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Current Developments in Section 382


Product Code - TMA89
Speaker(s): Todd Reinstein, Pepper Hamilton LLP and Kevin M. Jacobs, Ropes & Gray LLP
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 Section 382 was designed to discourage acquisitions of loss corporation stock that would result in the acquirer benefitting from the use of tax attributes of the loss corporation. Absent Section 382, acquirers could use the loss corporation’s tax attributes by first acquiring the stock of the loss corporation and then either contributing income-producing assets to the loss corporation or diverting income-producing opportunities to the loss corporation. Section 382 and its regulations contain complex mechanical rules designed to track the acquisition of loss corporation stock by new shareholders who were not owners of the loss corporation at the time that the tax attributes were generated to determine whether or not an ownership change has occurred and the tax attributes should be limited. To help ease the complexity of these rules, the IRS released two notices in June 2010, Notice 2010-49 and Notice 2010-50.

In Notice 2010-49, the IRS invited practitioners to provide comments on how to further modify the segregation rules. After receiving detailed comments on how to modify the rules, the IRS and Treasury issued Prop. Reg. Section 1.382-3(i) on November 22, 2011. The proposed regulation generally adopted the “Purposive Approach” described in Notice 2010-49 and provided three new proposed exceptions to the segregation rules.

In Notice 2010-50, the IRS provided guidance and invited practitioners to provide comments on whether taxpayers should be able to back out fluctuations in value under Section 382(l)(3)(C) in determining whether there was an ownership change under section 382, and if so, under what method(s) taxpayers should be able to do so.

This presentation focuses on the impact of Prop. Reg. Section 1.382-3(i) and Notice 2010-50 by providing a detailed analysis and illustrations of the guidance.

Presentation Objectives


The objectives of this 60-minute audio discussion include providing participants with a conceptual understanding and practical application of the following:

I. Proposed Regulation Section 1.382-3(i)

  • Aggregation and Segregation Rules
  • Secondary Transfer Exception
  • Small Redemption Exception
  • Higher Tier Entities Exception

II. Notice 2010-50

  • Section 382(l)(3)(c)
  • Full Value Methodology
  • Hold Constant Principle Methodologies
  • Look Back From Testing Date
  • Ongoing Adjustments from Acquisition Date
  • Application of the Hold Constant Principle methodologies in determining 5% shareholder and other open issues

Upon completion of this program, participants will be able to:

  • Understand the aggregation and segregation rules contained in Section 382
  • Be aware of the impact of Proposed Regulation Section 1.382-3(i)
  • Understand the application of Section 382(l)(3)(C) and fluctuations in value
  • Apply the Hold Constant Principle methods outlined in Notice 2010-50

Todd Reinstein, Pepper Hamilton LLP and Kevin M. Jacobs, Ropes & Gray LLP

 Todd B. Reinstein is a tax partner with Pepper Hamilton LLP, resident in the Washington D.C. office. Mr. Reinstein advises clients on federal corporate tax law including stock basis and earnings and profits calculations and simplifying corporate structures and minimizing the impact of complex consolidated return issues. He also has significant experience with Section 382 and related provisions. Mr. Reinstein is the chair of the AICPA Tax Division’s Corporations and Shareholders Technical Resource Panel and a member of the American Bar Association Section of Tax Section’s Section 382 Corporate Tax Working Group. Mr. Reinstein is a member of the District of Columbia and Florida bars, and is admitted to practice before the United States Supreme Court, the U.S. Tax Court and the U.S. Court of Federal Claims. He is a licensed certified public accountant in the District of Columbia and Maryland.

Kevin M. Jacobs
is a tax associate at Ropes & Gray LLP, resident in the firm’s Washington, D.C. office. Mr. Jacobs advises a wide range of clients on an array of tax issues, including the United States federal income tax aspects of domestic and international acquisitions (including leveraged acquisitions) and dispositions of public and private companies, joint ventures, financings, corporate restructurings, private equity and venture capital investments and securities offerings, and debt restructurings. Mr. Jacobs is a member of the American Bar Association Section of Tax Section’s Section 382 Corporate Tax Working Group. He is also a member of the District of Columbia and Florida bars, and is admitted to practice before the United States Supreme Court, the U.S. Court of Appeals for the District of Columbia Circuit, the U.S. Court of Appeals for the Federal Circuit, the U.S. Tax Court, and the U.S. Court of Federal Claims. He is an actively licensed certified public accountant in Colorado and Florida.