The IRS has issued a statement concerning the scope of regulations known by tax professionals as the “May Company regulations.”
In June 2015, temporary regulations (T.D. 9722) were published in the Federal Register providing rules to prevent a corporate partner from avoiding corporate-level gain through transactions with a partnership involving equity interests of the partner.
According to a recent IRS statement (quoted in full below), the definition of “stock of the corporate partner” in the temporary regulations did not “match the intended definition” as discussed in the preamble. Rather, the regulations are being clarified so that the term “stock of the corporate partner” includes the stock or other equity interests of a corporation that controls the corporate partner within the meaning of section 304(c), except that section 318(a)(1) and (3) do not apply
On June 12, 2015, the Internal Revenue Service and Treasury issued final and temporary regulations (T.D. 9722) that prevent a corporate partner from avoiding corporate-level gain through transactions with a partnership involving equity interests of the partner. The regulations were published in the Federal Register dated June 12, 2015 (80 FR 33402). Soon after issuance, practitioners noted that the stated definition in the regulations of “Stock of the Corporate Partner” did not match the intended definition as discussed in the preamble. In order to correct the stated definition, the IRS will publish a correction in the Federal Register to amend the relevant text of both the preamble and the regulation to clarify that the term “Stock of the Corporate Partner” includes the stock or other equity interests of a corporation that controls the Corporate Partner within the meaning of section 304(c), except that section 318(a)(1) and (3) shall not apply. The regulations, as published in the Internal Revenue Bulletin on June 29, 2015 (I.R.B. 2015-26 at 1094 et seq.), reflect these intended changes.
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