Daily Tax Update - February 1, 2007

IRS, TREASURY ISSUE 367(a) REGULATIONS: Today, the IRS and Treasury Department issued final and temporary regulations [TD 9311] under section 367(a) of the Internal Revenue Code (Code) regarding gain recognition agreements. The final regulations are necessary to update cross-references in the current regulations. The temporary regulations are necessary to respond to comments requested in Notice 2005-74. The regulations primarily affect U.S. persons that transfer stock or securities to foreign corporations or corporations engaged in transactions that affect existing gain recognition agreements. The text of these temporary regulations also serves as the text of the proposed regulations (REG-147144-06) set forth in the notice of proposed rulemaking on this subject.

  • The temporary regulations adopt the rules announced in Notice 2005-74, with a number of modifications. Notice 2005-74 only provided guidance on a particular range of transactions, namely certain asset reorganizations, that are insufficiently addressed in the current regulations. The temporary regulations respond to comments and provide guidance on the effect on GRAs of transactions that are not addressed in the current regulation or Notice 2005-74. The temporary regulations also make additional changes to the existing regulations. For example, the temporary regulations modify and clarify procedural requirements attendant to entering into GRAs. Finally, the temporary regulations reorganize the current regulation so that distinct paragraphs address triggering events, exceptions to triggering events, and events that terminate a GRA.
  • The IRS and Treasury Department continue to consider issuing additional public guidance that further revises §1.367(a)-8.
  • For additional information, contact Philip R. West - pwest@steptoe.com, Stanley Smilack - ssmilack@steptoe.com, or Michael C. Durstmdurst@steptoe.com
  • The regulations can be accessed via: http://www.steptoe.com/assets/attachments/2840.pdf

SENATE EXPECTED TO MINIMUM WAGE/TAX PACKAGE: Later today, the Senate is expected to approve a bill increasing the minimum wage and including $8.3 billion package of small business tax incentives. The bill will be "held at the desk" to avoid a Constitutional requirement that all tax legislation originate in the House. House Ways and Means Committee Chairman Charles Rangel (D-NY) said that he plans to let the bill "stop at the desk and mature." Rangel added that he hoped "people that have differences [will] talk with each other."


As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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