Rules Defining Acquiring Corporation Seen as ‘Fundamental Change’

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New proposed rules on the definition of an acquiring corporation in a tax code Section 381 transaction are a significant shift in policy, practitioners told Bloomberg BNA.
Mark Silverman, a partner with Steptoe & Johnson LLP, said May 7 that the rules “mark a fundamental change” in taxpayers' ability to choose whether tax attributes should go to the acquiring corporation or a subsidiary in a Section 381 transaction.
“What this has done is carve back the ability to move attributes to different entities,” Silverman said. “It's a policy call that they made.”
Under the rules (REG-131239-13) released May 6, the Internal Revenue Service said it would consider the acquiring corporation to be the one that directly acquires the assets in transactions described in Section 381(a)(2) (88 DTR G-1, 5/7/14).