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Asset Transfers to Foreign Corporations

By Alistair M. Nevius, J.D.

Please note: This item is from our archives and was published in 2013. It is provided for historical reference. The content may be out of date and links may no longer function.

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Regulations

The IRS issued final, temporary, and proposed regulations governing outbound asset transfers under Sec. 361.

T.D. 9614 contains final regulations that apply to transfers of certain property (including stock and securities) by a domestic corporation to a foreign corporation in certain nonrecognition exchanges and to distributions of stock of certain foreign corporations by a domestic corporation in certain nonrecognition distributions. It also established reporting requirements for property transfers and stock distributions governed by the regulations.

The final regulations provide that the exceptions to Sec. 367(a)(1) (Secs. 367(a)(2) and (3)) generally do not apply to a transfer of certain property by a U.S. transferor to a foreign acquiring corporation in a Sec. 361 exchange. They also provide an exception to the general rule, at the election of the U.S. transferor and members of the control group, subject to certain conditions. The conditions are intended to ensure that the net gain (if any) realized by the U.S. transferor in connection with the transfer of property subject to Sec. 367(a) is, in the aggregate, recognized currently by the U.S. transferor or, to the extent permitted, preserved in the stock received in the reorganization by certain domestic corporate shareholders of the U.S. transferor.

T.D. 9614 finalizes, with some modifications based on comments received, regulations that were proposed in 2008 (REG-209006-89). T.D. 9614 was effective March 19, 2013.

T.D. 9615 contains temporary regulations that eliminate one exception to the Regs. Sec. 1.367(a)-3(d)(2)(vi)(A) coordination rule between asset transfers and indirect stock transfers for certain outbound asset reorganizations. The temporary regulations also modify another exception to the coordination rule for certain outbound exchanges so that the exception is consistent with the remaining asset reorganization exception. In addition, they modify the procedures for obtaining reasonable-cause relief, eliminating a 120-day provision that had been proposed in 2008.

Finally, the regulations implement changes for transfers of stock or securities by a domestic corporation to a foreign corporation in a Sec. 361 exchange.

The rules in T.D. 9615 have also been issued in proposed form (REG-132702-10), and the IRS is asking for comments on the rules. T.D. 9615 was effective March 19, 2013.