Income Tax—Temporary Regulations on Corporate Spin-offs

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Income Tax—Temporary Regulations on Corporate Spin-offs

Posted by Kim Chen on February 12th, 2017

The IRS has issued guidance in the form of temporary regulations ( TD 9805 ) under IRC Secs. 355(e) and 355(f), which provide exceptions to the Section 355 rule that spin-offs of controlled corporations are tax-free. The regulations impose a tax on a company that spins off a unit if the distributing company or the unit that has been spun off (the controlled company) is acquired after the transaction. The text of the temporary regulations also serves as the text of the proposed regulations, which are similar to the proposed regulations issued in 2004, with certain modifications. The temporary regulations apply to distributions occurring after 1/18/17 unless made according to a binding agreement in effect on or before 12/16/16 or described in a ruling request submitted to the IRS or in a public announcement or filing with the Securities and Exchange Commission on or before that date. Temp. Reg. 1.355-8T; Prop. Reg. 1.355-8.