Daily Tax Update - February 28, 2007

NEW GUIDANCE CLARIFIES APPLICATION OF ACQUISITIVE D REORGANIZATION REGULATIONS TO TRIANGULAR REORGANIZATIONS: Today, the IRS issued proposed and temporary regulations providing guidance regarding the qualification of certain transactions as reorganizations under section 368(a)(1)(D) where no stock and/or securities of the acquiring corporation are issued and distributed in the transaction. The regulations issued today clarify the application of temporary regulations issued In December 2006 (see section 1.368-2T(l)), which addressed the qualification of certain transactions as reorganizations described in section 368(a)(1)(D) where no stock and/or securities of the acquiring corporation are issued and distributed in the transaction. Under the regulations issued in December 2006, it was possible that certain related party transactions that otherwise qualified as triangular reorganizations (such as triangular "A" or "C" reorganizations) would now qualify and be treated as "D" reorganizations. The proposed and temporary regulations issued today clarify that the regulations issued in December 2006 are not intended to affect the qualification of related party triangular asset acquisitions as reorganizations under section 368. Under the regulations issued today, such a transaction will not be treated as a reorganization described in section 368(a)(1)(D) by reason of the December 2006 regulations.

TAX BILLS INTRODUCED FEBRUARY 27 CAN BE ACCESSED VIA
http://www.steptoe.com/assets/attachments/2881.pdf

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
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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