Chronology of Recent Developments in the Regulations Under §§367 and 1248

The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing.

By Kimberly S. Blanchard, Esq.
Weil, Gotshal & Manges, New York, NY









T.D. 9243

Cross-border "A" reorgs

Regs. §1.367(b)-13

These now final regulations, proposed in 2005, were part of a package that for the first time recognized the possibility of doing a cross-border Type A reorganization. To accommodate that change, the §367 regulations had to be revised. In addition to making the obvious procedural revisions and the cross-references needed to accommodate Type A reorganizations, however, these regulations added extensive, new, and complex changes to the manner in which the §367 regulations operate generally, including entirely new basis and holding period rules for triangular reorganizations designed to preserve §1248 amounts. The regulations also changed the manner in which the "overlap" rule applies, such that a transaction described in both §367(a) and (b) will be subject to the latter, and made other changes.


T.D. 9250

§304 transaction (v. 1)

Regs. §§1.367(a)-3, 1.367(b)-4

These regulations "turned off" §367(a) with respect to the deemed §351 exchange that takes place in a §304 transaction. They have been sharply cut back and superseded by T.D. 9444, below.


T.D. 9273

Tax attributes

Regs. §1.367(b)-7

These regulations address the carryover of E&P and foreign tax accounts in foreign-to-foreign reorganizations.


Notice 2006-85

Killer Bs

2006-41 I.R.B. 677

This Notice, together with Notice 2007-48, has been superseded by T.D. 9400, below.


T.D. 9311


Regs. §§1.367(a)-3T, -8T

These temporary regulations updated and modernized the rules applicable to gain recognition agreements, particularly clarifying the effect of tax-free reorganizations following a gain recognition agreement having been entered into.


Notice 2007-48

Killer Bs

2007-25 I.R.B. 1428

See above and T.D. 9400 below.


T.D. 9345

§1248 E&P

Regs. §1.1248-8

These final regulations address attribution of E&P to stock following tax-free reorganizations involving foreign corporations.  They should be read together with the regulations under §367(b), and in particular with the proposed regulations issued on 8/20/08 described below.


Notice 2008-10

Killer Ds

2008-3 I.R.B. 277

This Notice essentially picks up on a theme first raised in the proposed version of Regs. §1.367(b)-13, above. It addresses transactions that were intended to qualify as "D" reorganizations that did not give rise to corporate-level gain under the regulations' coordination rule, or to shareholder-level gain due to the "boot within gain" rule of §356. The Notice modified the manner in which the coordination rule applied, such that the U.S. transferor of appreciated assets must recognize §367(a) gain. The Notice is similar to the final §304/367 regulations below (T.D. 9444) in that it addresses a §367(b) policy by using §367(a) gain recognition as a proxy.


T.D. 9400

Killer Bs

Regs. §1.367-14T

These temporary regulations replace the two prior "Killer B" Notices, and provide generally that where a foreign subsidiary purchases stock of its U.S. parent to be used as currency in a tax-free Type B reorganization, the purchase is treated as a dividend and thus as a repatriation of deferred foreign earnings.


T.D. 9402

Use of §956

Regs. §1.956-1T

Amendment of temporary regulations to change the manner in which the basis of U.S. property acquired by a CFC is determined. For background, see Rev. Rul. 74-503, revoked by Rev. Rul. 2006-2.



§367(a)(5), §1248(f)

Regs. §§1.367(a)-7, 1.1248(f)-1, -2, -3

These extraordinarily complex proposed regulations address §367(a)(5) and pick up on themes first broached in the proposals that led to Regs. §1.367(b)-13. The theme here is proper adjustment of inside and outside basis so as to preserve the right amount of untaxed gain at the right level, and to make appropriate adjustments of E&P so as to preserve any untaxed §1248 amounts.


T.D. 9446


Regs. §§1.367(a)-3, -8

These represent the finalization and further refinement of the temporary regulations from T.D. 9311.


T.D. 9444

§304 transactions (v. 2)

Regs. §§1.367(a)-9T, 1.367(b)-4T

These temporary regulations apply §367(a) as a proxy for §301(c)(3) gain where a shareholder in a §304 transaction accesses basis in old-and-cold shares.


T.D. 9477

§304 transactions

Regs. §1.304-4T

These regulations complete a story begun in 1988, when the prior version treated the parent of an acquiring corporation as the acquiring corporation if the purpose for using the subsidiary was to avoid an E&P inclusion. The revised regulation deals with the flip side, where the parent drops the stock of what would have been an issuing corporation into a new holding corporation, and transfers the latter.


This commentary also will appear in the September 2010 issue of BNA's  Tax Management International Journal .  For more information, in the BNA Tax Management Portfolios, see Davis, 919 T.M., U.S.-to-Foreign Transfers Under Section 367U.S.-to-Foreign Transfers Under Section 367(a) (a), Davis, 920 T.M.,  Other Transfers Under §367 , and Yoder and Kemm, 930 T.M.,CFCs — Sections 959-965 and 1248 , and in Tax Practice Series, see ¶7150, U.S. Persons — Worldwide Taxation, and ¶7160, U.S. Income Tax Treaties.


Request Transfer Pricing Report