Imposition of Fifth Special Measure Against the Islamic Republic of Iran as a Jurisdiction of Primary Money Laundering Concern

(c) * * * For additional definitions that apply for purposes of their respective sections, see §§ 1.385–3(g) and 1.385–4T(e).

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(4) * * *
(iv) * * * For purposes of the section 385 regulations, a corporation is a member of an expanded group if it is described in this paragraph (c)(4)(iv) immediately before the relevant time for determining membership (for example, immediately before the issuance of a debt instrument (as defined in § 1.385– 3(g)(4)) or immediately before a distribution or acquisition that may be subject to § 1.385–3(b)(2) or (3)).

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(d) * * *
(1) * * *
(i) In general. If a debt instrument (as defined in § 1.385–3(g)(4)) is deemed to be exchanged under the section 385 regulations, in whole or in part, for stock, the holder is treated for all Federal tax purposes as having realized an amount equal to the holder’s adjusted basis in that portion of the debt instrument as of the date of the deemed exchange (and as having basis in the stock deemed to be received equal to that amount), and, except as provided in paragraph (d)(1)(iv)(B) of this section, the issuer is treated for all Federal tax purposes as having retired that portion of the debt instrument for an amount equal to its adjusted issue price as of the date of the deemed exchange. In addition, neither party accounts for any accrued but unpaid qualified stated interest on the debt instrument or any foreign exchange gain or loss with respect to that accrued but unpaid qualified stated interest (if any) as of the deemed exchange. This paragraph (d)(1)(i) does not affect any rules in Title 26 of the United States Code that otherwise apply to the debt instrument prior to the date of the deemed exchange (for example, this paragraph (d)(1)(i) does not affect the issuer’s deduction of accrued but unpaid qualified stated interest otherwise deductible prior to the date of the deemed exchange). Moreover, the stock issued in the deemed exchange is not treated as a payment of accrued but unpaid original issue discount or qualified stated interest on the debt instrument for Federal tax purposes. (ii) * * * Notwithstanding the first sentence of paragraph (d)(1)(i) of this
section, the rules of § 1.988–2(b)(13)
apply to require the holder and the issuer of a debt instrument that is deemed to be exchanged under the
section 385 regulations, in whole or in
part, for stock to recognize any exchange
gain or loss, other than any exchange gain or loss with respect to accrued but unpaid qualified stated interest that is not taken into account under paragraph (d)(1)(i) of this section at the time of the deemed exchange. * * * (iii) Section 108(e)(8). For purposes of
section 108(e)(8), if the issuer of a debt
instrument is treated as having retired all or a portion of the debt instrument in exchange for stock under paragraph (d)(1)(i) of this section, the stock is treated as having a fair market value equal to the adjusted issue price of that portion of the debt instrument as of the date of the deemed exchange. (iv) * * * (A) A debt instrument that is issued by a disregarded entity is deemed to be exchanged for stock of the regarded owner under § 1.385–3T(d)(4);

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§ 1.385–2 [Removed]

• Par. 3. Section 1.385–2 is removed.
• Par. 4. Section 1.385–3 is amended by
  revising paragraph (g)(4) to read as follows:
  § 1.385–3 Transactions in which debt proceeds are distributed or that have a similar effect.

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(g) * * *
(4) Debt instrument. The term debt instrument means an interest that would, but for the application of this
section, be treated as a debt instrument
as defined in section 1275(a) and § 1.1275–1(d).

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• Par. 5. Section 1.1275–1 is amended
  by revising the last sentence of paragraph (d) to read as follows:
  § 1.1275–1 Definitions.

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(d) * * * See § 1.385–3 for rules that treat certain instruments that otherwise would be treated as indebtedness as stock for Federal tax purposes.

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Sunita Lough,
Deputy Commissioner for Services and Enforcement. Approved: September 30, 2019. David J. Kautter, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. 2019–23817 Filed 10–31–19; 4:15 pm] BILLING CODE 4830–01–P DEPARTMENT OF THE TREASURY Financial Crimes Enforcement Network 31 CFR Part 1010 RIN 1506–AB42 Imposition of Fifth Special Measure Against the Islamic Republic of Iran as a Jurisdiction of Primary Money Laundering Concern AGENCY: Financial Crimes Enforcement Network, (‘‘FinCEN’’), Treasury. ACTION: Final rule. SUMMARY: FinCEN is issuing this final rule, pursuant to Section 311 of the USA PATRIOT Act, to prohibit the opening or maintaining of correspondent accounts in the United States for, or on behalf of, Iranian financial institutions, and the use of foreign financial institutions’ correspondent accounts at covered U.S. financial institutions to process transactions involving Iranian financial institutions. DATES: This final rule is effective November 14, 2019. FOR FURTHER INFORMATION CONTACT: The FinCEN Resource Center, (800) 949– 2732, refer to FDMS Docket No. FinCEN–2019–0002. SUPPLEMENTARY INFORMATION:
I. Statutory Provisions
On October 26, 2001, the President signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107–56 (USA PATRIOT Act). Title III of the USA PATRIOT Act amended the anti-money laundering (AML) provisions of the Bank Secrecy Act (BSA), codified at 12 U.S.C. 1829b, 12 U.S.C. 1951–1959, and 31 U.S.C. 5311–5314, 5316–5332, to promote the prevention, detection, and prosecution of international money laundering and the financing of terrorism. Regulations implementing the BSA appear at 31 CFR
chapter X. The authority of the
Secretary of the Treasury (Secretary) to administer the BSA and its implementing regulations has been delegated to FinCEN.
Section 311 of the USA PATRIOT Act
(Section 311), codified at 31 U.S.C. 5318A, grants FinCEN the authority, upon finding that reasonable grounds exist for concluding that a jurisdiction outside of the United States, one or more financial institutions operating outside of the United States, one or more classes of transactions within or involving a jurisdiction outside of the United States, or one or more types of