US finalizes regs on outbound transfers of foreign goodwill

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The US IRS has released final regulations (TD 9803) under section 367 which eliminate the favorable tax treatment of outbound transfers of foreign goodwill and going concern value.

The final regulations, issued December 16, basically adopt the proposed regulations, issued September 2015.

The regulation’s preamble includes a lengthy discussion of why the IRS believes it has regulatory authority to adopt the regulations. The government’s authority has been called into question in this regard.

Like the proposed regulations, under the final regs, a US person that incorporates a foreign branch will recognize the gain attributable to the branch’s foreign goodwill.