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Final regulations: Defining predecessor, successor and limiting recognition of gain under section 355(e)

Final regulations: Defining predecessor, successor

The U.S. Treasury Department and IRS this afternoon released for publication in the Federal Register final regulations (T.D. 9888) as guidance regarding the distribution by a distributing corporation of stock or securities of a controlled corporation without the recognition of income, gain or loss.


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The final regulations [PDF 357 KB] (19 pages as published in the Federal Register) provide:

  • Guidance in determining whether a corporation is a predecessor or successor of a distributing or controlled corporation for purposes of the exception under section 355(e) to the nonrecognition treatment afforded qualifying distributions
  • Certain limitations on the recognition of gain in certain cases involving a predecessor of a distributing corporation
  • Rules regarding the extent to which section 355(f) causes a distributing corporation (and in certain instances, its shareholders) to recognize income or gain on the distribution of stock or securities of a controlled corporation

These regulations finalize regulations that were proposed in December 2016, and remove corresponding temporary regulations.

The purpose of this report is to provide text of these regulations.

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