IRS broadly interprets regulations, concluding that a gain recognition agreement was terminated rather than triggered

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October 2016

Overview

When US persons file a gain recognition agreement (GRA) to defer the gain realized on an outbound transfer of stock of a foreign corporation to another foreign corporation, they need to be mindful of any so-called triggering events that may occur in the next five years.  Certain events, however, may terminate rather than trigger a GRA, so that the US person no longer has any obligation to recognize the gain realized on the initial transfer (and pay interest on the deferred tax liability).  In a recent private letter ruling, PLR 201639014, the IRS broadly interpreted the GRA regulations in order to conclude that a particular GRA was terminated rather than triggered.

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Carl Dubert

Principal, International Tax Services, PwC US

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