The IRS on December 19 issued final and proposed regulations that address the time for measuring the continuity of interest (COI) requirement. The COI requirement is an important aspect of determining whether certain transactions qualify as tax-free reorganizations under section 368.
The final regulations apply to transactions occurring pursuant to binding contracts entered into after December 19, 2011. For transactions entered into after March 19, 2010, and occurring pursuant to binding contracts entered into on or before December 19, 2011, the parties may elect to apply the temporary regulations issued in 2007.
If adopted, the proposed regulations would apply to transactions occurring on or after the date the regulations are finalized, unless completed pursuant to a binding agreement in effect before that date.