8 regulations are deemed burdensome

By Alistair M. Nevius, J.D.

Editor: Sally P. Schreiber, J.D.
After reviewing all 105 final, temporary, and proposed Treasury regulations issued from January 2016 through April 2017, the Treasury Department has identified eight as burdensome, for which it will propose reforms as required by Executive Order 13789 (Notice 2017-38). The regulations identified as burdensome include the regulations under Sec. 385 implementing rules that would recharacterize certain transactions between related parties that are ostensibly debt as equity, curbing the practice of "earnings stripping," and proposed regulations under Sec. 2704 that would prevent taxpayers from taking certain estate valuation discounts.

Executive Order 13789, issued in April, directed Treasury to review significant regulations that were issued in 2016 and 2017 to determine if the regulations cost too much, are too complex, or exceed the IRS's statutory authority.

Treasury determined that 53 of the regulations issued during the review period were "minor or technical in nature" and not significant. It treated the remaining 52 regulations as potentially significant and reviewed them under the terms of the executive order. Treasury determined that eight regulations qualified as significant and met the criteria of the executive order.

Those eight regulations are:

  1. Proposed regulations under Sec. 103 on the definition of a political subdivision (REG-129067-15);
  2. Temporary regulations under Sec. 337(d) on certain transfers of property to regulated investment companies (RICs) and real estate investment trusts (REITs) (T.D. 9770);
  3. Final regulations under Sec. 7602 on the participation of a person described in Sec. 6103(n) in a summons interview (T.D. 9778);
  4. Proposed regulations under Sec. 2704 on restrictions on liquidation of an interest for estate, gift, and generation-skipping transfer taxes (REG-163113-02);
  5. Temporary regulations under Sec. 752 on liabilities recognized as recourse partnership liabilities (T.D. 9788);
  6. Final and temporary regulations under Sec. 385 on the treatment of certain interests in corporations as stock or indebtedness (T.D. 9790);
  7. Final regulations under Sec. 987 on income and currency gain or loss with respect to a Sec. 987 qualified business unit (T.D. 9794); and
  8. Final regulations under Sec. 367 on the treatment of certain transfers of property to foreign corporations (T.D. 9803).

Under Executive Order 13789, Treasury was directed to submit a final report to President Donald Trump by Sept. 18, 2017, recommending specific actions to mitigate the burdens imposed by the identified regulations. Visit thetaxadviser.com for updates on this report, which was scheduled to be submitted after this issue of The Tax Adviser went to press.

On Aug. 2, the AICPA's Tax Executive Committee, chaired by Annette Nellen, issued a letter to the IRS recommending that four of the above regulations be withdrawn: REG-163113-02 (Sec. 2704 regulations described in No. 4, above); T.D. 9790 (Sec. 385 regulations described in No. 6, above); T.D. 9794 (Sec. 987 regulations on qualified business units, described in No. 7, above); and T.D. 9803 (Sec. 367 regulations described in No. 8, above).

The AICPA noted that it had not taken a position on the remaining regulations and its silence did not indicate whether it supported their modification or repeal (AICPA letter available at www.aicpa.org.

Tax Insider Articles


Business meal deductions after the TCJA

This article discusses the history of the deduction of business meal expenses and the new rules under the TCJA and the regulations and provides a framework for documenting and substantiating the deduction.


Quirks spurred by COVID-19 tax relief

This article discusses some procedural and administrative quirks that have emerged with the new tax legislative, regulatory, and procedural guidance related to COVID-19.