Proposed regulations - Anti-loss importation rule; clarifying rules on imports of net built-in losses 

September 6: The Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-161948-05) that apply to certain nonrecognition transfers of loss property to corporations that are subject to federal income tax.

The proposed regulations [PDF 184 KB] are issued under sections 334(b)(1)(B) and 362(e)(1) and affect corporations receiving loss property.

The proposed regulations require that taxpayers must separately report the fair market value and basis of property (including stock) described in section 362(e)(1)(B) and in 362(e)(2)(A) that is transferred in a tax-free transaction.

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Text of the proposed regulations is provided with this report. A follow-up edition of TaxNewsFlash will describe the proposed regulations in greater detail.

Read also TaxNewsFlash-United States (August 30, 2013) describing final regulations under section 362(e)(2) with respect to determinations of the basis of assets and stock transferred in certain nonrecognition transactions, with a view to clarify and simplify the application of section 362(e)(2).

Reasons for today’s proposed regulations

Property is designated as “importation property” if two conditions are satisfied:

  • Any gain or loss recognized on a disposition of the property would not be subject to federal income tax in the hands of the transferor immediately before the transfer.
  • Any gain or loss recognized on a disposition of the property would be subject to federal income tax in the hands of the transferee immediately after the transfer.

There have been questions concerning how to determine whether property is importation property, and questions regarding the application of the anti-loss importation provisions and their interaction with other rules of the Code.

To address these issues, today’s proposed regulations provide a framework for identifying importation property and for determining whether the transfer of the property is a transaction subject to the anti-loss importation provisions (designated a “loss importation transaction” under the proposed regulations).

Request for comments

The proposed regulations will appear in the Federal Register on Monday, September 9, 2013. Comments and requests for a public hearing are due by a date that is 90 days after September 9.

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