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.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor 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. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.