Daily Tax Update - April 23, 2012: IRS Issues Final Regs on Cross-Border Stock Transfers and Gain Recognition

IRS AND TREASURY ISSUE FINAL REGULATIONS ON CHARACTERIZATION OF GAIN RECOGNIZED ON DISTRIBUTIONS WITH RESPECT TO STOCK IN CERTAIN FOREIGN CORPORATIONS:  Today, the IRS and Treasury issued final regulations on the characterization of gain recognized on distributions of property with respect to stock in foreign corporations.  The final regulations, which apply to distributions that occur on or after February 10, 2009, state that gain recognized under section 301(c)(3) in connection with the receipt of property distributed from a foreign corporation with respect to its stock shall be treated as gain from the sale or exchange of the stock of the foreign corporation for purposes of section 1248(a).  As a result, when gain is recognized with respect to stock of a controlled foreign corporation, the earnings and profits of lower-tier foreign subsidiaries described in section 1248(c)(2) are taken into account.

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