US Treasury and IRS on March 23 released the final version of tax regulations under section 901(m) that concern transactions that are treated as asset acquisitions of US tax purposes and are either treated as stock acquisitions or are disregarded for foreign income tax purposes. The regulations affect taxpayers that claim foreign tax credits.
The regulations finalize proposed regulations (REG-129128-14) under 901(m) and 704 and published on December 7, 2016. The section 901(m) regulations were modified in the final version; the section 704 proposed regulations were adopted without change.
In response to comments, the Treasury Department and IRS added an exemption to section 901(m) for covered asset acquisitions that applies in some cases where gains and losses with respect to the relevant foreign assets are recognized by members of the US-parented group that includes the section 901(m) payor.
Changes are also made to the foreign basis election consistency requirement as it relates to closed tax years. Changes also extend the scope of de minimis rules to further reduce the burden of compliance with the rules and address the interaction between section 901(m) and section 909.
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