Final ‘May Company’ regulations published

Tax Hot Topics newsletter The IRS has issued final regulations (T.D. 9833) under Sections 337(d) and 732 addressing transactions in which a corporation transfers appreciated property to a partnership that owns an interest in the corporation. The final regulations adopt the temporary regulations (T.D. 9722) with only minor modifications related to the definition of stock of the corporate partner and a de minimus exception.

The final regulations address the longstanding rules commonly referred to as the “May Company regulations” because they were issued in response to the transaction had been engaged in by May Department Stores in the 1980s. The May Company regulations generally require a certain percentage of gain to be recognized when a corporation that is a partner in a partnership contributes appreciated property to a partnership and receives an interest in its stock. The T.D. 9833 provides an exception when all the stock of the partnership is owned by corporate partners who are all members of the same affiliated group under Section 1504. The effective date of T.D. 9833 is for transactions on or after June 12, 2015.

Contact Greg Fairbanks
Managing Director, Washington National Tax Office
T +1 202 521 1503

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