The IRS released final regulations (T.D. 10004) on July 18 that provide guidance under Section 367(b) related to certain triangular reorganizations and inbound nonrecognition transactions. The final regulations largely adopt proposed regulations (REG–117614–14) issued on Oct. 6, 2023.
The final regulations affect corporations engaged in certain triangular reorganizations involving one or more foreign corporations, certain shareholders of foreign corporations acquired in such reorganizations, and foreign corporations that participate in certain inbound nonrecognition transactions. The final regulations cover the following:
- The treatment of property used to acquire parent stock or securities in connection with certain triangular reorganizations involving one or more foreign corporations
- The consequences to persons that receive parent stock or securities pursuant to such reorganizations
- The treatment of certain subsequent inbound nonrecognition transactions following such reorganizations and certain other transactions.
The final regulations generally apply to transactions completed on or after Jul. 17, 2024, but may also apply to transactions completed prior to Jul. 17, 2024, in the following situations:
- Rules finalized that were described in Notice 2014–32 generally apply to transactions completed on or after April 25, 2014
- Rules finalized that were described in Notice 2016–73 generally apply to transactions completed on or after Dec. 2, 2016
A taxpayer and its related party may choose to apply these rules to all open taxable years beginning before July 17, 2024, provided that they are applied consistently.
Taxpayers considering triangular reorganizations involving one or more foreign corporations or inbound nonrecognition transactions should consider the potential implication of the final regulations.
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