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
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