habilitation or reconstruction of a mass commuting vehicle (or component part thereof)?

A-18: Yes.

[T.D. 7850, 47 FR 50853, Nov. 10, 1982, as amended by T.D. 7879, 48 FR 11942, Mar. 22, 1983]

$51.442-1 Temporary regulations relating to change of annual accounting period.

(a) In general. Notwithstanding paragraph (c) (1) and (2) of §1.442-1 of the Income Tax Regulations, a corporation which

(1) Is described in section 934(b) and is an inhabitant of the Virgin Islands (within the meaning of section 28(a) of the Revised Organic Act of the Virgin Islands (48 U.S.C. 1642)), or

(2) Has in effect an election under section 936 may change its taxable year only if it secures the prior approval of the Commissioner in accordance with paragraph (b)(1) of §1.442–1.

(b) Effective date. This section shall apply only if the statement described in paragraph (c)(1) of §1.442-1 is filed after September 3, 1982.

[T.D. 7864, 47 FR 57921, Dec. 29, 1982; 48 FR 3367, Jan. 25, 1983]

$51.6045-1 Returns of information of brokers and barter exchanges.

(a) (b) [Reserved]

(c) Reporting by brokers. (1)—(2) [Reserved]

(3) Exceptions—(1) Sales effected for exempt recipients—(A) In general. No return of information is required with respect to a sale effected for a customer that is an exempt recipient as defined in paragraph (c)(3)(i)(B) of this section. (B) Exempt recipient defined. The term "exempt recipient” means—

(1) A corporation as defined in section 7701(a)(3), whether domestic or foreign;

(2) An organization exempt from taxation under section 501(a) or an individual retirement plan;

(3) The United States or a State, the District of Columbia, a possession of the United States, a political subdivision of any of the foregoing, a whollyowned agency or instrumentality of any one or more of the foregoing or a pool or partnership composed exclusively of any of the foregoing;

(4) A foreign government, a political subdivision thereof, an international organization or any wholly-owned agency or instrumentality of the foregoing;

(5) A foreign central bank of issue (as defined in §1.895–1(b)(1) as a bank which is by law or government sanction the principal authority, other than the government itself, issuing instruments intended to circulate as currency);

(6) A dealer in securities or commodities registered as such under the laws of the United States or a State;

(7) A futures commission merchant registered as such with the Commodity Futures Trading Commission;

(8) A real estate investment trust (as defined in section 856);

(9) An entity registered at all times during the taxable year under the Investment Company Act of 1940;

(10) A common trust fund (as defined in section 584(a));

(11) A financial institution such as a bank, mutual savings bank, savings and loan association, building and loan association, cooperative bank, homestead association, credit union, industrial loan association or bank, or other similar organization; or

(12) A person registered under the Investment Advisers Act of 1940 who regularly acts as a broker within the meaning of paragraph (a)(1) of §1.6045

1.

The terms used in this paragraph (c)(3)(1)(B) shall have the same meaning as those contained in 26 CFR 31.3452(c)-1 (revised as of April 1, 1983). A broker may treat any person described in paragraph (c)(3)(i)(B) (1) through (11) of this section as an exempt recipient without requiring such person to file an exemption certificate if the conditions of 26 CFR 31.3452(c)-1 (revised as of April 1, 1983) are satisfled. A broker may treat any person described in paragraph (c)(3)(1)(B)(12) of this section as an exempt recipient without requiring such person to file an exemption certificate if the person's status as a registered investment adviser who regularly acts as a broker within the meaning of paragraph (a)(1) of §1.6045-1 is known generally in the investment community. Alternatively, a broker can require any exempt recipient to file an exemption certificate

and may treat an exempt recipient who fails to file such certificate as a recipient which is not exempt.

(ii) Multiple brokers. In the case of a sale in which a broker is instructed to initiate the sale by a person that is an exempt recipient described in paragraph (c)(3)(1)(B) (6), (7), (11), or (12), of this section, no return of information is required with respect to the sale by the broker so instructed. In the case of a redemption of stock or retirement of securities, only the broker responsible for paying the holder redeemed or retired, or crediting the gross proceeds on the sale to such holder's account, is required to report the sale.

(iii) Cash on delivery transactions. In the case of a sale of securities through a "cash on delivery" account, a “delivery versus payment” account, or other similar account or transaction, only the broker which receives the gross proceeds from the sale against delivery of the securities sold is required to report the sale. If, however, such broker's customer is another broker ("secondparty broker") which is an exempt recipient, then only the second-party broker is required to report the sale.

(iv) Custodians, trustees and partnerships. No return of information is required with respect to a sale effected by a custodian or trustee in its capacity as such or a redemption of a partnership interest by a partnership provided the sale is otherwise reported by the custodian or trustee on a properly filed From 1041 or the redemption is otherwise reported by the partnership on a properly filed Form 1065, and all Schedule K-1 reporting requirements are satisfied.

(v) Sales at issue price. No return of information is required with respect to a sale of an interest in a regulated investment company (within the meaning of section 851) that computes its current price per share for purposes of distributions, redemptions, and purchases so as to stabilize the price per share at a constant amount that approximates its issue price or the price at which it was originally sold to the public.

(vi) Obligor payments on certain obligations. No return of information is required with respect to payments representing obligor payments on—

(A) Nontransferable obligations (including savings bonds, savings accounts, checking accounts, and NOW accounts);

(B) Obligations as to which the entire gross proceeds are reported by the broker on Form 1099 under provisions of the Internal Revenue Code other than section 6045 (including stripped coupons issued prior to July 1, 1982); or

(C) Retirement of short-term obligations (i.e., obligations with a fixed maturity date not exceeding one year from the date of issue) that have original issue discount, as defined in section 1232(b)(1).

(vii) Callable obligations. No return of information is required with respect to payments representing obligor payments on demand obligations that also are callable by the obligor and that have no premium or discount.

(viii) Foreign currency. No return of information is required with respect to a sale of foreign currency other than a sale pursuant to a forward contract or regulated futures contract that requires delivery of foreign currency.

(ix) Fractional share. No return of information is required with respect to a sale of a fractional share of stock if the gross proceeds on the sale of the fractional share are less than $20.

(x) Certain retirements. No return of information is required from an issuer or its agent with respect to the retirement of book entry or registered form obligations as to which the relevant books and records indicate that no interim transfers have occurred.

(4) Examples. The following examples illustrate the application of the reporting requirements:

Example (1). A, an individual who is not an exempt recipient, places an order with B, a person generally known in the investment community to be a federally registered broker/dealer, to sell A's stock in a publicly traded corporation. B, in turn, places an order to sell the stock with C, a second broker, which will execute the sale. B discloses to C the identity of the customer placing the order. C is not required to make a return of information with respect to the sale because C was instructed by B, an exempt recipient as defined in paragraph (c)(3)(i)(B)(6) of this section, to initiate the sale. B is required to make a return of information with respect to the sale.

Example (2). The facts are the same as in Example (1) except that B has an omnibus

account with C so that B does not disclose to C whether the transaction is for a customer of B or for B's own account. C is not required to make a return of information with respect to the sale because C was instructed by B, an exempt recipient as defined in paragraph (c)(3)(1)(B)(6) of this section, to initiate the sale. B is required to make a return of information with respect to the sale.

Example (3). D, an individual who is not an exempt recipient, enters into a "cash on delivery" ("COD") stock transaction by instructing K, a federally registered broker/ dealer, to sell stock owned by D, and to deliver the proceeds to L, a custodian bank. In addition, concurrently with the above instructions, D instructs L to deliver D's stock to K (or K's designee) against delivery of such proceeds from K. The records of both K and L with respect to this transaction show an account in the name of D. Pursuant to paragraph (h)(1) of §1.6045-1, D is considered the customer of K and L. Under paragraph (c)(3)(iii) of this section, K is not required to make a return of information with respect to the sale because K will pay the gross proceeds to L against delivery of the securities sold. L is required to make a return of information with respect to the sale.

Example (4). The facts are the same as in Example (3) except that E, a federally registered investment adviser who regularly acts as a broker within the meaning of paragraph (a)(1) of §1.6045-1, instructs K to sell stock owned by D and to deliver the proceeds to L. In addition, concurrently with the above instructions, E instructs L to delivery D's stock to K (or K's designee) against delivery of such proceeds from K. The records of both K and L with respect to this transaction show an account in the name of E. Pursuant to paragraph (h)(1) of §1.6045-1, E is considered the customer of K and L. Under paragraph (c)(3)(iii) of this section, K is not required to make a return of information with respect to the sale because K will pay the gross proceeds to L against delivery of the securities sold. In addition, L is not required to make a return of information with respect to the sale because L's customer, E, is another broker which is an exempt recipient. E is required to make a return of information with respect to the sale. The result would be the same even if the records of K and L with respect to this transaction show an account in the name of D.

Example (5). F, an individual who is not an exempt recipient, owns bonds that are held by G, a federally registered broker/dealer, in an account for F with G designated as nomineee for F. Upon the retirement of the bonds, the gross proceeds are automatically credited to the account of F. G is required to make a return of information with respect to the retirement because G is the broker responsible for making payment of the gross proceeds to F.

6a.103A-1 Interest on mortgage subsidy bonds.

6a.103A-2 Qualified mortgage bond. 6a.103A-3 Qualified veterans' mortgage bonds.

68.6652(g)-1 Failure to make return or furnish statement required under section 6039C.

AUTHORITY: 26 U.S.C. 7805.

Sections 6a.103A-2(k), (1), and (m) also issued under 26 U.S.C. 103A(j) (3), (4), and (5). § 6a.103A-1 Interest on mortgage subsidy bonds.

(a) In general-(1) Mortgage subsidy bond. A mortgage subsidy bond shall be treated as an obligation not described in section 103 (a)(1) or (a)(2). Thus, the interest on a mortgage subsidy bond is includable in gross income and subject to Federal income taxation.

(2) Exceptions. Any qualified mortgage bond and any qualified veterans' mortgage bond shall not be treated as a mortgage subsidy bond. See §6a.103A2 with respect to requirements of qualified mortgage bonds and §6a.103A-3 with respect to requirements of qualified veterans' mortgage bonds.

(3) Additional requirement. In addition to the requirements of §6a.103A-2, § 6a.103A-3, and this section, qualified mortgage bonds and qualified veterans' mortgage bonds shall be subject to the requirements of section 103(c) and the regulations thereunder.

(4) Advance refunding. On or after December 5, 1980, no tax-exempt obligation may be issued for the advance refunding of a mortgage subsidy bond (determined without regard to section 103A(b)(2) or §6a.103A-1(a)(2)). An obligation issued for the refunding of a mortgage subsidy bond will be considered to be an advance refunding obligation if it is issued more than 180 days before the prior issue is discharged.

(5) Registration. Any obligation that is part of a qualified mortgage bond issue or qualified veterans' mortgage bond issue and which is issued after De

cember 31, 1981, must be in registered form. The term "in registered form" has the same meaning as in §1.60492(d). Thus, in general, an obligation is issued in registered form if it is registered as to both principal and interest and if its transfer must be effected by the surrender of the old instrument to the issuer and by either the reissuance of the old instrument to a new holder or the issuance of a new instrument to a new holder.

of

(b) Definitions. For purposes $68.103A-2, 6a.103A-3, and this section the following definitions apply:

(1) Mortgage subsidy bond. (1) The term "mortgage subsidy bond" means any obligation which is issued as part of an issue a significant portion of the proceeds of which is to be used directly or indirectly to provide mortgages on owner-occupied residences.

(11) For purposes of subdivision (i), a significant portion of the proceeds of an issue is used to provide mortgages if 5 percent or more of the proceeds are so used.

(2) Mortgage. The term "mortgage" includes deeds of trust, conditional sales contracts, pledges, agreements to hold title in escrow, and any other form of owner financing.

(3) Bond. The term "bond” means any obligation. The term "obligation" means any evidence of indebtedness.

(4) State. (1) The term "State" includes a possession of the United States and the District of Columbia.

(ii) For purposes of subdivision (i), obligations issued by or on behalf of any State or local governmental unit by constituted authorities impowered to issue such obligations are the obligations of such governmental unit. See §1.103-1(b).

(5) Proceeds. The term "proceeds" includes original proceeds and investment proceeds. The terms "original proceeds" and "investment proceeds" shall have the same meaning as in §1.103–13(b)(2). Unless otherwise provided in §68.103A-2 or this section, however, amounts earned from the investment of proceeds which are derived from qualified mortgage bonds in nonmortgage investments may not be commingled for the purposes of accounting for expenditures with other non-bond amounts, and such proceeds

are investment proceeds even though not treated as investment proceeds for purposes of section 103(c). Repayments of principal on mortgages shall be treated as proceeds of an issue. Amounts (such as State appropriations or surplus funds) which are provided by the issuer or a private lender in conjunction with a qualified mortgage bond or a qualified veterans' mortgage bond shall not be treated as proceeds of a mortgage subsidy bond under this section. However, fees which are paid by a participating financial institution pursuant to an agreement with the issuer whereby such institution receives the right to originate or service mortgages and which are retained by an issuer are treated as original proceeds of the issue. Amounts provided by the issuer or a private lender may be treated as proceeds of an issue for purposes of section 103(c).

(6) Single-family and owner-occupied residences. Except for purposes of §6a.103A-2 (g) and (h)(2)(ii), the terms "single-family" and "owner-occupied," when used with respect to residences, include two-, three-, and four-family residences

(i) One unit of which is occupied by the owner of the units, and

(ii) Which were first occupied as a residence at least 5 years before the mortgage is executed.

[T.D. 7780, 46 FR 34314, July 1, 1981; 46 FR 37890, July 23, 1981, as amended by T.D. 7794, 46 FR 55514, Nov. 10, 1981]

§6a.103A-2 Qualified mortgage bond.

(a) In general (1) Qualified mortgage bond. A qualified mortgage bond shall not be treated as a mortgage subsidy bond, and the interest on a qualified mortgage bond will be exempt from Federal income taxation.

(2) Termination date. No obligation issued after December 31, 1987, shall be treated as part of a qualified mortgage bond issue.

(b) Definitions and special rules. For purposes of this section and §6a.103A-1, the following definitions apply:

(1) Qualified mortgage bond. The term “qualified mortgage bond" means one or more obligations issued by a State or any political subdivision thereof (hereinafter referred to as "governmental unit") as part of an issue

(i) All of the original proceeds of which, net of the costs of issuing the obligations and proceeds invested in a reasonably required reserve fund (such net amount hereinafter in this section referred to as "lendable proceeds"), are to be used to finance owner-occupied residences, and

(ii) Which meets each of the requirements of §6a.103A-1 and this section. A qualified mortgage bond does not include any bond that is an industrial development bond under section 103(b).

(2) Constitutional home rule city. The term "constitutional home rule city" means, with respect to any calendar year, any political subdivision of a State which, under a State constitution which was adopted in 1970 and effective on July 1, 1971, had home rule powers on the 1st day of the calendar year.

(3) Targeted area residence. The term "targeted area residence" means a residence in an area which is either

(1) A qualified census tract, or

(ii) An area of chronic economic distress.

(4) Qualified census tract. (i) The term "qualified census tract" means a census tract in which 70 percent or more of the families have an income which is 80 percent or less of the State-wide median family income.

(ii) The determination under subdivision (i) shall be made on the basis of the most recent decennial census for which data are available. With respect to any particular bond issue, such determination may be based upon the decennial census data available 3 months prior to the date of issuance and shall not be affected by official changes to such data during or after such 3-month period.

(iii) The term "census tract" means a census tract as defined by the Secretary of Commerce.

(5) Areas of chronic economic distress. (i) The term "area of chronic economic distress" means an area designated by a State as meeting the standards established by that State for purposes of this subparagraph and approved by the Secretary and by the Secretary of Housing and Urban Development in accordance with the criteria set forth in (iii) of this subparagraph. A State may withdraw such designation at any

time, with reasonable cause. Such withdrawal shall be effective upon notification by the State to the Assistant Secretary for Housing/Federal Housing Commissioner of the Department of Housing and Urban Development. Such withdrawal shall not affect the tax-exempt status of any outstanding issue of obligations.

(ii) For purposes of making a designation under this subparagraph, withdrawing a designation, or making any other submission, "State" means the governor of a State, or a State official commissioned by the governor or by State statute for such purposes.

(iii) The following criteria will be used in evaluating a proposed designation of an area of chronic economic distress:

(A) The condition of the housing stock, including the age of the housing and the number of abandoned and substandard residential units. Data pertinent to this criterion include the number and percentage of housing units that were constructed prior to 1940, the average age of the housing stock, the number and percentage of abandoned housing units, and the number and percentage of substandard residential units.

(B) The need of area residents for owner financing under a qualified mortgage bond issue as indicated by low per capita income, a high percentage of families in poverty, a high number of welfare recipients, and high unemployment rates. Data pertinent to this criterion include the per capita income of the population in the area, the number and percentage of families eligible to receive food stamps from a program pursuant to 7 U.S.C. 2011, the number and percentage of families eligible to receive payments under the Aid to Families with Dependent Children program, and the unemployment rate.

(C) The potential for use of owner flnancing under a qualified mortgage bond issue to improve housing conditions in the area. Data pertinent to this criterion include the number and percentage of owner-occupied homes that are substandard, the number and percentage of families that are low- or moderate-income renters, and the number and percentage of substandard