Notice 2015-79, post inversion transactions

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Issue Number:    Notice 2015-79

Inside This Issue

Notice 2015-79 describes regulations that the Treasury Department and the IRS intend to issue that will address transactions that are structured to avoid the purposes of section 7874 by

1. requiring the foreign acquiring corporation to be a tax resident in the relevant foreign country in order to have substantial business activities in the relevant foreign country;

2. disregarding certain stock of the foreign acquiring corporation in “third-country” transactions; and

3. clarifying the definition of nonqualified property for purposes of disregarding certain stock of the foreign acquiring corporation. 

    

   Notice 2015-79 also describes regulations that the Treasury Department and the IRS intend to issue that will address certain post-inversion tax avoidance transactions by defining inversion gain for purposes of section 7874 to include certain income or gain recognized by an expatriated entity from an indirect transfer or license of property and providing for aggregate treatment of certain transfers or licenses of property by foreign partnerships for purposes of determining inversion gain; and requiring an exchanging shareholder to recognize all of the gain realized upon an exchange of stock of a controlled foreign corporation (CFC), without regard to the amount of the CFC’s undistributed earnings and profits, if the transaction terminates the status of the foreign subsidiary as a CFC or substantially dilutes the interest of a United States shareholder in the CFC.

    

   Notice 2014-79 will be published in Internal Revenue Bulletin 2015-49 on Dec. 7, 2015.

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