The US Tax Administration (IRS) issued a correction to tax ordinances (TD 9803) on November 15 regarding the transfer of ownership of foreign corporations. These rules, which were published on 16 December 2016, retrospectively removed the exemption under section 367 (d) exceptions for goodwill and going-concern value and restricted 357 (a) active trades or business exemption.
Par. 2. Section 1.367(a)-1 is amended by adding a new paragraph to section 367(a)-1, entitled Transfers to foreign corporations subject to section 367(a): In general. New paragraph (e) states that close of taxable year in certain section 368(a)(1)(F) reorganizations. If a domestic corporation is the transferor corporation in a reorganization described in section 368(a)(1)(F) after March 30, 1987, in which the acquiring corporation is a foreign corporation, then the taxable year of the transferor corporation shall end with the close of the date of the transfer and the taxable year of the acquiring corporation shall end with the close of the date on which the transferor’s taxable year would have ended but for the occurrence of the transfer. With regard to the consequences of the closing of the taxable year, see section 381 and the regulations thereunder.”
The correction is effective November 15, and is applicable on or after December 16.
