On April 12, 2016, Treasury and the IRS issued proposed regulations regarding deemed distributions of stock and rights to acquire stock (REG-133673-15). The proposed regulations will affect corporations issuing rights to acquire stock, their shareholders and holders of rights, and withholding agents with respect to deemed distributions. The regulations are intended to:
The regulations under Section 305 govern actual and deemed distributions by a corporation of its own stock and rights to acquire its own stock. Specifically:
Under current regulations, when a distribution of stock (including a right to acquire stock) is a distribution of property, the amount of the distribution is the fair market value, on the date of the distribution, of the stock or right to acquire stock that is distributed.
Amount of Deemed Distribution:
Timing of deemed distributions
Withholding on Deemed Distributions
Foreign entities assuming withholding responsibilities
Reliance on issuer information reportin
Issuer Reporting Under Section 6045B
Reporting for U.S. Persons
The proposed regulations under section 305 would apply to deemed distributions occurring on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. A taxpayer, however, may rely on these proposed regulations for deemed distributions that occur on or after January 1, 2016.
It is significant to note that the proposed regulations only address withholding requirements on section 305(c) distributions on or after January 1, 2016. They do not address what withholding agents should do to remediate past years. It is anticipated that future guidance will address that issue.
Written or electronic comments and requests for a public hearing must be received by July 12, 2016. Send submissions to: CC:PA:LPD:PR (REG-133673-15), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC, 20044. Submissions may also be hand-delivered, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and REG-133673-15).
The proposed regulations described above can be obtained by clicking here: https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-08248.pdf
For further information, please do not hesitate to contact us.
Any tax advice in this communication is not intended or written by KPMG to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing, or recommending to another party any matters addressed herein.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.