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Proposed Rule

Treatment of Property Used To Acquire Parent Stock in Certain Triangular Reorganizations Involving Foreign Corporations

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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 under section 367(b) of the Internal Revenue Code (Code) regarding certain triangular reorganizations. The regulations implement rules described in Notice 2006-85 and Notice 2007-48. The regulations primarily affect corporations engaged in certain triangular reorganizations involving one or more foreign corporations. 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 August 25, 2008.


Send submissions to: CC:PA:LPD:PR (REG-136020-07), 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-136020-07), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically, via the Federal eRulemaking Portal at (IRS REG-136020-07).

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Concerning the proposed regulations, Daniel McCall, (202) 622-3860; concerning submissions of comments, requests for a public hearing, and/or to be placed on the building access list to attend a hearing, contact Richard Hurst ( or (202) 622-7180 (not toll-free numbers).

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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 367(b) of the Code and certain triangular reorganizations. The text of those regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the temporary regulations and the proposed regulations.

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 is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. Accordingly, a regulatory flexibility analysis is not required. This certification is based on the fact that the regulations will primarily affect large multi-national corporations that engage in triangular reorganizations subject to the regulations. The regulations apply to triangular reorganizations, involving one or more foreign corporations, to the extent that, in connection with the reorganization, the acquiring corporation purchases, in exchange for property, all or a portion of the stock used to acquire the stock or assets of the target corporation. Therefore, the IRS and Treasury Department expect only a de minimis number of small business entities to be subject to the regulations. Pursuant to section 7805(f) of the Code, this regulation has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

Before these 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. The IRS and Treasury Department request comments on the clarity of the proposed rules and how they can be made easier to understand. 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.

Drafting Information

The principal author of these proposed regulations is Daniel McCall of the Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in their development.

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List of Subjects in 26 CFR Part 1

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Proposed Amendments to the Regulations

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

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Paragraph 1. The authority citation for part 1 is amended by adding new entries in numerical order to read as follows:

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

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Section 1.367(a)-3(b)(2)(i)(C) also issued under 26 U.S.C. 367(a) and (b). * * *

Section 1.367(b)-14 also issued under 26 U.S.C. 367(b). * * *

Par. 2. Section 1.367(a)-3 is amended by adding new paragraph (b)(2)(i)(C) to read as follows:

Treatment of transfers of stock or securities to foreign corporations.
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(b) * * *

(2) * * *

(i) * * *

(C) [The text of this proposed amendment to § 1.367(a)-3(b)(2)(i)(C) is the same as the text of § 1.367(a)-3T(b)(2)(i)(C) published elsewhere in this issue of the Federal Register].

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Par. 3. Section 1.367(b)-14 is added to read as follows:

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Acquisition of parent stock for property in triangular reorganizations.

[The text of proposed § 1.367(b)-14 is the same as the text of § 1.367(b)-14T(a) through (e)(5) published elsewhere in this issue of the Federal Register.]

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Linda E. Stiff,

Deputy Commissioner for Services and Enforcement.

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[FR Doc. E8-11647 Filed 5-23-08; 8:45 am]