The US IRS on September 10 issued proposed regulations under section 382(h) relating to the determination of a loss corporation’s built-in gains and losses as of the date of an ownership change.
The proposed rules would aid in the operation of Section 382, which imposes limits on the ability of a loss corporation to offset taxable income in periods after an ownership change with losses attributable to periods before that change.
The Service said that the enactment of the Tax Cuts and Jobs Act created new areas of complexity and ambiguity in this area necessitating the issuance of the proposed regs. The proposed regs seek also to provide clearer guidance than that provided in Notice 2003-65.
With regard to net unrealized built-in gain and loss, the regs adopt as mandatory Notice 2003-65’s safe harbor computation based on the principles of section 1374.
The IRS decided not to incorporate into the proposed regs the 338 approach provided for in the notice and seeks stakeholder feedback on this decision.
The government said that the 338 approach is too complex, could result in an overstatement of built-in gains and losses, and would require significant modification as a result of changes made in the Tax Cuts and Jobs Act.
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