US IRS Issue Tax Regulations On Disregarded Stock In Inversions

On January 18, the IRS has published final tax regulations and guidance on disregarded stock in inversions designed to fight tax avoidance associated with the inversion. The IRS also requests comments on proposed rulemaking by cross-reference to temporary regulations on Inversions and Related Transactions.

Rules on Inversions and Related Transactions + Guidance

The published document contains final regulations that identify certain stock of a foreign corporation that is disregarded in calculating ownership of the foreign corporation for purposes of determining whether it is a surrogate foreign corporation. These regulations also provide guidance on the effect of transfers of stock of a foreign corporation after the foreign corporation has acquired substantially all of the properties of a domestic corporation or of a trade or business of a domestic partnership. These regulations are effective on January 18, 2017.

Proposed Rulemaking by Cross-Reference to Temporary Regulations

The Treasury Department and the IRS are amending portions of temporary regulations that address certain transactions that are structured to avoid the purposes of section 7874 of the Internal Revenue Code. The temporary regulations affect certain domestic corporations and domestic partnerships whose assets are directly or indirectly acquired by a foreign corporation and certain persons related to such domestic corporations and domestic partnerships.

Written or electronic comments and requests for a public hearing must be received by April 18, 2017.

Sources: Guidance and Rules, Proposed Rulemaking


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