§ 11.7476-2 Notice to interested parties. (a) In general. Any person applying to a district director for a determination described in paragraph (b) (5) of § 11.7476-1 shall cause notice of the application to be given to all persons who qualify as interested parties under § 11.7476-1 with respect to the plan whether or not such application is received by the Internal Revenue Service before the date on which section 410 applies to the plan.

(b) Nature of notice. The notice required by this section shall be given in writing, shall contain the information and be given within the time required by the Commissioner, and shall be given in the following manner:

(1) Present employees. In the case of a present employe who is an interested party, notice shall be given in person, by mailing, or by posting. In addition, if any such employee is in a unit of employees covered by a collective bargaining agreement between employee representatives and one or more employers, notice shall be given in person or by mail to the collective bargaining representative of such employee.

(2) Former employees or beneficiaries. In the case of a former employee or beneficiary who is an interested party, notice shall be given in person or by mail to the last known address of such former employee or beneficiary.

(3) Notice by posting. Notice given by posting shall be made throughout the geographical area in which the interested parties ordinarily are employed by posting such notice (i) at those locations customarily used by the employer for notices to employees with regard to labor-management relations matters at worksites of employees, or (ii) if the plan is maintained pursuant to one or more collective bargaining agreements, at those locations customarily used by the employee representatives for posting notices with regard to labor-management relations matters, such as local union meeting places, or (iii) at a combination of such locations.

(Secs. 7476 and 7805 of the Internal Revenue Code of 1954 (88 Stat. 949 and 68A Stat. 917; (26 U.S.C. 7476 and 7805))) [T.D. 7358, 40 FR 24003, June 4, 1975]

§ 11.7476-3

Notice of determination.

(a) In general. Under section 7476 (b) (5), if a district director sends to the employer, the plan administrator, an interested party with respect to the plan, or the Pension Benefit Guaranty Corporation (or in the case of certain individuals who qualify as interested parties under paragraph (b) of § 11.7476-1, to the person described under paragraph (c) of this section as the representative of such individuals) by certified or registered mail a notice of determination with respect to the qualification of a retirement plan described in section 7476(d), no proceeding for a declaratory judgment by the United States Tax Court with respect to the qualification of such plan may be initiated by such person unless the pleading initiating such proceeding is filed by such person with such Court before the ninety-first day after the day after such notice is mailed.

(b) Address for notice of determination (1) Applicant. In the case of the applicant for a determination, a notice of determination referred to in section 7476(b) (5) shall be sufficient if mailed to such person at the address set forth on the application for the determination.

(2) Interested party. In the case of an interested party or parties who, pursuant to section 3001(b) of the Employee Retirement Income Security Act of 1974 (88 Stat. 995), submitted a comment to a district director with respect to the qualification of the plan, a notice of determination referred to in section 7476 (b) (5) shall be sufficient if mailed to the address designated in the comment as the address to which correspondence should be sent.

(c) Representative of interested parties. (1) In the case of an interested party who, in accordance with section 3001 (b) of the Employee Retirement Income Security Act of 1974 (88 Stat. 995), requests the Secretary of Labor to submit a comment to a district director on matters respecting the qualification of the plan, where pursuant to such request such Secretary does in fact submit such a comment, the Administrator of Pension and Welfare Benefit Programs, Department of Labor, shall be the representative of such interested party for

purposes of receiving the notice referred to in section 7476(b) (5) with respect to those matters on which the Secretary of Labor commented.

(2) In the event a single comment with respect to the qualification of the plan is submitted to a district director by two or more interested parties, the representative designated in the comment for receipt of correspondence shall be the representative of all the interested parties submitting the comment for purposes of receiving the notice referred to in section 7476(b)(5) on behalf of all of them. Such designated representative must be either one of the interested parties who submitted the comment or a person described in paragraph (e) (6) (i), (ii) or (iii) of § 601.201 of this chapter (Statement of Procedural Rules). If one person is not designated in the comment as the representative for receipt of correspondence, a notice of determination mailed to any interested party who submitted the comment shall be notice to all the interested parties who submitted the comment for purposes of section 7476 (b) (5).

(Secs. 7476, 7805, Internal Revenue Code of 1954, (88 Stat. 949, 68A Stat. 917; (26 U.S.C. 7476, 7805))) [T.D. 7367, 40 FR 29535, July 14, 1975]

§ 12.1 Election to treat income from certain aircraft and vessels as income from sources within the United States.

(a) In general. Under section 861(e) a taxpayer owning certain aircraft or vessels manufactured in the United States who leases them to certain United States persons may elect to treat amounts includible in gross income with respect to such aircraft or vessels as income from sources within the United States. A vessel or aircraft with respect to which an election was made carries that election with it if it is transferred pursuant to a transaction described in section 861(e) (4).

(b) Time and manner of making election. The election by a taxpayer to treat income from certain aircraft and vessels as income from sources within the United States must be made not later than the time, including extensions thereof, prescribed by law for filing the income tax return for the first taxable year selected by the taxpayer for application of the rules of section 861(e) or March 31, 1972, whichever is later. The election shall be made by a statement attached to the taxpayer's return (or an amended return) for the first taxable year for which it is to be effective. The statement shall indicate that the election is made under section 861(e), shall set forth information to identify the vessel or aircraft to which it applies, and shall state that the electing taxpayer is the owner of the aircraft or vessel. In addition the statement shall represent:

(1) That the vessel is section 38 property or would be section 38 property but for section 48(a) (5);

(2) That the vessel or aircraft is leased to a United States person who is not a member of the same controlled group of corporations (as defined in section 1563) as the taxpayer and shall include the name and taxpayer identification number of the lessee; and

(3) That the vessel or aircraft was manufactured or constructed in the United States.

A copy of the statement of election shall be sent by the taxpayer to the Commissioner of Internal Revenue (Attention ACTS:A:P:), Washington, D.C. 20224.

(c) Special rules concerning revocation of elections and permanent regulations.

(1) An election made in accordance with paragraph (b) of this section shall be binding unless consent to revoke is obtained from the Commissioner. An application to revoke the election will not be accepted before the promulgation of the permanent regulations under section 861(e).

(2) If the permanent regulations which are issued under section 861(e) require the furnishing of information additional to that which was furnished with the statement of election filed pursuant to paragraph (b) of this section the taxpayer must furnish such additional information in a statement addressed to the district director, or the director of the Internal Revenue service center, with whom the election was filed. This statement must clearly identify the election and the taxable year for which it was made.

[T.D. 7158, 37 F.R. 16, Jan. 4, 1972; 37 F.R. 281, Jan. 8, 1972]

§ 12.3 Investment credit, public utility property elections.

(a) Elections-(1) In general. Under section 46 (e), three elections may be made on or before March 9, 1972, with respect to section 46(e) property (as defined in subparagraph (3) of this paragraph). An election made under the provisions of section 46(e) shall be irrevocable.

(2) Applicability of elections. (1) Any election under section 46(e) shall be made with respect to all of the taxpayer's property eligible for the election whether or not the taxpayer is regulated by more than one regulatory body.

(11) (a) Paragraph (1) of section 46(e) shall apply to all of the taxpayer's section 46(e) property in the absence of an election under paragraph (2) or (3) of section 46(e). If an election is made under paragraph (2) of section 46 (e), paragraph (1) of such section shall not apply to any of the taxpayer's section 46(e) property.

(b) An election made under the last sentence of section 46(e) (1) shall apply to that portion of the taxpayer's section 46 (e) property to which paragraph (1) of section 46(e) applies and which is short supply property within the meaning of § 1.46-5(b) (2) of this chapter (Income Tax Regulations) as set forth in a notice of proposed rule making published in 37 FR 3526 on February 17, 1971.

(iii) If a taxpayer makes an election under paragraph (2) of section 46(e), and makes no election under paragraph (3) of such section, the election under paragraph (2) of section 46(e) shall apply to all of its section 46(e) property.

(iv) If a taxpayer makes an election under paragraph (3) of section 46(e), such election shall apply to all of the taxpayer's section 46(e) property to which section 167(1) (2) (C) applies. Paragraph (1) or (2) of section 46 (e) (as the case may be) shall apply to that portion of the taxpayer's section 46(e) property which is not property to which section 167(1) (2) (C) applies. Thus, for example, if a taxpayer makes an election under paragraph (2) of section 46(e), and also makes an election under paragraph (3) of section 46(e), paragraph (3) shall apply to all of the taxpayer's section 46 (e) property to which section 167(1) (2) (C) applies and paragraph (2) shall apply to the remainder of the taxpayer's section 46(e) property.

(3) Section 46(e) property. "Section 46(e) property" is section 38 property which is both property described in section 50 and is

(i) Public utility property within the meaning of section 46(c)(3)(B) (other than nonregulated communication property of the type described in the last sentence of section 46(c) (3) (B)), or

(11) Property used predominantly in the trade or business of the furnishing or sale of (a) steam through a local distribution system or (b) the transportation of gas or steam by pipeline, if the rates for such furnishing or sale are established or approved by a governmental unit, agency, instrumentality, or commission described in section 46 (c) (3) (B). (b) Method of making elections. A taxpayer may make the elections described in section 46(e) by filing a statement, on or before March 9, 1972, with the district director or director of the internal revenue service center with whom the taxpayer ordinarily files its income tax return. For rules in the case of taxpayers filing consolidated returns, see § 1.1502-77(a) of this Chapter (Income Tax Regulations). Such statement shall contain the following information: (1) The name, address, and taxpayer identification number of the taxpayer, (2) The paragraph (or paragraphs) of section 46(e) under which the taxpayer is making the election,

(3) If an election is made under the last sentence of section 46(e) (1), the name and address of all regulatory bodies which have jurisdiction over the taxpayer with respect to the section 46(e) property covered by such election and a statement setting forth the type of the public utility activity described in section 46(e) (5) (B) in which the taxpayer engages, and

(4) If an election is made under paragraph (3) of section 46(e), a statement indicating whether an election has been made by the taxpayer under section 167 (1) (4) (A).

[T.D. 7161, 37 F.R. 3511, Feb. 17, 1972]

§ 12.4 Election of Class Life Asset Depreciation Range System (ADR).

(a) Elections filed before February 1, 1972. No election or tax return shall be filled which does not conform to section 109 of the Revenue Act of 1971 (Public Law 92-178, 85 Stat. 508). If a taxpayer has before February 1, 1972 filed an election and a tax return in accordance with § 1.167(a)-11 of this chapter (relating to depreciation allowances using the Asset Depreciation Range System published in the FEDERAL REGISTER for June 23, 1971), such election will be treated as an election under the Class Life Asset Depreciation Range System (ADR) as contained in section 109 of the Revenue Act of 1971 and the proposed amendments to §1.167(a)-11 of this chapter published in the FEDERAL REGISTER for January 27, 1972, provided that the election conforms with the provisions of the Class Life Asset Depreciation Range System (ADR) contained in section 109 of the Revenue Act of 1971 and the amendments to the regulations as finally adopted. Such an election and the determination of tax liability on the tax return are subject to the terms and conditions of section 109 of the Revenue Act of 1971 and the final regulations prescribing the Class Life Asset Depreciation Range System (ADR). (For revocation of an election, see paragraph (c) of this section.) An election and tax return filed before February 1, 1972, which does not conform with the final regulations prescribing the Class Life Asset Depreciation Range System (ADR) is an invalid election unless corrected by an amended tax return and election filed no later than the time permitted by paragraph (c) of this section. If a valid election under § 1.167(a)-11 of this chapter is not filed

for a taxable year, the taxpayer is required to file or amend his tax return and determine tax liability for the taxable year without regard to § 1.167(a)-11 of this chapter.

(b) Elections filed after January 31, 1972. No election or tax return shall be filed which does not conform with section 109 of the Revenue Act of 1971. An election and tax return flied under § 1.167(a)-11 of this chapter after January 31, 1972, and before the final amendments to the regulations are published in the FEDERAL REGISTER, should be filled in accordance with section 109 of the Revenue Act of 1971 and the proposed amendments to 1.167(a)-11 of this chapter relating to the Class Life Asset Depreciation Range System (ADR). Such election and the determination of tax liability on the tax return are subject to the terms and conditions of section 109 of the Revenue Act of 1971 and the final regulations prescribing the Class Life Asset Depreciation Range System (ADR). An election and tax return filled after January 31, 1972, which does not conform with the final regulations prescribing the Class Life Asset Depreciation Range System (ADR), is not a valid election unless corrected by an amended tax return and election filed no later than the time permitted by paragraph (c) of this section. (For revocation of election, see paragraph (c) of this section.) If a valid election under 1.167(a)-11 of this chapter is not filed for a taxable year the taxpayer is required to file or amend his tax return and determine tax liability for the taxable year without regard to §1.167(a)-11 of this chapter.

(c) Special rule for election and revocation. Notwithstanding the rules of §1.167(a)-11 of this chapter, a taxpayer is permitted to make, amend or revoke an election under §1.167(a)-11 of this chapter at any time before the latest of (1) the time the taxpayer files his first return for the taxable year of election, (2) 120 days after the final regulations prescribing the Class Life Asset Depreciation Range System (ADR) are published in the FEDERAL REGISTER, or (3) the time prescribed by law (including extensions thereof) for filing the return for the taxable year of election. The notification of amendment or revocation of an election shall be made by filing an amended tax return with the Internal Revenue Service Center with which

the election was filed. The election should be filed in the manner specified in the Class Life Asset Depreciation Range System (ADR) regulations as finally prescribed.

(d) Examples. The principles of this section may be illustrated by the following examples:

Example (1). Taxpayer A filled an election under § 1.167(a)-11 before February 1, 1972. A elected to use the modified half-year convention by treating all assets as placed in service on the first day of the second quarter of the taxable year, excluded section 1250 property (as defined in section 1250 (c)) and property used predominantly outside the United States from the election, and included "subsidiary assets" (as defined in § 1.167(a)-11(b) (5) (vii) of the proposed amendments to the regulations) in the election. A's election does not conform with the regulations under § 1.167(a)-11 as proposed to be amended. A should file an amended return and election within 120 days after the publication of the final class Life Asset Depreciation Range System (ADR) regulations under § 1.167(a)-11. Such amended return and election must conform to the final amendments to the regulations. In the amended election, A must adopt one of the conventions permitted by the final amendments. Assuming the proposed amendments are finally adopted, A may exclude his subsidiary assets from the election provided the conditions of paragraph (b) (5) (vii) of § 1.167(a)-11 of the regulations, as proposed to be amended, are met, and A must include property used predominantly outside the United States in the election unless paragraph (b) (5) (iii), (v), or (vi) of § 1.167 (a)-11, as proposed to be amended, permit the exclusion of the property. Generally, A must include section 1250 property in the election unless paragraph (b) (5) (vi) of § 1.167(a)-11, as proposed to be amended, permits the exclusion of the property.

Example (2). Taxpayer B filed an election to compute depreciation under § 1.167(a)-11 before February 1, 1972. B elected to use the half-year convention and has no assets used predominantly outside the United States. B excluded section 1250 property from the election and included his subsidiary assets in the election. Assume that the provisions of paragraph (b) (5) (vi) of § 1.167(a)-11, as proposed to be amended, apply and permit the exclusion of section 1250 property and that B does not elect to exclude subsidiary assets pursuant to paragraph (b) (5) (vii), as proposed to be amended. B has no assets which were excluded from the election under paragraph (b) (5) (v) of § 1.167(a)-11, as proposed to be amended. The election which was filled before February 1, 1972, will be treated as a valid election under the Class Life Asset Depreciation Range System (ADR) as contained in the final amendments to the regulations, if it conforms with those amend

ments. B need not file an amended election provided his election conforms to the final regulations under § 1.167(a)-11. However, B may file an amended election within 120 days after the final regulations under § 1.167(a)–11 are published in the FEDERAL REGISTER in order to include section 1250 property, or to exclude subsidiary assets, or to make other changes, or to revoke the election. [T.D. 7159, 37 FR 1469, Jan. 29, 1972]

§ 12.5 Transfer to a DISC of assets of export trade corporation.

(a) In general. (1) Section 505 of the Revenue Act of 1971 (85 Stat. 551) permits, subject to certain adjustments, certain tax-free transactions involving a transfer of property by an export trade corporation (as defined in section 971) to a DISC (as defined in section 992(a)).

(2) For purposes of this section, all statutory references are to the Internal Revenue Code of 1954 except that references to section 505 are to the Revenue Act of 1971. All terms used in this section shall have the same meaning as when used in such Code.

(b) Direct, indirect, and other transfers. (1) Under section 505(b) (1), if during a taxable year of an export trade corporation beginning before January 1, 1976, such export trade corporation without receiving consideration directly transfers property to a DISC, if all of the oustanding stock of each of such corporations is owned by a common parent, and if certain other conditions are met, then, among other consequences enumerated in section 505, notwithstanding section 367 or any other provision of Chapter 1 of the Code, no gain or loss shall be recognized by, and no constructive dividend shall be includible in the gross income of the export trade corporation, the parent, or the DISC by reason of such transaction. If, instead of a direct transfer from the export trade corporation to the DISC, the parties enter into an indirect transfer in which the property is distributed by the export trade corporation to the parent without receiving consideration and immediately thereafter is transferred by the parent to the DISC, then for purposes of section 505(b) the transaction will be treated as a direct transfer by the export trade corporation to the DISC, but only if

(1) It is shown to the satisfaction of the Commissioner or his delegate that such indirect transfer of the property was carried out for bona fide business reasons, and