate tax shelters in which any interests are offered for sale 
after February 28, 2000. Otherwise, the rules that apply to 
confidential corporate tax shelters in which any interests are offered 
for sale after February 28, 2000, and on or before June 14, 2002 are 
contained in this Sec. 301.6111-2T in effect prior to June 14, 2002. 
(See 26 CFR part 301 revised as of April 1, 2002).

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
    Approved: June 11, 2002.
Pamela F. Olson,
Acting Assistant Secretary of the Treasury.
[FR Doc. 02-15321 Filed 6-14-02; 11:32 am]
BILLING CODE 4830-01-P