The Internal Revenue Service has released final regulations on the treatment of gains recognized on stock in certain foreign corporations upon distributions.
The regulations in
In February, 2009, the IRS and the Treasury Department published temporary and proposed regulations in the Federal Register. The 2009 regulations, in part, provide that the gain recognized in connection with the receipt of a distribution of property from a foreign corporation with respect to its stock shall be treated as gain from the sale or exchange of the stock of a foreign corporation.
The 2009 regulations also addressed the application of Section 367 to certain related-party stock transactions that are recharacterized under Section 304. The IRS and the Treasury Department intend to amend the regulations under Section 367 to provide that the Section 351 exchange that is deemed to occur in a Section 304 transaction is subject to Section 367(a) and (b), as applicable.
Accordingly, this Treasury decision does not finalize the portions of the 2009 regulations that address the interaction of Sections 304 and 367. Those portions of the 2009 regulations will be withdrawn in separate published guidance, according to the IRS.