IRS finalizes inversion regulations

Tax Hot Topics newsletterOn July 11, the IRS and Treasury released final regulations (T.D. 9834) under section 7874. The regulations are generally intended to address transactions structured to avoid the intent of section 7874. The final regulations largely adopt temporary and proposed regulations issued in 2016. The temporary regulations were set to expire on April 4, 2019.

The final regulations make minor technical changes and calcifications to the previous proposed and temporary regulations. These changes
impact a number of rules, including the “Acquisitions of Multiple Domestic Entities Rule,” the “Passive Asset Rule,” the “Third-country Rule, among others. The IRS and Treasury also finalized temporary regulations under sections 304, 367, 956 and 7701(l), which seek to reduce the tax benefit of certain post-inversion tax avoidance transactions.

The regulations are effective on varying dates including retroactively in many circumstances. The effective dates are largely based on applicability dates included in previously issued proposed and temporary regulations, or dates included in notices announcing certain rules. Taxpayers that have entered into, or those that plan to enter into, an inversion transaction should carefully consider the potential impact of these new rules.

David Sites
Partner, Washington National Tax Office
T +1 202 861 4104

David Zaiken
Managing Director, Washington National Tax Office
T +1 202 521 1543

Cory Perry
Senior Manager, Washington National Tax Office
T +1 202 521 1509

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