Rules Finalized to Crack Down on Repatriation Through Killer B Deals

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IRS unveils final rules (T.D. 9526) intended to curb tax-free repatriation of earnings through cross-border triangular reorganizations known as “Killer Bs,” with changes that one practitioner says represent an overall tightening of the rules IRS first set out in 2008. “Generally, the IRS and Treasury Department rejected suggestions to substantially carve back the rules,” John Harrington of SNR Denton in Washington tells BNA. In fact, the changes “appear to be overall a net tightening of the rules,” he says. In major changes, the final regulations modify a priority rule to determine when the guidance will apply, clarify when adjustments will be made under tax code Section 367(b), combine two timing rules found in the original guidance, and modify the definition of property in the 2008 regulations. While IRS adds two new exceptions, it expands the reach of the rules to deals involving securities.