Daily Tax Update - June 19, 2012: Final Regs Modify Election Under Consolidated Return Rules

FINAL REGULATIONS MODIFY CONSOLIDATED GROUP ELECTION FOR INTERCOMPANY ITEMS AFTER A LIQUIDATION:  Today, the Treasury Department and the IRS issued final regulations concerning the election under which a consolidated group can avoid immediately taking into account an intercompany item after the liquidation of a target corporation.  The final regulations adopt without significant change the proposed regulations issued in 2009. 

  • The new regulations apply if (1) Section 332 would otherwise apply to the liquidation of the target company (Old T) into the distributee member (B); (2) B transfers substantially all of T’s assets to a new member of B’s consolidated group (New T); and (3) a direct transfer of substantially all of Old T’s assets to New T would qualify as a Section 368(a) reorganization.  If these three conditions are satisfied, the transaction will be treated as if Old T transferred substantially all of its assets to New T in exchange for New T stock and the assumption of T’s liabilities in a Section 368(a) reorganization.
  • The new regulations apply to liquidations of a target corporation that occur on or after October 25, 2007, and are effective June 20, 2012. 
  • The corresponding temporary regulations, Treas. Reg. 1.1502-13T, have been removed.
  • For additional information, contact Mark J. Silverman - msilverman@steptoe.com
  • The regulations can be accessed here.

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