The US IRS on November 15 issued a correction to tax regulations (TD 9803) dealing with transfers of property to foreign corporations.
These regulations, published December 16, 2016, retroactively eliminated the section 367(d) exception for foreign goodwill and going concern value and narrowed the 357(a) active trade or business exception.
Section 1.367(a)-1 of the regulations is now amended by adding a new paragraph to section 367(a)-1, entitled Transfers to foreign corporations subject to section 367(a): In general.
New paragraph (e) states:
“(e) Close of taxable year in certain section 368(a)(1)(F) reorganizations. If a domestic corporation is the transferor corporation in a reorganization described in section 368(a)(1)(F) after March 30, 1987, in which the acquiring corporation is a foreign corporation, then the taxable year of the transferor corporation shall end with the close of the date of the transfer and the taxable year of the acquiring corporation shall end with the close of the date on which the transferor’s taxable year would have ended but for the occurrence of the transfer. With regard to the consequences of the closing of the taxable year, see section 381 and the regulations thereunder.”
The correction is effective November 15, and is applicable on or after December 16.
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