IRS Finalizes Hot Stock Rules Without Change but Hints of More Guidance

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The Internal Revenue Service finalizes without changes regulations that generally turn off the so-called hot stock rule in certain reorganizations where a 2007 active trade or business test applies. The regulations allow stock purchased in the five years before such a reorganization to be treated as tax-free. “The IRS and Treasury Department have decided not to expand the scope of the final regulation to cover additional situations at this time,” IRS says in the preamble to the Oct. 19 final rules (T.D. 9548). The agency offers little explanation of its decision, but leaves the door open for future guidance.

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