Outbound regulations finalized allowing more tax-free reorganizations under Sections 367 and 1248

March 2013


The IRS and Treasury Department, on March 18, 2013, released regulations governing cross-border reorganizations and generally permitting US taxpayers to substitute current gain recognition and/or income inclusions for basis reductions in newly acquired shares. These final, temporary, and proposed regulations primarily deal with Sections 367(a)(5) and 1248(f). The regulations are significant to all multinational corporations engaging in mergers and acquisitions activity. In certain nonrecognition transfers, taxpayers may now elect to avoid current taxation at the cost of reducing stock basis. The flexibility provided in these regulations is taxpayer favorable notwithstanding certain compliance burdens and the elimination of one of several exceptions to gain recognition included in prior regulations. The clarification provided by the new regulations for acquisitive and divisive (e.g., Section 355 spin-offs) reorganizations is welcomed.

Contact us

Doug McHoney
Co-leader, US Integrated Global Structuring team
Tel: +1 (312) 298 2527

Calum Dewar
Co-leader, US Integrated Global Structuring team
Tel: +1 (646) 471 5254

Follow us