Tagexecutive order

Treasury Withdraws Problematic Section 2704 Discount Regulation

By:  Amanda Wilson

As previously discussed (here), the IRS and Treasury identified in July eight Obama era tax regulations that are burdensome on taxpayers.  In early October, Treasury announced that it proposed to repeal or revise these regulations.  It has now taken its first concrete step in doing so, by withdrawing the Section 2704 proposed regulations released last year.  These proposed regulations limited the availability of the lack of liquidity discount when valuing interests in family controlled corporations and partnerships for estate, gift, and generation skipping tax purposes.  This proposed regulation was very unpopular among tax practitioners and its withdrawal is viewed as a positive change.

Treasury To Repeal/Revise 8 Burdensome Regs

By:  Amanda Wilson

As previously discussed (see prior post here), the IRS and Treasury identified in July eight Obama era tax regulations that are burdensome on taxpayers.  The next step for Treasury was to determine what to do with these regulations, and today we got Treasury’s answer.

Treasury proposes to withdraw entirely:

  • Proposed regulations under Section 2704 limiting lack of marketability discounts of an interest for estate, gift and GST taxes.
  • Proposed regulations under Section 103 defining a “political subdivision” of a State that is eligible to issue tax-exempt bonds.

Treasury proposes to revoke in part:

  • Final regulations under Section 7602 on the participation of certain persons by the IRS in a summons interview.  Treasury proposes to revise the regulations so outside lawyers would no longer be allowed to participate in examination, but allow outside subject-matters experts to participate.
  • Temporary and proposed regulations under Section 752 dealing with allocation of liabilities for disguised sale purposes and treatment of bottom-dollar guarantees.  Treasury proposes to revoke the rules governing how liabilities are allocated for purposes of disguised sale rules and reinstating the prior regulations.  However, Treasury proposes to retain the regulations as it relates to bottom-dollar guarantees.
  • Final and Temporary regulations under Section 385 dealing with characterization of related-party debt as debt or equity for tax purposes.  Treasury proposes to revoke the documentation regulations, but retain the distribution regulations pending enactment of tax reform.

Treasury proposes substantially revising:

  • Temporary regulations under Section 337(d) dealing with transfers of property by C corporations to REITs and RICs, including rules designed to prohibit/limit tax-free spinoffs of REITS and RICs.
  • Final regulations under Section 987 dealing with currency gains or losses with respect to a qualified business unit.
  • Final regulations under Section 367 dealing with the treatment of certain transfers of property to foreign corporations.

The full report can be found here.

 

 

IRS Identifies 8 Burdensome Regulations for Reform

By:  Amanda Wilson

Responding to a Trump Executive Order, the Treasury Department has reviewed all significant tax regulations issued after December 31, 2015 and identified eight regulations to be reformed to mitigate the burden that the regulations impose on taxpayers.  These regulations are:

  • Proposed regulations under Section 103 defining a “political subdivision” of a State that is eligible to issue tax-exempt bonds.
  • Temporary regulations under Section 337(d) dealing with transfers of property by C corporations to REITs and RICs, including rules designed to prohibit/limit tax-free spinoffs of REITS and RICs.
  • Final regulations under Section 7602 on the participation of certain persons in a summons interview.
  • Proposed regulations under Section 2704 limiting lack of marketability discounts  of an interest for estate, gift and GST taxes.
  • Temporary regulations under Section 752 dealing with allocation of liabilities for disguised sale purposes and treatment of bottom-dollar guarantees.
  • Final and Temporary regulations under Section 385 dealing with characterization of related-party debt as debt or equity for tax purposes.
  • Final regulations under Section 987 dealing with currency gains or losses with respect to a qualified business unit.
  • Final regulations under Section 367 dealing with the treatment of certain transfers of property to foreign corporations.

Many of these regulations were criticized or disliked by tax practitioners and therefore their proposed reform (which can include full repeal) is generally good news for taxpayers.

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