The US IRS today published in the Federal Register final anti-loss importation regulations, making mostly minor changes from proposed tax regulations issued in 2013.
The Service also finalized portions of 2005 proposed tax regulations issued under sections 332 and 351 to reflect statutory changes.
The Service said that commentators generally agreed with the framework of the 2013 proposed anti-loss importation rules. Issued under sections 334(b)(1)(B) and 362(e)(1), the regulations identify whether property is importation property based upon a “hypothetical sale” analysis.
One change adopted involves the treatment of tax exempt transfers of debt-financed property. The regulations eliminate the “cliff-effect” that prevented property from being importation property even when there is only a de minimis amount of indebtedness creating a small tax gain or loss. Instead, under the final rules, a portion of such debt-financed property is subject to the anti-loss importation rule.
The IRS said it agreed that clarification is needed regarding the interaction of the proposed section 362(e)(1) regulations, the section 362(e)(2) regulations, and the proposed section 704(c)(1)(C) regulations. The Service said it will make the clarifications when finalizing the section 704(c)(1)(C) regs.
The IRS also said it rejected several commentator requests to modify the proposed regulations regarding transfers by partnerships and regarding the regs’ antiabuse rules.
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