82 FR 32281 - Transactions Involving the Transfer of No Net Value

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 82, Issue 133 (July 13, 2017)

This document withdraws the remaining part of a notice of proposed rulemaking containing proposed regulations that would have required an exchange or distribution of net value for certain corporate formations and reorganizations to qualify for nonrecognition treatment under the Internal Revenue Code (Code). Other parts of the notice of proposed rulemaking were previously adopted as final regulations. The proposed regulations being withdrawn also addressed the treatment of certain distributions not qualifying for tax-free treatment under section 332 of the Code. The proposed regulations being withdrawn would have affected corporations and their shareholders.

[Federal Register Volume 82, Number 133 (Thursday, July 13, 2017)]
[Proposed Rules]
[Pages 32281-32282]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-14723]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-139633-08]
RIN 1545-BI18


Transactions Involving the Transfer of No Net Value

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Partial withdrawal of notice of proposed rulemaking.

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SUMMARY: This document withdraws the remaining part of a notice of 
proposed rulemaking containing proposed regulations that would have 
required an exchange or distribution of net value for certain corporate 
formations and reorganizations to qualify for nonrecognition treatment 
under the Internal Revenue Code (Code). Other parts of the notice of 
proposed rulemaking were previously adopted as final regulations. The 
proposed regulations being withdrawn also addressed the treatment of 
certain distributions not qualifying for tax-free treatment under 
section 332 of the Code. The proposed regulations being withdrawn would 
have affected corporations and their shareholders.

DATES: As of July 13, 2017, the proposed revisions to Sec.  1.332-2(b) 
and (e); the proposed addition of Example 2 to Sec.  1.332-2(e); the 
proposed additions of Sec.  1.351-1(a)(1)(iii) and (a)(1)(iv); the 
proposed addition of Example 4 to Sec.  1.351-1(a)(2); the proposed 
amendments to Sec.  1.368-1(a) and (b); the proposed addition of Sec.  
1.368-1(f); and the proposed revision to Sec.  1.368-2(d)(1) in the 
notice of proposed rulemaking (REG-163314-03) that was published in the 
Federal Register (70 FR 11903) on March 10, 2005 are withdrawn.

FOR FURTHER INFORMATION CONTACT: Jean Broderick at (202) 317-6848 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    On March 10, 2005, the Department of the Treasury (the Treasury 
Department) and the IRS published a notice of proposed rulemaking (REG-
163314-03) in the Federal Register (70 FR 11903) containing proposed 
regulations under sections 332, 351, and 368 (2005 Proposed 
Regulations). The 2005 Proposed Regulations generally would have 
provided that the non-recognition rules in subchapter C of chapter 1 of 
subtitle 1 of the Code do not apply unless there is an exchange (or, in 
the case of section 332, a distribution) of net value (the net value 
requirement). The 2005 Proposed Regulations also provided that section 
332 would apply only if the recipient corporation receives some payment 
for each class of stock it owns in the liquidating corporation. 
Finally, the 2005 Proposed Regulations provided guidance on the 
circumstances in which (and the extent to which) creditors of a 
corporation are treated as proprietors of the corporation in 
determining whether continuity of interest is preserved in a potential 
reorganization (Creditor Continuity of Interest).
    On December 12, 2008, the Treasury Department and the IRS adopted 
the Creditor Continuity of Interest provisions of the 2005 Proposed 
Regulations as final regulations (TD 9434) published in the Federal 
Register (73 FR 75566). Minor portions of the 2005 Proposed Regulations 
that reflected statutory changes to sections 332 and 351 were adopted 
as final regulations as part of a Treasury decision adopting final 
regulations under sections 334(b)(1)(B) and 362(e)(1) (TD 9759), 
published in the Federal Register (81 FR 17066) on March 28, 2016. The 
Treasury Department and the IRS have decided to withdraw the remainder 
of the 2005 Proposed Regulations.
    The Treasury Department and the IRS are of the view that current 
law is sufficient to ensure that the reorganization provisions and 
section 351 are used to accomplish readjustments of continuing 
interests in property held in modified corporate form. With respect to 
section 332, the holdings of H.K. Porter Co. v. Commissioner, 87 T.C. 
689 (1986), Spaulding Bakeries Inc. v. Commissioner, 27 T.C. 684 
(1957), aff'd, 252 F.2d 293 (2d Cir., 1958), H.G. Hill Stores, Inc. v. 
Commissioner, 44 B.T.A. 1182 (1941), Rev. Rul. 2003-125, 2003-2 C.B. 
1243, Rev. Rul. 68-602, 1968-2 C.B. 135, Rev. Rul. 68-359, 1968-2 C.B. 
161, and Rev. Rul. 59-296, 1959-2 C.B. 87, continue to reflect the 
position of the Treasury Department and the IRS.

Drafting Information

    The principal author of this withdrawal notice is Jean Broderick of 
the Office of Associate Chief Counsel (Corporate). However, other 
personnel from the Treasury Department and the IRS participated in its 
development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

[[Page 32282]]

Partial Withdrawal of Proposed Rulemaking

    Accordingly, under the authority of 26 U.S.C. 7805, the Treasury 
Department and the IRS withdraw the proposed revisions to Sec.  1.332-
2(b) and (e); the proposed addition of Example 2 to Sec.  1.332-2(e); 
the proposed additions of Sec.  1.351-1(a)(1)(iii) and (a)(1)(iv); the 
proposed addition of Example 4 to Sec.  1.351-1(a)(2); the proposed 
amendments to Sec.  1.368-1(a) and (b); the proposed addition of Sec.  
1.368-1(f); and the proposed revision to Sec.  1.368-2(d)(1) in the 
notice of proposed rulemaking (REG-163314-03) that was published in the 
Federal Register (70 FR 11903) on March 10, 2005.

Kirsten B. Wielobob,
Deputy Commissioner of Services and Enforcement.
[FR Doc. 2017-14723 Filed 7-12-17; 8:45 am]
 BILLING CODE 4830-01-P