[Code of Federal Regulations]
[Title 26, Volume 7]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.597-6]

[Page 388]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.597-6  Limitation on collection of income tax.

    (a) Limitation on collection where tax is borne by Agency. If an 
Institution without Continuing Equity (or any of its Consolidated 
Subsidiaries) is liable for income tax that is attributable to the 
inclusion in income of FFA or gain from a Taxable Transfer, the tax will 
not be collected if it would be borne by Agency. The final determination 
of whether the tax would be borne by Agency is within the sole 
discretion of the Commissioner. In determining whether tax would be 
borne by Agency, the Commissioner will disregard indemnity, tax-sharing, 
or similar obligations of Agency, an Institution, or its Consolidated 
Subsidiaries. Collection of the several income tax liability under Sec. 
1.1502-6 from members of an Institution's consolidated group other than 
the Institution or its Consolidated Subsidiaries is not affected by this 
section. Income tax will continue to be subject to collection except as 
specifically limited in this section. This section does not apply to 
taxes other than income taxes.
    (b) Amount of tax attributable to FFA or gain on a Taxable Transfer. 
For purposes of paragraph (a) of this section, the amount of income tax 
in a taxable year attributable to the inclusion of FFA or gain from a 
Taxable Transfer in the income of an Institution (or a Consolidated 
Subsidiary) is the excess of the actual income tax liability of the 
Institution (or the consolidated group in which the Institution is a 
member) over the income tax liability of the Institution (or the 
consolidated group in which the Institution is a member) determined 
without regard to FFA or gain or loss on the Taxable Transfer.
    (c) Reporting of uncollected tax. A taxpayer must specify on the 
front page of Form 1120 (U.S. Corporate Income Tax Return), to the left 
of the space provided for ``Total Tax,'' the amount of income tax for 
the taxable year that is potentially not subject to collection under 
this section. If an Institution is a subsidiary member of a consolidated 
group, the amount specified as not subject to collection is zero.
    (d) Assessments of tax to offset refunds. Income tax that is not 
collected under this section will be assessed and, thus, used to offset 
any claim for refund made by or on behalf of the Institution, the 
Consolidated Subsidiary or any other corporation with several liability 
for the tax.
    (e) Collection of taxes from Acquiring or a New Entity--(1) 
Acquiring. No income tax liability (including the several liability for 
taxes under Sec. 1.1502-6) of a transferor in a Taxable Transfer will 
be collected from Acquiring.
    (2) New Entity. Income tax liability (including the several 
liability for taxes under Sec. 1.1502-6) of a transferor in a Taxable 
Transfer will be collected from a New Entity only if stock that was 
outstanding in the Old Entity remains outstanding as stock in the New 
Entity or is reacquired or exchanged for consideration.
    (f) Effect on section 7507. This section supersedes the application 
of section 7507, and the regulations thereunder, for the assessment and 
collection of income tax attributable to FFA.

[T.D.8641, 60 FR 66103, Dec. 21, 1995]