Par. 2. Sections 1.1062-0 through 1.1062-3 are added to read as follows:
(a) Acceleration of remaining installment payments. If a taxpayer makes a section 1062 election, and if an acceleration event subsequently occurs with respect to that taxpayer, the due date for the unpaid portion of all remaining installment payments is accelerated as provided in paragraph (b)(2) of this section unless the eligible section 1062 transferee exception provided in paragraph (c) of this section applies. For purposes of paragraph (b) of this section, an S corporation is treated as a C corporation if it has an applicable net tax liability or a remaining unpaid applicable net tax liability at the entity-level.
(b) Acceleration events —(1) In general. The following events are acceleration events for purposes of paragraph (a) of this section with respect to a taxpayer that has made a section 1062 election—
(i) The assessment of an addition to tax for the failure to timely pay an installment described in § 1.1062-2(c)(1);
(ii) In the case of a taxpayer that is an individual, the death of that individual;
(iii) In the case of a taxpayer that is a C corporation, a trust, or an estate, a liquidation, dissolution, termination, or sale, exchange, distribution, or other disposition of substantially all the assets of the taxpayer (including in a title 11 or similar case);
(iv) In the case of a taxpayer that is a C corporation, a cessation of business by the taxpayer;
(v) In the case of a taxpayer that is a C corporation and is not a member of a consolidated group, the C corporation becoming a member of a consolidated group;
(vi) In the case of a taxpayer that is a C corporation and a member of a consolidated group, the consolidated group ceasing to exist or otherwise discontinuing to file a consolidated return; and
(vii) In the case of a taxpayer that is a C corporation, a trust, or an estate, a determination by the Commissioner described in paragraph (c)(3)(ii)(A) of this section.
(2) Due date of remaining installment payments. The due date for the unpaid portion of all remaining installment payments is—
(i) In the case of an acceleration event described in paragraph (b)(1)(i) of this section, the date on which the addition to tax for failure to timely pay the installment payment is assessed;
(ii) In the case of an acceleration event described in paragraph (b)(1)(ii) of this section, the due date (without regard to extensions) for filing the return for the taxable year in which the individual dies; and
(iii) In the case of an acceleration event described in paragraphs (b)(1)(iii) through (vii) of this section, the date of the acceleration event (or, in a title 11 or similar case, the day before the petition is filed).
(3) Consolidated groups. Paragraphs (b)(1)(iii) and (iv) of this section apply to a consolidated group by treating the group as a single taxpayer. See § 1.1062-2(a)(2)(iii).
(c) Eligible section 1062 transferee exception —(1) In general. Paragraph (a) of this section will not apply to accelerate the unpaid portion of all remaining installment payments of a taxpayer with respect to which an acceleration event occurs if—
(i) The acceleration event is a sale of substantially all the assets of the eligible section 1062 transferor; and
(ii) The eligible section 1062 transferor and the eligible section 1062 transferee enter into a transfer agreement that satisfies the requirements of paragraph (c)(2) of this section.
(2) Transfer agreement —(i) Manner of making transfer agreement. A transfer agreement must be entered into by an eligible section 1062 transferor and an eligible section 1062 transferee—
(A) By both the eligible section 1062 transferor and the eligible section 1062 transferee timely filing a Form 1062-T, Transfer Agreement Under Section 1062(b)(2)(C) (or successor); or
(B) In any other manner prescribed in guidance published in the Internal Revenue Bulletin or in forms and instructions ( see §§ 601.601(d)(2) and 601.602 of this chapter).
(ii) Timing —(A) In general. Except as provided in paragraph (c)(2)(ii)(B) or (C) of this section, a transfer agreement must be filed on or before the date that is 30 days after the date of the acceleration event with respect to which the transfer agreement is entered into.
(B) Acceleration event occurring before section 1062 election. If an acceleration event occurs prior to the date an eligible section 1062 transferor makes a section 1062 election, the transfer agreement with respect to the acceleration event will be treated as timely filed for purposes of paragraph (c)(2)(i)(A) of this section if it is filed simultaneously with the eligible section 1062 transferor's section 1062 election. See § 1.1062-2(a)(2)(iv).
(C) Transition rule. If an acceleration event with respect to which a transfer agreement is entered into occurs on or before [date of publication of final regulations in the Federal Register ], the transfer agreement with respect to the acceleration event will be treated as timely filed for purposes of paragraph (c)(2)(i)(A) of this section if it is filed by 30 days after [date of publication of final regulations in the Federal Register ].
(iii) Signature requirement. The transfer agreement must be signed under penalties of perjury by both—
(A) A person who is authorized to sign a return on behalf of the eligible section 1062 transferor; and
(B) A person who is authorized to sign a return on behalf of the eligible section 1062 transferee.
(iv) Terms of transfer agreement. A transfer agreement must contain the following items:
(A) The name, address, and taxpayer identification number of the eligible section 1062 transferor and the eligible section 1062 transferee.
(B) The amount of the eligible section 1062 transferor's remaining unpaid applicable net tax liability.
(C) The date and a detailed description of the acceleration event that led to the transfer agreement.
(D) A statement that the document constitutes an agreement by the eligible section 1062 transferee to assume the liability of the eligible section 1062 transferor for any unpaid installment payments of the eligible section 1062 transferor under section 1062.
(E) A statement that the eligible section 1062 transferee agrees to comply with all conditions and requirements of section 1062, this section and § 1.1062-2.
(F) A representation that the eligible section 1062 transferee has the financial ability to make the remaining installment payments required under section 1062, this section and § 1.1062-2 with respect to the applicable net tax liability being assumed by the eligible section 1062 transferee.
(G) A certification by the eligible section 1062 transferee stating that the eligible section 1062 transferee waives the right to a notice of liability and consents to the immediate assessment of the remaining unpaid portion of the eligible section 1062 transferor's applicable net tax liability.
(H) If the eligible section 1062 transferor continues to exist immediately after the acceleration event, an acknowledgement that the eligible section 1062 transferor (and any subsequent successor to the eligible section 1062 transferor) will remain jointly and severally liable (including under § 1.1502-6, if applicable) for any unpaid applicable net tax liability of the eligible section 1062 transferor.
(I) Any additional information, representation, or certification required by guidance published in the Internal Revenue Bulletin or in forms and instructions ( see §§ 601.601(d)(2) and 601.602 of this chapter).
(3) Consent of Commissioner —(i) In general. If an eligible section 1062 transferor and an eligible section 1062 transferee file a transfer agreement satisfying all the requirements of paragraph (c)(2) of this section, the eligible section 1062 transferee will be considered to have entered into an agreement with the Commissioner for purposes of this paragraph (c). If the Commissioner determines that additional information (for example, additional information regarding the ability of the eligible section 1062 transferee to fully pay the remaining applicable net tax liability) is necessary, the eligible section 1062 transferee must provide that information upon request.
(ii) Material misrepresentations and omissions. If the Commissioner determines that a transfer agreement contains a material misrepresentation or material omission, or if the eligible section 1062 transferee does not provide the additional information requested under paragraph (c)(3)(i) of this section within the timeframe communicated by the Commissioner to the eligible section 1062 transferee, then the Commissioner—
(A) May reject the transfer agreement (effective as of the date of the related acceleration event); or
(B) May determine that an acceleration event has occurred with respect to the eligible section 1062 transferee as of the date of the Commissioner's determination that a transfer agreement contains a material misrepresentation or material omission (such that any unpaid installment payments become due on that date).
(4) Effect of assumption —(i) In general. If the eligible section 1062 transferee exception in this paragraph (c) applies with respect to an acceleration event, the eligible section 1062 transferee assumes all outstanding obligations and responsibilities of the eligible section 1062 transferor with respect to the applicable net tax liability as though the eligible section 1062 transferee had included in income the gain from the qualified sale or exchange. Accordingly, the eligible section 1062 transferee is responsible for making payments and reporting with respect to any unpaid installment payments.
(ii) Eligible section 1062 transferee. If an acceleration event described in paragraphs (b)(1)(iii) through (vi) of this section subsequently occurs with respect to an eligible section 1062 transferee, any unpaid installment payments of the eligible section 1062 transferor that were assumed by the eligible section 1062 transferee will become due on the date provided in paragraph (b)(2)(iii) of this section.
(d) Examples. The following examples illustrate the application of the rules of this section. For purposes of the examples under this paragraph (d), assume that the taxpayer has made a valid section 1062 election with respect to an applicable net tax liability from a qualified sale or exchange.
(1) Example 1: Acceleration event—C corporation —(i) Facts. At a time when A has remaining unpaid installment payments, A sells all its assets to B, a United States person, in a fully taxable transaction. Each of A and B is a C corporation.
(ii) Analysis. Pursuant to paragraph (b)(1)(iii) of this section, the sale by A of all its assets to B is an acceleration event. Accordingly, pursuant to paragraph (b)(2)(iii) of this section, the due date for the unpaid portion of A's remaining installment payments is the date of the sale. However, B is an eligible section 1062 transferee. See § 1.1062-1(g). Consequently, if A and B enter into and file a transfer agreement that satisfies the requirements of paragraph (c)(2) of this section, the unpaid portion of A's remaining installment payments will not become due; instead, B will be treated as having assumed all outstanding obligations and responsibilities with respect to those unpaid installment payments. See paragraphs (c)(1) and (4) of this section.
(2) Example 2: Acceleration event—S corporation —(i) Facts. The facts are the same as in paragraph (d)(1)(i) of this section ( Example 1 ), except that A is an S corporation that was subject to tax on the gain from the qualified sale or exchange under section 1374 and made a valid section 1062 election with respect to its applicable net tax liability from that gain.
(ii) Analysis. Pursuant to paragraph (a) of this section, A is treated as a C corporation because it has an applicable net tax liability. Accordingly, the results are the same as in paragraph (d)(1)(ii) of this section ( Example 1 ).
(3) Example 3: Acceleration event—consolidated group— (i) Facts. The facts are the same as in paragraph (d)(1)(i) of this section ( Example 1 ), except that A is a member of a consolidated group of which C is the common parent (C Group). B is not a member of the C Group.
(ii) Analysis. Pursuant to paragraph (b)(3) of this section, the C Group is treated as the taxpayer. Accordingly, in determining whether the sale of assets is an acceleration event under paragraph (b)(1)(iii) of this section, the C Group must determine whether the assets held by A constitute substantially all the assets of the C Group. If the sale is an acceleration event, any transfer agreement under paragraph (c)(2) of this section must be entered into by the agent for the C group on behalf of A. See § 1.1062-2(a)(2)(iii).
(4) Example 4: Acceleration event—grantor trust— (i) Facts. Individual D is treated as owning all of E, a grantor trust, under sections 671 through 679 of the Code. Under local law, E is the owner of qualified farmland property, which E sells in a qualified sale or exchange. D, rather than E, has an applicable net tax liability with respect to the qualified sale or exchange. D makes a section 1062 election with respect to the qualified sale or exchange. Subsequently, D dies.
(ii) Analysis. D is treated as the taxpayer. Accordingly, D's death is an acceleration event. Whether E has an event described in paragraph (b)(1) of this section is not relevant in determining whether an acceleration event occurs.
(5) Example 5: Acceleration event—non-grantor trust— (i) Facts. Individual F is a beneficiary of G, a non-grantor complex trust. No one is treated as owning any portion of G under sections 671 through 679. G has a qualified sale or exchange. In accordance with the provisions of sections 661, 662, and 643 of the Code, a portion of the gain on the qualified sale or exchange is deducted by G and reportable by F. F and G each has an applicable net tax liability with respect to the qualified sale or exchange, and F and G each makes a section 1062 election with respect to the qualified sale or exchange. F dies on Date 1. On Date 2, G terminates.
(ii) Analysis. F and G are treated as separate taxpayers. Accordingly, F's death is an acceleration event with respect to F's remaining unpaid applicable net tax liability. However, F's death is not an acceleration event for G and has no effect on G's remaining unpaid applicable net tax liability. Similarly, G's termination is not an acceleration event for F and has no effect on F's remaining unpaid applicable net tax liability. However, G's termination is an acceleration event with respect to G's remaining unpaid applicable net tax liability.
(e) Applicability date. This section applies to qualified sales or exchanges occurring in taxable years ending after [date of publication of final regulations in the Federal Register ].