Regulations coordinating rules under sections 367, 482

Regulations coordinating rules under sections 367, 482

The Treasury Department and IRS late this morning released for publication in the Federal Register temporary regulations (T.D. 9738) and, by cross-reference, proposed regulations (REG-139483-13) to clarify the arm’s length standard and the best method rule under Code section 482 and relating to transfers of property— including foreign goodwill and going-concern value—to foreign corporations in nonrecognition transactions under section 367.


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The purpose of this report is to provide text of these important regulations as quickly as possible. Further analysis and information about these regulations will be issued by KPMG.


According to the preamble, the temporary regulations [PDF 216 KB] clarify the coordination rules that apply to controlled transactions—including controlled transactions that are subject in whole or part to both sections 367 and 482. 

The preamble explains that transfers of property subject to section 367 that occur between controlled taxpayers require a consistent and coordinated application of sections 367 and 482 to the controlled transfer of property and any related transactions between controlled taxpayers. The controlled transactions may include transfers of property subject to section 367(a) or (e), transfers of intangible property subject to section 367(d) or (e), and the provision of services that contribute significantly to maintaining, exploiting, or further developing the transferred properties. All of the transactions (and any related elements) must be analyzed and valued on a consistent basis under section 482 in order to achieve the intended purposes of sections 367 and 482.

The temporary regulations are being issued to address Treasury and IRS concerns that certain results reported by taxpayers reflect an asserted form or character of the parties’ arrangement that involves an incomplete assessment of relevant functions, resources, and risks and an “inappropriately narrow analysis of the scope of the transfer pricing rules.”  

The proposed regulations [PDF 280 KB] affect “United States persons” that transfer certain property, including foreign good will and going-concern value, to foreign corporations in nonrecognition transactions described in section 367.

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