Skip to Content

Proposed Rule

Corporate Reorganizations; Guidance on the Measurement of Continuity of Interest

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble


Internal Revenue Service (IRS), Treasury.


Notice of proposed rulemaking by cross-reference to temporary regulations.


In the Rules and Regulations section of this issue of the Federal Register, the IRS is issuing temporary regulations that provide guidance regarding the satisfaction of the continuity of interest requirement for corporate reorganizations. The text of those regulations also serves as the text of these proposed regulations.


Written or electronic comments and requests for a public hearing must be received by June 18, 2007.


Send submissions to: CC:PA:LPD:PR (REG-146247-06), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA: LPD:PR (REG-146247-06), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent electronically, via the Federal eRulemaking Portal at​ (IRS and REG-146247-06).

Start Further Info


Concerning the proposed regulations, Lisa S. Dobson at (202) 622-7790; concerning submissions of comments and requests for a public hearing, Kelly Banks at (202) 622-0392 (not toll-free numbers).

End Further Info End Preamble Start Supplemental Information


Background and Explanation of Provisions

Temporary regulations in the Rules and Regulations section of this issue of the Federal Register amend the Income Tax Regulations (26 CFR part 1) relating to section 368, which provides for general nonrecognition treatment for reorganizations. In addition to complying with the statutory and certain other requirements, to qualify as a reorganization, a transaction generally must satisfy the continuity of interest (COI) requirement. COI requires that, in substance, a substantial part of the value of the proprietary interests in the target corporation be preserved in the reorganization. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the amendments.

Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Comments and Requests for Public Hearing

Before the proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8) copies) or electronic comments that are submitted timely to the IRS. Comments are requested on all aspects of the proposed regulations. All comments will be available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time, and place for the public hearing will be published in the Federal Register. Start Printed Page 13059

Drafting Information

The principal author of these regulations is Lisa S. Dobson of the Office of the Associate Chief Counsel (Corporate). However, other personnel from the IRS and Treasury Department participated in their development.

Start List of Subjects

List of Subjects in 26 CFR Part 1

End List of Subjects

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

Start Part


Paragraph 1. The authority citation for part 1 continues to read, in part, as follows:

Start Authority

Authority: 26 U.S.C. 7805 * * *

End Authority

Par. 2. Section 1.368-1 is amended by:

1. Revising paragraph (e)(2).

2. Revising and redesignating the text of paragraph (e)(8) as paragraph (e)(8)(i).

3. Adding paragraph (e)(8)(ii).

The revisions and addition read as follows:

Purpose and scope of exception of reorganization exchanges.

[The text of the proposed amendment to § 1.368-1(e)(2) and (e)(8) is the same as the text of § 1.368-1T(e)(2) and (e)(8) published elsewhere in this issue of the Federal Register].

Start Signature

Kevin M. Brown,

Deputy Commissioner for Services and Enforcement.

End Signature End Part End Supplemental Information

[FR Doc. E7-5045 Filed 3-19-07; 8:45 am]