Proposed Treasury regulations and revenue procedure provide guidance on the requirements of Section 355

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Jul 18, 2016

Overview

The Internal Revenue Service and the US Department of the Treasury recently released proposed regulations  and a revenue procedure, which provide guidance on certain requirements for tax-free distributions under Section 355 of the Internal Revenue Code. The proposed regulations (REG-134016-15) ​released on July 14, 2016 clarify the application of the device prohibition and the active trade or business requirement of Section 355.  Rev. Proc. 2016-40, released ​on July 15, 2016, provides two safe harbors indicating when the control requirement under Section 355(a)(1)(A) will be deemed satisfied. Both items are intended to provide clarification on the requirements of Section 355 and address concerns the IRS has previously identified.

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Julie Allen

National Tax Services Market Leader and Mergers and Acquisitions Tax Leader, PwC US

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