Prop Regs: Triangular Reorganizations and Nonrecognition Transactions

The IRS has issued proposed reliance regs related to triangular reorganizations and nonrecognition transactions. The proposed regs adopt, with modifications, the regs described in Notice 2014-32 and Notice 2016-73. The proposed regs relate to the treatment of property used to acquire parent stock or securities in connection with certain triangular reorganizations involving one or more foreign corporations; the consequences to persons that receive parent stock or securities pursuant to such reorganizations; and the treatment of certain subsequent inbound nonrecognition transactions following such reorganizations and certain other transactions. (Preamble to Prop Reg REG-117614-14)

Applicable date.

With respect to those rules described in Notice 2014-32, the proposed regs generally would be applicable to transactions completed on or after April 25, 2014, subject to limited exceptions. (Prop Reg §1.367(a)-3(g)(1)(viii) and Prop Reg §1.367(b)-10(e)(2))

With respect to those rules described in Notice 2016-73, the proposed regs generally would be applicable to transactions completed on or after December 2, 2016. (Prop Reg §1.367(a)-3(g)(1)(viii), Prop Reg §1.367(b)-3(g)(7)(i), Prop Reg §1.367(b)-4(i), and Prop Reg §1.367(b)-10(e)(3))

To the extent the proposed regs contain rules not previously announced in Notice 2016-73, the proposed regs would be applicable to transactions completed on or after October 5, 2023. (Prop Reg §1.367(b)-3(g)(7)(i), Prop Reg §1.367(b)-6(a)(1)(v) and Prop Reg §1.367(b)-6(a)(1)(vi), and Prop Reg §1.1411-10(i))

Taxpayers and their related parties (within the meaning of Code Sec. 267(b) and Code Sec. 707(b)(1)) may choose to apply the rules of Notice 2014-32 and Notice 2016-73 or the proposed regs to any open tax year beginning before the date the proposed regs are filed as final reg, provided that taxpayers and their related parties consistently apply either the entirety of Notice 2014-32 and Notice 2016-73 or the entirety of the proposed regs for such years and each subsequent tax year beginning before the date the proposed regs are filed as final regs.

For more information on the regs described in Notices 2014-32 and 2016-73, see Checkpoint’s Federal Tax Coordinator ¶ F-6649.1.